How Prototyping Can Boost Your Chance of Business Funding
These days, entrepreneurs are placing more and more focus on developing prototypes, as they have several benefits including showing what works and what doesn’t, generating customer feedback, and making it easier for investors to get a better understanding of the vision that you have for your product – and ultimately decide to fund it.
For many small business owners, entrepreneurs, and aspiring product designers, getting the attention of investors is crucial for gaining necessary traction. Here are just some of the main reasons why prototypes are high when pitching to investors, and how they can help your business get the funding that it needs.
1. They Create an Emotional Connection:
It’s no surprise that investors are more likely to part with their money if they can have an emotional connection to the product, something that’s far more likely to happen when a prototype is available compared to merely talking about an idea. People’s attitudes towards a product tend to change when they can take it into their hands and test it out and use it.
On the other hand, if an investor has to rely solely on their imagination to understand your product, they’re just not going to get as excited about it.
Having an emotional reaction to your product is essential for an investor; after all, they are going to be involved in its growth from a very early stage. A good investment should generate pride.
2. It’s an Expected Standard:
Thanks to easy and cheap 3D printing and the rise of prototype manufacturers like Rapid Direct who provide fast online CNC machining, prototype manufacturing, and sheet metal manufacturing, standards for prototypes have been raised a lot in recent years.
CNC machining, electronics prototyping with development boards, and other kinds of prototype manufacturing are more comfortable than ever to access; essential proof of principle model or a crude mock-up of a product idea no longer cuts it these days.
If you want to get that attention of an investor to your product idea, bear in mind that they expect you to utilize these resources available to you.
That being said, there are some exceptions to this. Your family and friends, for example, maybe willing to invest money in your product idea before they see a working prototype. And if you have an exceptional track record in product development already, you may be able to raise funds with just an idea.
3. It Helps Them Understand Where You Stand:
While having the best prototype available when pitching is crucial for getting investment, it’s understandable that not every startup is going to have the funds available to produce an expensive, top-of-the-line one.
While refinement is expected, having a prototype available gives investors the chance to understand better where you are currently standing in the process.
Don’t worry too much if you are not in a position to create the best prototype; if you have a compelling story, this can be coupled with a basic prototype to convince investors of what could be possible.
4. It Allows for Feedback:
Having a prototype allows a company to get feedback about their product idea, which can then be used to make changes, improvements, and refinements through the product development process.
Often, entrepreneurs and product design teams are cycling through the process of product development at the same time as raising money; in this case, they will usually pause during various phases of the product to complete fundraising rounds or use the prototype to get customer feedback and get potential clients and companies interested in a more refined version of the product.
When a physical prototype is used, it becomes much more comfortable for markets to respond and provide essential feedback to inform the next phase of the design process.
5. Determine the Weak Points:
A working prototype can make it much easier to highlight the weaknesses in the business or the product. This can undoubtedly be a good thing as it helps both product designers and investors get a better understanding as to which further resources are needed and where they are best spent to ensure the most successful results. Also, giving feedback can help to strengthen the emotional connection between your product and an investor.
6. Looking for the Right Investor:
To determine whether the startup’s idea is a good fit, investors need to have a broad vision of the market. If it fits, what are the odds of beating the competition? Even though they are often necessary and functionally deficient compared to the final product, a prototype can provide proof that an idea can be implemented in the first place. It can be used for gathering feedback from both future customers and business partners to help the business grow even further.
Even if you do not have a prototype ready, it’s advisable to perform a mutual analysis when you are looking for an investor. Prototyping, developing, and launching a product are time-sensitive situations, but accepting the first offer is not always the wisest idea.
An investor who is knowledgeable about the market and the type of product that you are producing will also be able to act as a source of valuable advice and support to your business. The broader their market vision is, the more expensive they will be to your business.
7. Which Path to Choose?
There are various options available when it comes to getting funding for your product idea. Crowdfunding platforms have gained a lot of traction in recent years, with several digital products brought to life because of them.
And it often works well for both market validation and traction, helping you to get a reaction from the public without having to develop and launch your product first fully. You can also use crowdfunding to become more fundable and increase the amount of interest that your company presents to investors and venture capitalists.
8. Getting Started With Your First Prototype:
If you have an idea for a product that will disrupt a particular industry, you’re probably thinking about building your prototype. You will want to get answers on how to do this with the most chance of success, and how to use it to attract investors in your product or your business.
The truth is that if you find it challenging to build a prototype, chances are you are going to find it difficult – if not impossible – to build a successful business.
Bear in mind that your prototype probably isn’t going to come out perfect, but that’s not the point.
If anything, a less-than-perfect prototype is a good thing as it allows you to get a clearer idea of what the issues are and what needs changing before you showcase it to any potential investors.
No matter what kind of product idea you have, developing a prototype certainly makes it easier to get funding. Whether you’re looking for a traditional investment relationship with a venture capitalist or want to raise money through crowdfunding platforms, a working prototype can help potential investors better understand your product without relying on their imagination alone and create vital emotional connections with your product that would not be possible otherwise.
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