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“Investor First Product” – The Latest Fad In The Startup Industry

“Investor First Product” – The Latest Fad In The Startup Industry

In the last one year, the Indian startup ecosystem has taken off and continues its upward flight – fueled majorly by a huge influx of money and more VCs willing to offer startups an early stage launchpad.

Startup employees are giving up on their jobs to push-start their own ventures, exemplary alumni are leading public opinion to overpower the confines of convention. Their display of extraordinary balance of risk & skill to create some life-changing success stories is promising, encouraging and to say the least, inspiring.

But there has been a phenomenal shift in the mindset of founders – they are now creating Investor First products against the earlier focus on agility, mobile-first, etc.

Investor First product. Does it ring a bell?

I will help to decode the new entrant in market lexicon, with a few hypothetical, yet insightful conversations:

The very own and not-so-dear product

Situation: Founders brainstorming to create something revolutionary

Founder 1: Let us make an app that delivers “Idli” to people within 15 mins of their call.
Founder 2:
Founder 1: And award referral bonus of nine idlis on getting a friend onboard.
Founder 2:
Founder 1: App will go viral. Let’s get some investment.

First investment

Situation: Pitch to Investors

Founder 1: We deliver idli for breakfast.
Investor 1: How many users do you have? Do you have your product ready?
Founder 2:
Founder 1: I am from IIMC, while the other two co-founders are from IIT-D and IIT-B.
Investor 2: You obviously know your shit, I am in.

Growth Strategy

Founder 1: Let us put idli billboards all across the city. People will notice us.
Founder 2: Okay, I will get the quotations.
Founder 1: I need 30% of the hoardings exclusive at the airports.
Founder 2: But aren’t our user demographics different?
Founder 1: What about our investors’ demographics? I need hoardings all around Delhi and Mumbai airports by tomorrow. Period.

Metrics to track

Founder 1: We need to track and actively maintain KPIs. Just got a call from the investors.
Founder 2: Cool, let’s track average number of idlis a customer order in a month.
Founder 1: No, give me 30 days cohort, DAU and MAU. Investors will get it better.
Founder 2: …
Founder 1: Kar de na yaar, next round bhi toh uthana hai.

Investment Bout 2

Situation: Founder 1 thinks it is the time for the company to grow further, and hence  there is a need of next round of funding.

Founder 1: We are doing 100 orders per day, and if we get your 10M$ we will be able to scale to 10,000 orders per day.
Investor 11: When do you think you will reach a breakeven point?
Investor 12: Nice joke, Investor 11. Founder 1, do you deliver fried idlis too?
Investor 11: …
Founder 1: …
Investor 12: That was a trap question, we are in. Time for due diligence.

And the investor pleasing saga continues. We continue to make investor first products and services.

If you are a founder, think twice if this is the path you want to follow. As my notorious co-founder puts it.

Jinke pehle do rounds number par hote hai, baaki do nahi hote.

Big companies are built on strong products, followed by strong growth hacks. Investors money should accelerate, but shouldn’t be your company’s core value proposition.

Fun exercise: Think of 10 startups around you, how do they fare in terms of their Investor First approach.

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