Honest feedback (Problem VS. VCs)

One of the most important distinctions in early-stage companies is the difference between a good business and a venture-scale business.

Investors are optimizing for opportunities that can generate exceptional returns across an entire portfolio, which means many perfectly viable businesses may never fit the venture model. Understanding that distinction can make fundraising feedback much easier to interpret.

Hey Rayan! These are interesting questions!

I'm not a VC and I've only met a few of them. But as someone who has failed at startups a bunch of times and took knowledge and experience as the only valuable thing from those failures, I'm happy to share my opinion.

1. Generally when asked that way my initial reaction would be to dig for more specifics. Gen Z is a broad audience but at least it's some audience that shares common traits — that's nice already. Plus it includes myself, so I can personally relate. But maybe you should narrow it more.

   I think no smart venture capitalist would dismiss the idea solely because its target audience is Gen Z or whatever. Especially knowing some huge success stories among them in like every modern niche from blogging and gaming to art, blockchain. It's not like they all have no money or you can't monetize their attention. It can be a perfect target audience for some businesses, and terrible for others.

2. This is a really painful question because when you hear opinion or advice from a venture capitalist it's easiest to believe and act on what they say. Especially if you perceive them as someone with huge experience and many connections in your area or business in general and their opinion contradicts your decisions.

   It's important to filter any advice by whether it's really going to improve your business at its current stage.

   Recently I talked to a friend who is raising his first round of funding for his startup. He got advice from a very reputable investor with large capital and valuable connections in the field. He said he would invest if they'd made a demo of their app and he'd use that demo to get attention of all his connections to bring talent and experts in the field.

   I'd advised them to go pitch to other 10-20 vc investors and improve their pitching. The reason is simple and comes from the context.

   They have already verified the key hypotheses of their business because during the previous year they have sold their solution to hundreds of customers in a semi-automated way — like selling online courses to groups of 20.

   The whole purpose of raising money for them is to scale and automate this thing by building an app. They have proved a) the demand: they can sell it predictably, b) the big market: they can scale it, c) the solution: people are happy with the product and are buying higher tiers.

   Do they need to build a demo app? It will be crappy without the engineering team that they don't have yet without funding. Even so does the demo help the business anyhow? No, they don't need to test the product on customers — they have already done it. When I asked my friend theses questions, he agreed: the demo was only needed for the investor and his show or whatever reasons he got in mind. It surely wasn't going to bring any value to the business in its current stage.

   The moral of this story is: focus on the right metric that you want to improve right now (OMTM, One Metric That Matters). If you need to raise money focus on pitching to investors frequently and testing and improving your pitch — your OMTM is the number of pitch sessions. If you haven't reached a Product/Market Fit, your OMTM might be the number of problem and solution interviews.

   Knowing and focusing on what's important is the key — that way you can hear any advice and know on which to act. Regardless of fame and reputation of the person giving you advice.

3. I don't know, I'm know nothing about incubators in Canada :)