Prove that you Can Deliver and Sell
When you tested your business assumptions, you interviewed customers to verify your hypotheses about product market fit – in other words, you verified that your solution solves a compelling problem and is something customers will buy. Now you need to prove both that you can deliver at least an initial solution, and that customers will buy it. That’s the way you prove product-market fit.
This is a critical step both for your business and for getting funding from investors. It’s difficult to get serious angle-investors interest until you have made serious headway proving your product-market fit.
How to Prove Product-Market Fit
The most convincing way to prove product-market fit is to:
- Build a minimum viable product
- Show that customers will buy it by collecting orders
- Collect customer testimonials
With the above proof in hand, the message to investors is “product-market fit is proven – no we need funding to ramp growth”. That’s the kind of story many angel investors like to hear.
Why is accomplishing the above so compelling to investors? Because it shows that you’ve reduced four key areas of risk:
- Technology Risk: by delivering at least a very basic product you’ve shown that your team has the technical capability to deliver a solution.
- Market Risk: by showing revenue you’ve proven that there are customers that do find your solution sufficiently compelling to be worth money.
- Team Risk: you’ve proven that you can collect a core team that is sufficient to develop, sell, and deliver a solution.
- Finance Risk: you’ve proven that you can be creative and find a way to finance the initial development, giving greater confidence to investors that you’ll be able to find more funding.