In the past month I’ve had three different co-founders of digital marketing agencies approach me for feedback on their idea for a SaaS marketing product. All three product ideas have been different but the questions they ask were the same: what are some best practices for incubating a product in a service company, how should I staff it, and do you think I can raise money for the idea if I make it a separate business? My answer to the last question is always the same:
Don’t raise money for the idea until you have a repeatable customer acquisition process.
Now, this sets the bar extremely high but it gets people thinking in the right mindset. To have a repeatable sales process means you have customers and you have patterns as to how you acquired those customers. It also means that you figured out how to make ends meet before you take someone else’s money, which bodes well for delivering a nice return on a potential investor’s money. A big benefit of this approach is that if you’re an entrepreneur without a successful track record you’ll be able to raise money at a much better valuation. Also, if things go really well, you might be able to bootstrap indefinitely.
What else? What do you think of developing a repeatable customer acquisition process before raising money?