Product Testing Before Investing

A discussion about the importance of personally testing products before making investment decisions, particularly in the context of startup investing.

Key Investment Decision Factors

• Personal experience with product is crucial
  • Best to be an actual customer/user
  • Easier to invest when you understand the product firsthand
  • Helps validate if product solves real problems

Real Example: Back Office Software Investment

• Problem identification

  • Many founders struggle with back office operations
  • Tasks like taxes, paperwork, and compliance are painful
  • Current solutions (Gusto, Quickbooks) are hard to switch from

• Product evaluation approach

  • Speaker plans to test product personally
  • Will evaluate if it solves their own business pain points
  • Looking for "magical" user experience
  • Currently avoiding back office tasks due to complexity

Investment Decision Framework

• Key questions to answer through testing:

  • Is the product truly automated or human-powered?
  • Can it scale effectively?
  • Does it solve real pain points?
  • Is it significantly better than existing solutions?

• Red flags to watch for:

  • Too broad product scope
  • Unclear value proposition
  • Heavy reliance on manual operations
  • Difficulty competing with established players

Investment Philosophy

• Personal testing is the "make or break" factor
• Being the target customer makes investment decisions easier
• Avoid investing in products you can't personally validate
• Focus on products solving clear pain points you understand