It’s possible to raise VC funding even if you haven’t built a real product, according to Charles Hudson, founder and managing partner at seed-stage firm Precursor Ventures. It’s just very, very difficult.
I interviewed Hudson during TechCrunch Early Stage, our virtual event for startup founders. He gave a short talk titled “How to sell an idea when you don’t have a product,” then answered questions from me and from attendees watching at home.
Hudson said Precursor invests in about 25 startups every year and that a majority are pre-launch and pre-traction. So when he’s considering startups where there “isn’t any evidence or traction,” he and other investors are basically considering two things: How well the founder knows the industry, and how well the investors know the founder.
Of course, if you’ve already had success and you know everyone on Sand Hill Road, it might not be that hard to get that first check. But what about everyone else?
Below, I’ve quoted some highlights from Hudson’s thoughts about how to raise money pre-product. You can also watch the full presentation/conversation at the end of this post.
‘You need to have a unique and durable insight that will still be true in 12 to 18 months’
You need to have a unique and durable insight that will still be true in 12 to 18 months … The unique part is important because you still haven’t launched your product yet. And so whatever it is that you’re doing, if it’s not unique, if it’s a really obvious insight, you’ll probably have 10 or 12 competitors that are launched in the market by the time you get your product out.
