What product you should build as an entrepreneur should, in large part, be based on your runway. For example, very few entrepreneurs could have built Tesla because most entrepreneurs are neither super rich nor able to raise tons and tons of money right out of the gate. This seems pretty obvious.
Everyday, I see entrepreneurs trying to build products that are way out of the scope of their runway. For example, if you are trying to build a new type of email marketing tool, you will need to have a completely different approach from what MailChimp does because you will not be able to afford to build out all the features of a full-fledged traditional email marketing system. It would take years to go head-to-head with their features. Similarly, if you are looking to build out a CMS, you should not even consider trying to incorporate all the features that Weebly or WordPress have because they have developed features that took years to build.
Now, does this mean that should not build a product in an existing space at all? No. But, it means that you need to really think carefully about how to build a simple and quick-to-build product that will compete in an existing space through strong differentiation. SendGrid (500 Portfolio company) is a great example of that. They didn’t build out (at first) all the typical features of an email marketing solution. They were an API that sent mail. That’s it. No interface, no WYSIWYG features. And that was enough. They took one aspect of a traditional email marketing solution and blew it up. Hubspot, too, in the beginning, was just focused on helping people write content. Back then, they didn’t have emailing features or a CRM or anything. This all took years to build. The initial version of the product was based on the hypothesis that they could build a simple tool that would ride on the new wave of content marketing. It’s only now that they compete in the traditional marketing automation space.
Don’t use most of your runway on product development
One of the biggest mistakes I see entrepreneurs make is that they spend too much time on product development. Part of the reason is that the scope of products are often far too complex for the first iteration. It is much better to take just one feature and blow that out of the water. Make it super simple and easy to use, and do this within just a fraction of your runway. If you’re a first-time entrepreneur without much easy access to capital, you should be shooting to get this done in < 2 months. If you can’t get it done in this time, your scope is probably too big.
There are lots of big problems that small features can solve. This is often easiest to find in products (of existing dinosaur players) who have built up bloated software. Craigslist is a good example.
Take one of these large bloated products or companies, and write down a full list of every single feature or thing that the product achieves. From this list, there are often several features that could be standalone products in themselves.
Find balance between painting your vision and explaining your current product
For all these reasons, I hate it when VCs say, “Is this a feature?” Yes! In order for you to have survivability in the beginning, your product really should feel like just a feature. But it doesn’t have to stay that way.
When you pitch your company, it will be very important to walk a fine line between conveying your vision and how things are today. Explaining the ins and outs of your current product is going to be un-inspiring, but talking too much about the future will make it seem like you’ve done nothing, or worse yet, an investor will think you’re lying if he/she finds out what your product actually looks like.
When you talk about your vision, you should be explicit in mentioning that this is how you see the future and where you see your company going. Make sure to tie your pitch back to where you currently are and the steps you need to tackle to fulfill your vision.