Unless you build something truly magical, you haven’t earned the right for funding

Photo credit: Utah Mizushima.

Entrepreneurs often ask me, “When should I raise Series A? How do I know my company is ready? How much traction do we need to have before we approach NSI?”

I find that question very hard to answer. Each business is unique, so there are obviously many factors one must consider. However, the hard truth is that venture capitalists meet hundreds, sometimes thousands of companies a year and we can only invest in a handful.

In many cases, it’s a fait accompli. Sometimes, the product needs more work or the metrics need more time to play out. Sometimes, it’s too early to feel if the company is going to make an impact in the market. In a world where time is extremely limited, we often must make a quick—occasionally unfair—judgment. We must wait for more evidence and more data points. And as the team will attest, it’s hard. It’s hard to be data-driven. It’s hard to be clinical about the process.

And I hate this part of the VC process.

And I hate this part of the VC process. Because entrepreneurship is not clinical, it is ultimately emotional.

Because entrepreneurship is not clinical, it is ultimately emotional. We make decisions in life because we are moved by our emotions. We buy products because we love them; we pay for insurance because we fear the consequences; we complain because something feels unfair.

Our brains have been programmed to respond to our emotions. We cannot survive in the wild if we consider every possibility, every logical road, and every choice in a decision tree. We can pretend we’re rational, but we’re slaves to our emotions. When we abdicate decisions to logic, then we eschew everything that it means to be human.

So if you want to pique interest from investors in the startup world, you need to create a product that is magical. I’m not talking about an app with pretty animations or a nice UI. I mean that the core value of the product must elicit an emotional response like “OMG, this thing is like freaking magical!”

It should make us think:

• Wow, I can just press a button and an ojek appears?
• Holy cow! I get to check out 50 people with the swipe of a thumb?
• I can book my restaurant at 2 am when the place is closed?
• Wait, I can see my loved ones on a screen when they are 3,000 miles away?

Every business has risks. It has some concerning metrics or faces some seemingly unbeatable incumbents. However, we can look past those concerns when a product captures that surprise, amazement, wonder, and excitement. Throw in some equal measures of how-the-heck-did-they-do-that and omg-I-need-to-tell-my-friends-about-this and achieve that feeling. Build something that elicits a real emotional response and invent something that is truly magical, then come talk to us about Series A.

Until that time, you haven’t earned that massive marketing campaign, that new user discount, or that regional expansion. You’ll waste time and money solving the wrong problem.

You still need to invest in sleepless nights, tweaking the core user experience until it’s great. You need to endure the heart-wrenching doubts from early investors, friends, and loved ones while you find product-market fit.