Sometimes, early stage companies hear investors say that it’s “too early” for them to invest.

It’s a puzzling response when most VC’s are considered “early stage”.  The definition of “early” seems to be inconsistent, and the very same investor might turn around and invest in something that seems just as “early” later.

Couple thoughts on this:

1. Consumer internet investors tend to fall into two camps.  Those who generally invest before product market fit, and those who invest after (I think Dave McClure put it this way first). It’s fairly obvious who you are talking to when you look at their portfolios and do a little research into what stage the companies were in when they invested.  Even if a VC is intrigued by your company, if they aren’t used to investing before product-market-fit, they will be very very hard to convince, and might send you on wild goose chases for directional (but largely irrelevant) data. The best investors are pretty transparent about what they are looking for in specific markets. The best investors also know that the priorities of a company are very different at these stages, and are able to provide the right kind of help at the right time. 

2. Most investors have made exceptions to their baseline behavior.  So I find that “it’s too early” is usually code for one of two things.  1. I don’t know the founders, and their backgrounds aren’t so amazing that I feel like I absolutely must invest now. 2. This doesn’t fit into the short list of companies I’m specifically looking for. On the first, the thought is that certain entrepreneurs as so good, that they will find PMF even if it doesn’t exist today.  “Heat Seeking Missles” as Josh Kopelman calls them. On the second, it’s usually easier to convince an investor about the potential for PMF when they think in part that it’s their idea.  This is a difficult needle to thread, so I don’t recommend necessarily trying to find this pro-actively.  But investors will sometimes have such strong points of view on a market or a problem that they are willing to take the “leap of faith” with entrepreneurs prior to PMF.  The further away you are from an investor’s ideal team and core thesis areas, the higher the traction bar. 

Final thought: I’m observing increasingly that there is some confusion between traction and product market fit.  Similarly, I think there is some confusion about a successful product that has achieved PMF and a successful company.  But that’s a post for another day.