This comment can paralyse founders. It suggests that you’re a long way off from having customers or a business. And in the absence of traction (the only antidote to combat this comment), investors will usually make this observation for one of three reasons.
The investor believes what you’ve just pitched is novel but they invest further up the value chain and as a result they perceive that a business they’re involved in could integrate what you’ve got as part of an existing product.
Perhaps the most famous public example of this came from Steve Jobs after Dropbox founder Drew Houston declined Apple’s advances to acquire his file sharing service. Steve Jobs claimed Dropbox was nothing more than a feature (that could be part of iCloud) and it would die. Drew’s position in the value chain suggested a different outcome and today Dropbox is valued at $10b.
The second reason is that investors know that an incumbent product manufacturer who applies a relatively small amount of effort could build what you’ve just pitched and get it in their customer’s hands with ease.
I’m always wary when a venture’s premise is based on a statement like, “we thought wouldn’t it be great if [insert Apple / Google / LinkedIn / AWS / SalesForce / Facebook / Pinterest] was able to do [insert function]”. There is a growing trend of companies affording teams time at work to explore side projects that may drive innovation and value.
And for this reason alone setting out to build a business based on creating a small improvement or a not yet available component of an existing product from the outside (and worse still, which relies on the incumbent product to function) is dangerous territory for any founder to find themselves.
And there is no way to know if or how far away that small improvement or component is from being brought online by an incumbent product manufacturer. Investors intimately understand how this confluence of issues is likely to play out. Not well.
The final reason is the simplest, investors just want to see how you handle confronting feedback.
Before responding, understand the basics.
Features lead to products which lead to platforms
It’s easy to understand that a product is a collection of features. It’s also relatively straight forward to grasp that a platform (like LinkedIn or Facebook) is the base from which multiple products can be built and deployed to users. But very few know how to define where this all starts — with a feature.
In other words, a person will be able to describe how a small element of a product made the experience better (or worse).
In this context remember that:
a) Value isn’t always financial. In fact, where early features and products are involved, value equals how regularly and how deeply people use your collection of features to create a habit that changes their life; and
b) It’s difficult to immediately monetise a feature because it usually only goes part of the way to solving a pain-point.
To add colour to definition, think about Dropbox soon after launching in 2007. Sharing files via the cloud was useful feature but it didn’t completely scratch the itch enough to pay for it. Fast forward to today. 500M registered users think sharing, syncing, reviewing and editing files across all devices with different tiers of storage is pretty good. And I agree.
So how should you respond when an investor says, “this is a feature, not a product”?
No matter whether an investor uses reason 1, 2 or 3 (above) as the motive to make this comment, your most powerful defence is traction and knowledge about the investor’s context.
So, if you do have traction:
Ask why they made this observation and note that you’re keen to understand their context and perspective.
Re-confirm who your target users are, add qualitative or anecdotal feedback about why they like what you’ve built.
Remind the investor of month on month growth in new users, revenue, product engagement and churn (to begin with).
Re-confirm the size of the prize and that you have a compelling plan to take XX%, if not most or all of it.
Be a sponge for feedback and listen carefully to what the investor says next. They may change their perspective (i.e. you have more than just a feature), in which case the conversation will likely dive deeper into your future plans and objectives. Or, they may not, and in these cases, valuable product and market advice usually ensues.
But what if you don’t have traction?
See Step 1 (above) and then listen carefully.
You’re probably about to receive feedback you don’t want or agree with but it’s worth hearing it.
Add it to the signals you’ve received from beta testers, friends and colleagues.
It’s never easy processing feedback that contradicts your vision but without the ability to embrace different perspectives, the probability of success only decreases.
Please hit recommend (❤) if you learned something and leave a comment below if you’d like to dive deeper.
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