Dharmesh Shah explains why founders find it easier to sell a vision than actual results. A product launch introduces real data investors can scrutinize, and even positive early revenue can disappoint Series B investors if it doesn't show enough scale or risk reduction to justify a significant valuation jump.
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It's much easier to sell a vision and a story than it is reality, even though the reality should be better. For instance, let's say you haven't launched the product yet, and let's say the company's worth, we'll pick a number, $2 million. You would think the day after, like when you actually have a product out there, the company would be worth more. So maybe it's worth $2,001,000. You would think that the valuation would have gone up because you've now taken some risk out, the product is out there now. Turns out, in most cases, that's not true. It's not true. And the reason it's not true is because once you launch the product out there, now there's data to look at. And so once there's data, now there's something for investors to poke at. And if there's something for investors to poke at, They will poke at it. That's their job. We had a revenue-generating product that we'd been selling for a while. We had all the numbers or whatever, and the numbers were trending correctly, but they just weren't big. The resistance from the Series B investors was, well, you guys are expecting a step up in valuation from your Series A, which is reasonable for an entrepreneur to expect because the company was doing well. But we don't feel like you've taken enough risk off the table to warrant that valuation. That's what made it hard, right? Which is we actually had evidence, we had numbers, and they were all pointing in the right direction, but they were just small.
