Tiny, fast experiments
I was watching Shark Tank this weekend and one of the entrepreneurs who pitched in that episode did not get funding for one reason only. He had a good product. He had a little bit of traction. There were promising signs this business could be successful.
But when the sharks asked him what he would do with the money, he said he would put it toward marketing.
And that was the full extent of his plan.
From that response, the investors started to lose faith in this founder’s ability to grow. He’d done an admirable job reaching the point he reached, but they didn’t believe he knew what to do with the money to get the business to the next level.
Founders often struggle with this question. They think they need money in order to learn what to do next. “I need money to grow, but I can’t raise money until I’ve already grown.” I hear this ALL.OF.THE.TIME. I said it too once upon a time.
It’s not true. Right now, before you raise growth capital, you need to run tiny, fast experiments that teach you what will work and what won’t work once you have the capital you need. You need to start building the Machine – running tiny, fast experiments that don’t cost a lot and don’t take a lot of time to learn.
Then you can walk into an investor pitch and give a solid answer to the question of “how will you use this money”. You will know better than to say “invest in marketing.” You’ll have a detailed game plan and go to market strategy that you are confident turns $1 into $4 every single time.
Each day, I publish an idea I'm working on, highlights from a founder coaching session, or other tidbits from my work with founders, investors, corporate partners, and accelerators. Check out the Hustle+Fire blog for more.