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Differentiation for Startups

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I am new to seeking capital. In Alabama - the angel funds are clear that the only differentiation they can rely on is the existence of paying customers that prove the product has gained significant traction. Existing sales is the sole data point that puts a hard stop on the entrepreneurs ability to present to an angel group.

As I read and research VC and angel funding - it seems the rest of the markets opinion on 'differentiation' for a startup is not shared.

Paul Singh had a good post:

Just thought I would start a discussion around this. Thoughts?

Hi Henry!

Right now is a big struggle for most startups because Facebook's failure in its IPO made a lot of angels too nervous to invest.

There are several things investors seem to look for:

1. A great market opportunity

2. Great traction with a product in that market

3. Great team to execute

4. Something defensible against other companies

Differentiation could be in any of those four areas.

Paul Singh has a good point -- "found the founder" -- but even he would tell you 500 Startups rejects most of the founders they meet.

I think their acceptance rate is 3%, and YCombinator is 1%.

That is to say, a lot of great founders get rejected.

And so, we keep struggling and making our businesses better every day.

By the way, the best way to get angel funding is to not need it.

In that sense, it's a good idea to have enough paying customers that you can pass on any deal you don't like.

Easier said than done.

Awesome response - Thanks! Playing with the risk/reward factor.


There are always tradeoffs.

Rule #1 is SURVIVE.

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