5 scenarios in which you need or don’t need a product before raising funds

One of the most common questions I hear from founders is this:

“Do I need to have a product before raising investment?”

The answer isn’t as straightforward as you might think, it depends on your industry and your business model.

For some industries, having a fully developed product is essential. In others, it’s not just unnecessary, it’s unrealistic.

Here’s how it breaks down:

1. If you’re in R&D-heavy Industries

Think biotech, deep tech, or hardware. These businesses often require significant funding just to build the first version of their product. Investors in these industries understand that you’re raising to fund the R&D phase itself.

2. If you’re in Software or SaaS

For software companies, having an MVP (Minimum Viable Product) or at least a prototype is usually expected. Investors want to see evidence that your solution works, even in its simplest form. Early traction or customer feedback can make all the difference here.

3. If you’re in Consumer Goods or E-Commerce

Having a tangible product, even if it’s an early version, is typically crucial. This is because investors need to see that there’s demand for what you’re offering and that your product can reach customers effectively.

4. If you’re in a New Market or Disruptive Space

Sometimes, you’re raising not to build a product but to validate an idea or business model. Here, you’ll need to convince investors that the opportunity is real and that their money will help you create something worth funding further.

5. It’s about the right expectations

Investors aren’t just looking for a product, they’re looking for proof that you’re moving in the right direction. That proof could be a prototype, market research, early customer interest, or even just a well-thought-out plan, depending on the industry.

Fundraising isn’t one-size-fits-all. It’s about understanding what investors expect in your industry and delivering exactly that.