One of the favorite exercises we do with our companies is called “For the Love of Marketing”. It gives insight as to how founders think about their companies, why they are building their product or service, and most importantly how their strategic acumen will work to accomplish goals.
[For the sake of reading space we will forgo explaining how the exercise works in totality.]
This process helps us identify where founders would actually allocate their investment versus where they say they would allocate their investment. Nearly 50% of founders at the end of the exercise believe that the largest share of their budgets should be allocated to marketing. At 42Phi this is equivalent to waking in the middle of the night and finding a spider crawling on your bed; both startling and terrifying. Although we love marketing, and we do LOVE marketing, marketing for very early stage companies should be comprised primarily of sweat and hustle, not cash.
For every $1 of cash a founder desires to invest in marketing, a founder should first invest $10 of sweat into marketing.
“Sweat before money” - 42Phi Proverb
Once product market fit is secure (don’t mind the naysayers as this can take up to 18 months) funds can and should be allocated to a more sizeable marketing strategy.
In addition, investors want to know that product adoption can and is happening organically. The viral coefficient gives insight into whether customers are really committed and engaged. It also sends the right cue to any investor that customer growth has the potential to be exponential.
By the end of the exercise we learn whether founders are in love with the idea of fundraising or in love with the idea of building a viable product and sustainable company. This is critical for us at 42Phi given that our goal is to work with founders who truly want to build viable products and sustainable companies. For us, the desire to raise funds alone is simply not enough. Please don’t misunderstand; fundraising too is great. Money gives founders the freedom to more rapidly innovate.
All great founders should desire both to build a sustainable company and to raise the funds necessary to carry forth innovation. But for the love of marketing, please do so in the appropriate order!