I was recently speaking with an entrepreneur considering fundraising who was pre-revenue and pre-product. One idea we discussed was the option of “raising” by starting with a services offering. Here are a few reasons that option could make sense, especially in a difficult fundraising environment.

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Prove authentic demand

Almost every entrepreneur believes they have a great idea (read The Mom Test). But when you are pre-revenue and pre-product, how do you really know? One way to test is can you understand the problem enough to pitch a solution to customers that they will buy today. If you can’t articulate the solution/value well enough and they won’t pay for it, I would question do you really have authentic demand? If not, keep asking more customer discovery questions to learn why not. If yes, see below.

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Build product together

I am a huge fan of building with developing partners (i.e. potential customers). By selling a services offering, you don’t need a fully functioning customer facing product. You just need to deliver a solution that solves the problem. Guess what, that can be done manually behind the scenes. Imagine you are using a Google sheet and some analytics to deliver a “solution” at this stage. While doing it manually doesn’t scale, it does help you more rapidly iterate and learn what it takes to solve the problem.

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Efficiency of time and money

Lastly, you get paid to do this, and doing a “services” product costs more your time (vs. the cash cost of building out a customer version). After doing the services multiple times, you not only get some “fundraising” in the door, you learn what the product does/does not need to look like. That time you would have spent trying to fundraise pre-revenue/pre-product is now spent actually delivering revenue and product.

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Not every business can go this route, but if you can start with services that can be a viable option to get the business going. Then when you go build the product/software you are far more efficient with what you build, you already have paying customers that will convert to the product, and fundraising also becomes easier with paying customers and a working solution.

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