Startup Port’s approach to successful startups:
Proof of use versus proof of knowledge
Proof of use equals proof of users
Proof of use has an immediate added benefit that proves the startup can actually attract and retain users and create revenue. This benefit is also part of de-risking the investor’s involvement (equity or debt) in funding the company. It simply means that the proof of that traction would be financed by investors who can bear the proven and calculated growth risk (there is no such thing as “no risk”). On the other hand for the startup, proof of use opens new financing options, attract more smart investors and a better path to reward its early adopters.
Proof of knowledge does not equal proof of users
The proof of knowledge approach in proving a startup’s ability to become successful is problematic. A knowledge-based standard is very subjective, as it claims that the knowledge of the startup founders and team is going to lead to traction and adopted users. Such a subjective standard may or may not open investment opportunities as investors do not have a solid proof that the startups will have sustainable and scalable revenue stream. In this standard approach there is very little, if none, de-risking of the investment assets. Instead of a standard based on education or experience, startups need to concentrate on proving their “use” case by showing and proving traction, even if it’s small, in the very early stages of their existence.
Regardless of how much education knowledge you have, the proof of a success of a startup is in the proof of adopted and recurring users with scalable revenue streams. It’s not the idea, it’s the execution that turns into revenue! It’s that simple.
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