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Entrepreneur Office Hours - Issue #166
What's almost as hard as building a two-sided marketplace?
Whenever someone discusses a particularly difficult type of startup to build, I feel like they always reference two-sided marketplaces. While I agree that two-sided marketplaces are, indeed, difficult to build, they’re also not very common. I see lots more entrepreneurs trying to build a different type of company that’s almost as hard, but nobody ever mentions it. Naturally, that’s exactly why I had to write an entire article about it, which you’ll find in this issue of EOH.
Also in this issue, I lament magical products… especially the kinds people always seem to be trying to sell my children. And, in the Q&A, I answer a great question about fundraising.
Fine… you got me… like most of my fundraising Q&As, in this issue’s I give more of a non-answer than an actual answer, but I feel like you wouldn’t trust me if I my answers weren’t the honest truth. Unfortunately, more often than not, the honest truth is: “It depends…”
Lots of entrepreneurs struggle building their startups without realizing they’ve chosen a type of company that’s particularly difficult to get off the ground.
Your Pitch Is Making Your Startup’s Product Seem Too Magical
Only one type of customer buys magical products, and it’s probably not the type of customer you’re selling to.
Office Hours Q&A
I’m wondering what the best tactic to take with investors is. Should my goal be volume? Or should my goal be specificity? Meaning do I want to speak with as many investor as possible to successfully fundraise, or do I want to just try to find a few very targeted investors who seem most likely to invest?
I realize you’re asking something that seems like a simple question with a simple answer, but it’s surprisingly tricky to give the “right” answer because a big part of the issue comes down to personal preference and the ways you prefer to operate.
In this particular case, the two options you’ve presented require two very different processes. A high volume approach generally means doing lots of prospecting and having lots of pitch meetings. A low volume, high specificity approach means doing lots of research beforehand.
In that sense, the best way I can answer your question is by asking more questions:
How would you rather spend your days? Would you rather spend them doing Google deep-dives? Or would you rather spend them in meetings?
To be clear, in the case of fundraising, neither option is necessarily better or worse because the outcome is going to be the same. Whether you prospect investors with a high volume approach or a highly targeted approach, if you’re successful, the outcome will be the same: You’ll ultimately have a relatively high number of deep-dive conversations about your venture with a relatively small number of people. How you get to that point doesn’t matter so long as you get there.
Just remember that the important thing about investor prospecting isn’t getting initial conversations with them. Investor conversations are fairly easy to schedule. It’s what happens in those initial conversations that matters. You need to be able to give a compelling pitch that shows your traction and suggests you’d be worth talking with in more detail. The goal, in other words, is to get to the important deep-dive conversations that come after an initial pitch.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!