Nivi · January 13th, 2011
When you build a new feature, you try to think about its benefits. But you never know what the real benefits are, until you talk to gratified users.
But getting out of the building and talking to users is hard. Naval and Brendan talk to a lot of AngelList users but I’ve gotten lazy.
So I use Quora to do customer development. I read this Quora thread in agonizing detail to extract the AngelList benefits I posted a couple days ago.
This anonymous answer motivated the exercise because it completely ignores the features of AngelList and focuses exclusively on some surprising benefits (emphasis added):
1) The Application Process
AngelList has a very simple and straightforward application process. But they force you to focus on the key metrics, social proof and other factors that lead to successful fundraising. Just the process of applying, helps you clarify what is necessary to put your company in the best position to fundraise, whether it is through AngelList or through other methods. (It is kinda like a test prep course; all standardized test can be hacked with some preparation and knowledge about how it works. The AngelList process + venture hacks is your Kaplan prep course for raising a round.)2) The Depth of the Roster
Most startups know about the “famous” investors – those who have great public reputations or are name brands. But there are an amazing number of high quality angels, who fly below the radar, that AngelList gives you exposure to. Oftentimes, it can be these angels who help close out your round.3) The Time Factor
AngelList creates a sense of urgency around the investment process. Nearly every investor that reached out to us, resulted in a call or meeting within 10 days. When compared to non-AngelList intros we received, this is a huge difference in time. Also, decision (both yes and no’s) were given fairly quickly.4) The Validation
Compared to other conversation, the investors we met through AngelList seemed to be leaning towards investing from the initial conversation. A large part of this is the validation a startup gets by being on AngelList. What I mean is that investors were looking for reasons to say yes, as opposed to reasons to say no. The answer still might be no in the end, but it was always a more productive and engaged conversation.
Thank you, Anonymous.
I have had the benefits, not features line pounded into my head so many times and yet as a 23 year old entrepreneur starting my first business I think I made a big mistake with my first “major” investment in my business.
I recently built a web application for entrepreneurs looking to write a business plan executive summary. This application asks 20 questions and then spits out a PDF report with our suggestions for improving your executive summary. It is a cool little tool, but I think I forgot my audience.
When people come to my website they want to learn how to write an executive summary so that is why my free ebook and executive summary template are so popular. This new tool does not benefit my typical user because they have not written their executive summary yet!
I think that application might have some benefit for entrepreneurs who already wrote their executive summary and are about to submit it to a VC or an angel. It is a quick 3 minute quiz to make sure you did not make any major mistakes. Unfortunately that segment of entrepreneurs is not currently my audience.
Anyway, just wanted to say thanks for this post because it helped me connect some dots as to why my cool new application is not a raving success yet…
Thanks for VentureHacks I just started following you guys earlier this week. I love it!
Isn’t this focusing on building the better mousetrap, rather than selling it?
“We hired the Vice President of Sales for the spirit division of Republic, the largest liquor distributor in Texas, and immediately we had a ‘yes’ from every liquor store chain in Texas before we made our first bottle,” … “We’ll do more in revenue with Deep Eddy {new product/ company} in the first year than we did in the first four years of Sweet Leaf {prior product/ company}. We’ll do seven figures in our first year.”
I’d argue that establishing the path to sales and wherever possible pre-selling are the first steps. In the IT world, creating and selling demos first. Yes, some consider it selling vaporware but that process helps define the most important product benefits, i.e. moon-roofs are nice to have, but how often are they actually used?
Later in the article the CEO talks about how removing risks for investors (will it sell?) helped him raise capital. “It’s so much easier to raise money after all your assumptions are based off of fact. Most startups don’t do enough proving out their assumptions before they raise money.”
see Texas CEO Magazine Jan/ Feb 2011, page 46.
This entrepreneur sold Sweet Leaf for ~$200 million
A couple of things about validation:
“…A large part of this is the validation a startup gets by being on AngelList. What I mean is that investors were looking for reasons to say yes, as opposed to reasons to say no…”
1. That’s talking about the investors’ validation which, it doesn’t matter how nice and charming it looks, will never be as valuable as end user validation.
2. What’s really interesting of AL is that is changing the default, as was pointed there. That is a thing to keep an eye on. It’s probably the neutralization of the deal flow what is changing the game.
What I love from AL is that is making entrepreneurs use better their attention. I love that because they are the doers and wealth isn’t going to be created by distracting the doers.
I’m an entrepreneur near Dayton, Ohio. Pat Newcombe at the Small Business Development Center downtown recommended Wendy Kennedy’s program, “So what? Who cares? Why you?” to get past the features vs benefits hurdle. I first used white papers downloaded from her site (wendykennedy.com) which yielded several “aha” moments. I also ordered Wendy’s book which yielded several more breakthrough insights.