You've got a game-changing startup idea, a rockstar team, and big dreams of scaling fast. 🚀
But there's just one problem: you need funding. And conventional wisdom says that to get investors on board, you need a minimum viable product (MVP).
It makes sense, right? An MVP is proof that your idea actually works. It shows traction. Investors want to see that before they open their wallets.
But in reality an MVP isn't always necessary - or even advisable - for getting an early-stage investment.
In fact, for some startups, rushing to build an MVP can backfire badly. 💣
So how do you know if you need an MVP to get funded? And if not, what are your other options?
Let's break it down.
Why Do Investors Expect an MVP?
Most investors do expect to see an MVP before they'll consider cutting a check.
And it's not hard to understand why. An MVP is tangible evidence that you're not just a wantrepreneur with a half-baked idea.
It shows you've put in the work to take your idea from a simple idea to a functioning prototype. In short, they want you to be skin in the game, because that’s the stick-to-itiveness that makes startups successful.
An MVP also provides crucial market validation. It demonstrates that there's real demand for what you're building.
That's especially important in the early stages, when you're asking investors to make a leap of faith in your vision.
Finally, it shows that you are able to build a product and adapt to the market. Something very few people do well.
So in short: investors love MVPs because they de-risk their investment. They turn your promising idea into something provable.
When Can Startups Raise Funding Without an MVP?
That being said, not every startup needs an MVP to get funded.
In fact, there are some cases where building an MVP too soon can actually hurt your chances of landing investment.
Take deep tech startups, for example. If you're working on something truly groundbreaking - say, a new kind of quantum computing or AI - chances are an MVP just isn't feasible.
The technology might still be in the proof of concept stage. Or maybe it requires millions in R&D before you can even think about a workable prototype.
In those cases, investors understand that an MVP is premature. What they're betting on is the strength of your team, the audacity of your vision, and your ability to hit key technical milestones.
The same goes for hardcore science-based startups. If you're developing a new drug or medical device, pre-clinical data and expert validation can be more important than an MVP.
And even for more typical software startups, there are times when an MVP can wait.
If you've got a stellar track record as a founder, a crack team of engineers, and a clear path to revenue, you might be able to raise on vision alone. 🦄
MVPs Shows Market Validation and Investor Confidence
But let's be clear: those are the exceptions, not the rule. For the vast majority of early-stage startups, an MVP is still your best bet for getting funded.
That's because an MVP does two crucial things:
1) It validates that you've found a problem worth solving. By getting your solution into the hands of real users, you're testing whether your core value prop resonates.
Do people actually want what you're building? Will they use it? Will they pay for it? An MVP helps answer those make-or-break questions.
2) It builds investor confidence. Even if your MVP is bare-bones, it shows that you can execute on your vision.
You've gone beyond napkin sketches and Powerpoint presentations. You've built something real and put it out into the world. That's a huge credibility boost.
Plus, an MVP lets you de-risk key assumptions. Will users adopt your core features? Can you acquire customers at a sustainable cost? How long will they stick around?
Hard data on those fundamentals makes your startup a much safer bet for investors.
By the way, we are Realistack, a product design and MVP development studio that exclusively works with tech startups.
If you want to launch your startup and need help with developing your MVP, don’t hesitate to reach out.
We usually take a 5% share upon delivery in exchange for a lower hourly rate. That way, our interests are aligned with yours in the long run.
Alternatives to an MVP for Securing Funding
So if an MVP is so important, what are your options if you're just not ready to build one?
One approach is to lean hard into pre-launch validation. That means doing deep customer development to prove out your problem-solution fit.
You could run surveys and interviews to understand your target users' pain points. Build landing pages to gauge interest in your value prop. Get LOIs from potential customers.
The more data you can gather to validate your idea, the stronger case you can make to investors - even without an MVP.
You could also double down on your team and advisors. Investors bet on people as much as ideas.
If you have a rockstar lineup of engineers, designers, and domain experts, that can be incredibly compelling - especially for hard tech and deep science startups.
The key is to showcase your team's unique unfair advantages. What have they built before? What cutting-edge research have they pioneered? How are they uniquely qualified to tackle this problem?
Sell your team as much as your idea.
Risks of Building an MVP Prematurely
But let's say you do decide to build an MVP. That's great - but be careful not to rush it.
Because here's the thing: a bad MVP can be worse than no MVP at all.
If your MVP is buggy, confusing, or just plain underwhelming, it can torpedo your credibility with investors.
Instead of proving your concept, it raises doubts about your team's ability to execute.
Even if your core idea is sound, a shoddy MVP makes it look like you don't know how to build a quality product.
