[BrooklynRage]

When doing a hard tech startup, how can you show traction/product-market-fit to investors before your product is being sold? The cost of going from crude prototype to sellable product can easily be in the 6-figure range, so how do you break this Catch 22?

[sama]

You can usually find some intermediate milestone to prove to investors you're more than just a talker.

[fooshint]

Do you have any examples?

[petra]

Build a simulation(in some multiphysics simulation tool) that shows your concept may work and can be validated by a 3rd party.

[argonaut]

That not a great example. A better one is to build a v0.00000001 that actually works but is obviously not the final product nor even an MVP. E.g. a technical demonstration of some component.

[lmm]

Can you get more concrete? "a technical demonstration of some component" isn't really an example.

[argonaut]

My point is, a simulation is not going to impress anyone.

[danieltillett]

There is a real gap in the market and it is not limited to just hard tech. There are an enormous number of great businesses out there that can’t raise funds until they have a product and they can’t make a product without funds.

The solution is actually pretty obvious - investors have to start investing in businesses that are nothing more than a good concept, especially those of outsiders or non-serial founders. This is hard work though.

[pjlegato]

The issue is that the risk of investing in a startup is extremely high even if you do limit investment to serial founders or post-product, post-traction businesses. It's already very hard to generate a positive return even with those conditions, and impossible to tell with certainty which will work out.

Investing in random unproven founders with no product or traction (apparently) makes it practically impossible. Even fewer will work out than in the pre-screened batch, and the hit rate is already close to zero.

If it were at all possible, there would be no need for VCs at all. You'd just fill out some forms about your idea and then do an IPO.

[danieltillett]

Do you have any evidence that the hit rate would be close to zero if you invested in founders with just a concept?

[pjlegato]

Yes. Y Combinator, which (very unusually) funds people with no track records and just a concept, has had only two really big successes (AirBnB and DropBox) in 11+ years and close to a thousand companies in the program.

http://yclist.com/

[eldavido]

I've been thinking about this a lot recently.

I think the answer is to become a serial founder. Elon Musk's career is a good model for this. He started with some kind of media/software company and then took on harder and harder challenges as he gained credibility.

[elmar]

Personally I find that the application form is not adequate to "hard tech" companies.