Vision & Validation
What is & what could be
TLDR: There are only two things you need to do to raise pre-seed money—sufficiently answer the questions “what is” and “what could be.”
Last week, I wrote about my recent move to Antler, and I promised I’d write this post too:
The only two things a founder needs to do when starting out is Vision & Validation. That’s both more complicated than it reads, but less complicated than most make it out to be in practice. I’ll write another post on that in the future.
First some context.
I like to think of founders like astronauts in the movies, solving one problem at a time until they can return to earth.
You would never see Matt Damon in The Martian get stuck on Mars, solve one math equation, and then be home. He had to solve a long list of challenges.
With founders however, there seems to be this gravitational pull to solve everything at once, going from zero to one hundred rather than Zero to One.
The job though is not to build the entire company in the first six months. The job is to get to the next stage.
The job is to inspire the right investors to provide you with the right amount of capital to build the company in the right way with the right people.
I think it’s because of the pressure to succeed and lack of safety net, that founders undervalue this concept of simplifying the job and focusing on getting to the next stage as the primary objective.
Getting from idea to funding is only about two things: vision & validation.
At a high level, I call the topic “vision & validation” for two reasons. First, alliteration makes it easy to remember, not dissimilar to a rule of three. Second, it follows a core principle of inspiring others, comparing “what is” to “what could be.”
Nancy Duarte introduced me to the concept in her TED talk, but I’ve since recognized this juxtaposition in many great leadership principles.
I’ll skip over the power of what is and what could be for now, but just know that the world’s most inspiring speakers from Martin Luther King Jr to Steve Jobs have leveraged this communication style to inspire action.
So let’s start with vision.
Vision is all about what could be. It’s about the possibilities, the trends and sizes of markets, the first principles of building a great business, and seeing the future differently than others and being right about it.
As a founder, you need to be able to inspire others, not only to get your first investment, but to recruit customers & users, to attract talent, and to create a long-term view that guides your decision making today.
Here are some questions to ask yourself if you are at a pre-seed or seed stage with your idea:
Do I personally have enough domain expertise to confidently predict the future?
Is this problem and this market objectively big enough to build a $1b+ business?
If not now, will it be in 5-10 years? How do you know?
If you accomplish what you’re currently setting out to do, where would it go from there?
What about from there? And from there, and from there, and from there?
Get on a whiteboard. Bring people together to challenge your assumptions. Spend the time to think as big as you possibly can before you even start building. Continue to work and rework this vision, testing the narrative with your target audience of investors and potential customers.
Getting this right does not mean you’re deciding the rest of your life. Perfection is not the goal, but rather enough conviction in yourself and enough objectivity in the facts to inspire those around you and make it to the next stage.
The next stage is funding, and funding requires validation.
Many founders have the resources and skills to go from zero to one without any investment, but at some point in order to win any market, you will need capital.
And to attract capital you need validation.
Of course the media would have you believe that all you need to do is open the car windows while driving down Sand Hill Road, and the VC money will fly in. In reality though, if you’re competing for dollars from the best funds in the world, you need to be prepared the way an outlier would be.
Validation is about much more than traction and your inner circle telling you you’re right. It’s about validating founder market fit, technology, users, market size, use of funds, competitive landscape, and strategy.
The job here is to instill conviction that you’re not only building toward a big vision, but to develop credibility that you are right. Here are some things to consider:
How do I know I am the best person in the world to build this? (Here you validate founder market fit with background, past successes, and your team)
Is the technology novel? (If it is novel, you need to build it, at least to MVP. If not, you need to prove you can get to market with the resources available to you)
Are my first users/customers the right group to focus on? (How will this strategy and target profile compound into the future?)
Will anyone use this or pay me for it? (Are you able to build a fast-growing waitlist, onboard real users, gather customer feedback & references, or sign any initial deals?)
Is the market big enough now, or will it be in the future? (Can you quantify the market? This is your TAM, SAM, SOM)
How do you know your business model will scale? (What is the playbook for hypergrowth, and how do you know you’re right?)
And if you can do all of that, a detailed data room will be needed to take you the distance: a clean cap table, a Delaware C-Corp, an intelligent attempt at a P&L, a market and competitive analysis, an investor FAQ, and any additional detail that will help an investor with diligence.
Answering these questions may seem like a lot of work, but if you take them as individual tasks, it’s much less daunting than the list would make it appear.
Again, it’s about solving one problem at a time, with a focus on getting to the next stage rather than building the entire business.
The best way I’ve found to work on this with a founder is to create a blank investor deck, and pose the following question:
What needs to be true, and evident on these 10 blank slides, for an investor to give you $2m-$4m at ~20% dilution?
From there, you start to build.
You juxtapose what is (this massive market is broken) and what could be (but we can fix it).
And what is (we’ve formed the best team in the world) with what could be (and together we can change the world).
Then sharing what is (the current options to solve this problem are underserving the market) in contrast to what could be (our product is demonstrably better, faster, cheaper).
And we know this because of what is (we’ve validated the users & customers as evident by our waitlist growing at 100% MoM), and with your capital what could be (is immediate onboarding of X users leading to Y revenue).
At which point what is (now a thriving seed stage business) we will build what could be (a world class team, by using the capital to hire X, Y, and Z positions).
So on and so forth, shifting back and forth between vision & validation, conviction & proof, asks & evidence.
If you can get to vision & validation, you can approach an investor with confidence not only in yourself and your company, but with enough leverage to raise enough capital that you will neither overdilute the business from day one nor undercapitalize it to win the market.
And if you need help with those things, if you need to be surrounded by other founders and great builders, then the obvious option is joining an Antler residency.
See you Monday.