There's also the risk of premature optimization. It's easy to get distracted by polishing every detail.
If you pour too much time and money into your MVP, you might run out of runway before you even get to pitch investors. 😬
How to Tailor Your Funding Strategy to Your Startup's Context
So how do you strike the right balance? How do you decide if you need an MVP - and if so, how much to invest in building it?
The key is to tailor your approach to your specific startup and market context. There's no one-size-fits-all playbook.
If you've already got a stellar reputation and deep domain expertise, you might be able to get by with lighter-weight proof points - customer LOIs, detailed wireframes, etc.
The common denominator is proof. However you do it, you need to demonstrate to investors that your idea is sound, your market is real, and your team can deliver.
Using Pre-Launch Validation to Replace an MVP
So what does effective pre-MVP validation look like?
One powerful approach is to build an audience before you build your product.
Find out where your target users congregate online and start engaging with them. Share valuable content, answer their questions, build your credibility as a thought leader.
Then when it comes time to raise funding, you can point to that thriving community as evidence of pent-up demand.
Investors love to see organic interest and engagement..
You can also leverage pre-sales and waiting lists. Building a landing page that clearly articulates your value prop and invites people to sign up for early access.
If you can get hundreds or thousands of people to give you their contact info, that's a compelling signal to investors.
It shows there's real appetite for what you're building.
Investor Psychology: How an MVP Impacts Their Decision
But let's be real: even the most brilliantly executed pre-launch campaign isn't as powerful as a working MVP.
Because here's the thing about investors: they're human. And humans are wired to put more stock in tangible evidence than abstract promises.
When an investor can actually see and touch your product - even in a basic form - it flips a psychological switch.
Suddenly your startup goes from an interesting-but-unproven idea to something concrete and real.
That has a huge impact on how investors perceive risk and reward. An MVP makes your startup feel more solid - and therefore more backable.
Plus, investors know that building an MVP requires focus and discipline. It forces you to distill your idea down to its most essential elements and make hard tradeoffs.
That ruthless prioritization is a key skill for any successful founder. Proving you can do it boosts their confidence significantly.
Risks of Overpromising and Underdelivering
Also, your MVP has to deliver on its promises.
If your prototype is a buggy mess or your beta is functionally useless, that actually erodes investor trust.
If you put out a half-baked MVP, you're sending the message that you're willing to settle for mediocrity.
But if you take the time to craft an MVP that truly solves a hair-on-fire problem - even in a limited way - you'll generate the kind of excitement and momentum that opens checkbooks.
One viable option that is rarely talked about is outsourcing MVP development. It is the second best thing to do if you can’t build something great on your own.
It may not prove you can build a great product, but it can prove traction and that you are able pivot and do whatever necessary to meet the market demand.
If you are interested in outsourcing your product development, check out my guide on choosing an MVP development company.
The Role of the Team in Attracting Investment Without an MVP
So if an MVP isn't strictly necessary to get funded, what is? In a word: people.
Time and again, studies have shown that the #1 thing investors look for is a great team.
They bet on the jockey, not the horse. 🏇
Think about it: at the seed stage, your startup is mostly an untested hypothesis. You've probably got more questions than answers.
What investors are really evaluating is whether YOU have what it takes to turn that hypothesis into a massive success.
They're looking at your track record, your domain expertise, your grit and resilience. An MVP is just one data point in that bigger picture.
So if you don't have an MVP, double down on showcasing your team's unfair advantages:
- Have you previously built and scaled a successful startup in this space?
- Do you have unique insights and connections from working in the industry for years?
- Are you partnering with world-class advisors and investors?
The more you can demonstrate that you're the right team to deliver on this opportunity, the less critical an MVP becomes.
How to Balance Vision and Validation
At the end of the day, landing seed funding without an MVP is about striking a delicate balance.
You need to paint a big, bold vision for how you're going to change the game. But you also need to back it up with solid proof points.
The key is to focus on validating the riskiest parts of your business model.
The more uncertainty and risk you can take off the table, the more comfortable investors will feel backing you - MVP or no MVP.
TL;DR
- For most startups, an MVP is the way to go
- But sometimes an MVP might be overkill or not feasible
- If you can't build an MVP, focus on validating your riskiest assumptions other ways
- Showcase your team's domain expertise, execution ability, and unfair advantages
- Strike a balance between painting a big vision and proving you can deliver
- Remember: investors back people first and ideas second.
So do you need an MVP to get funded? The answer is: it depends.
But one thing is certain: you DO need proof. Proof that you're solving a real problem, proof that customers want what you're building, and proof that you're the team to make it happen.
Nail that, and the checks will follow. 💸
Now get out there and make it happen.
