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What Will Investors Think?

Should I tell them I am building my product without code?

That is the subject of this week's video interview

In the interview, two founders who are currently building apps without code discuss how they have handled the caveat that their products are built entirely without code. In particular, this week's conversation focused on how these founders broach that topic with investors and what kind of responses they get.

One fear of telling investors

One fear, of telling investors that the product you are asking them to invest in is built entirely without code, is that the investor might think less of the product and therefore be less likely to invest.

In the interview, Tara Reed talks about her experience with this worry. Her view was not necessarily that she feared what investors would think--although she admits that she might have had that fear had she thought deeper about this early on. Rather, she never really felt compelled to mention it because she did not think that it mattered. She was building a product; it worked; and that seemed to be all that mattered.

She is probably right. It should not matter in terms of appraising the product's ability to capture business value (i.e. revenue). If the product is good enough for people to use and pay for, then it is better than many of the other products out there, almost all of them custom-coded.

However, the area in which investors might have more of a concern is protectability: if the product is built without code, does that make it easier to rip-off? Is this product and her business more vulnerable to competitive threats? I think the answer depends, but not necessarily on whether the product was built without code or not. It depends more on the competitive advantages inherent to the business model.

For example, I could rip-off AirBnB if I wanted to, without writing any code. But would I be a threat to AirBnB? No way. Why not? Because AirBnB's business model keeps users plugged into an easy-to-use, two-sided marketplace that, by now, has such a strong position in its market that any potential entrant would face a near-impossible challenge unless/until AirBnB users encounter some compelling reason to jump ship. This highlights where most of today's competitive advantages really come from: it's not the "proprietary technology;" it's the hustle and the reputation for delighting customers. Winning and dominating a market matters more than how you built your product.

One advantage of telling investors

In the interview, Jon Colgan talks about the advantages of always pairing good news with bad news with there is bad news to tell. When you give someone bad news, it is like a cliffhanger in a story. The listener is left wondering how the story will end. Are you doomed? Will you pull out of the flat spin at the last minute. People crave resolution, and telling an investor that you are attempting to do this thing that not many entrepreneurs have done successfully--build your product without code--makes the investor want to stick around to either watch you crash and burn or triumph against the odds. This is not because of the investor's strategy; it's because he/she is a human being, and human beings like stories, crave resolution, and have trouble tuning out the thrill of suspense in motion.

In this case, actually, it does not matter whether the investor is optimistic that you will be able to pull it off or is more fatalistic that you are doomed to fail. Either way, it's hard for him to forget what you are up to.

Here's the video interview

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