We’ve been talking about the five most common symptoms of Market Myopia experienced by early-stage enterprises. Today, we’re going to talk about what it means to investors.
In our research, which you can read more about in the Play Bigger Founder’s Workbook, 70% of enterprises faced issues of investor skepticism. A common refrain we hear from entrepreneurs experiencing this - “Investors just don’t get it, they don’t see the potential I see.”
But that’s actually not correct. These founders haven’t given investors the tool to see that potential, and often because they haven’t articulated it themselves.
As Tim Guleri, Managing Director at Sierra Ventures, put it to us: “We see startups with $1m in ARR but they just can’t answer the question of the category they are in and that’s holding back the partnership meeting.”
Jamie Montgommery, Co-Founder and Managing Partner of March Capital adds: “I see too many companies building things that need to be sold, rather than bought. They need too much up front investment to sell. Customers don’t invest naturally. The reality is that the world doesn’t want another cloud software company. They need a solution.”
In order to succeed with investors, founders need to show up with more than a better product. They need to show investors how what they are doing is truly different and solves a costly problem that hasn’t been solved, or in some cases even known, previously.
Last week we talked about problem/market fit, and how it can help keep enterprises focused on the right rabbits to chase. Finding problem/market fit has a similarly positive impact on fundraising, because that is exactly what investors are looking for, untapped potential.. The ability to see new markets with new revenue - not another cloud software company, but something truly different and necessary.
In a funding landscape that has seen 20% or more drop in series A and series B funding volume the last few years, showing up without a point of view on how to solve a different and costly problem is unlikely to warrant investment. However, showing the world how a costly, unsolved problem is resolved by a new category of solutions - that’s exactly the kind of exponential opportunity venture capital requires to justify the risk.
More to come...
