119. Pre-Sell Before You Build: Avoid Costly Startup Mistakes — with David Hirschfeld
Most founders dive headfirst into building their product—only to realize later that nobody wants it. Sound familiar?
In this Feel the Boot episode, I sat down with David Hirschfeld, founder of Tekyz and creator of the Launch First methodology, to talk about how to flip that script. Instead of building first and hoping for customers, David shows how founders can sell before they build—and avoid the mistakes that sink most startups.
If you’re an early-stage founder, this post is a must-read. We cover how to validate your idea, avoid wasting time and money, and focus on real customer problems—before you write a single line of code.
Let’s dig in.
Why Most Founders Build the Wrong Product
Let’s start with the hard truth: founders love their solution too much.
David has worked with over 90 startups (many of them failed), and one pattern shows up again and again:
Founders fixate on the solution and ignore the problem.
They think, “I have this amazing idea—everyone will want it!” So they pour time and money into building a product, but never pause to ask:
Who exactly needs this?
What problem am I solving?
Is this their biggest priority?
The result? A product no one will pay for.
David’s advice is simple but powerful:
Fall in love with the problem, not the solution.
Instead of asking “Do you like this product?”, ask:
“What are your biggest challenges in this area?”
“How much is this problem costing you?”
“If I could solve this for you, would you pay for it—and how much?”
If you can’t answer those questions clearly, you shouldn’t be building yet.
The Power of Pre-Selling: How to Know Before You Build
Here’s where David’s Launch First method changes the game.
Rather than building an MVP and hoping people will use it, start by pre-selling your idea.
Sounds scary, right? But here’s why it works:
If you can’t sell it before it exists, you won’t sell it after.
Pre-selling forces you to find real customers and validate your assumptions.
You can fund development with early sales, instead of draining your own bank account.
But how do you sell something that doesn’t exist? That’s where high-fidelity mockups come in.
High-Fidelity Mockups: Your Secret Weapon for Pre-Sales
Most founders think of MVPs as half-working products. But David takes a smarter approach:
Build a “looks real” mockup that’s so detailed, people think it’s a real product.
These high-fidelity, animated mockups:
Show exactly how the product will work.
Include realistic user flows—onboarding, key features, interactions.
Help you walk potential customers through the experience.
Because they feel real, mockups build confidence that you can actually deliver. And when people see a real solution to their burning problem? They buy.
“If you’ve nailed the problem and the right early adopters, selling a great mockup isn’t hard,” David told me.
Plus, these mockups:
Speed up development by eliminating misunderstandings.
Help you avoid costly rework—because you’ve tested the workflow before coding starts.
Give investors something concrete to see, even before you have a product.
Founders who use this method get to revenue faster—and with less wasted effort.
Founder Mindset Mistakes: Why Founders Fail (and How to Avoid It)
Throughout our conversation, David pointed out critical mindset mistakes that kill startups before they even begin:
1. Solution-First Thinking
Founders fall in love with what they want to build and stop listening to customers.
✅ Fix: Stay focused on the problem you’re solving and who has it.
2. Trying to Reach “Everyone”
“Everybody needs this!”
No, they don’t. Early success comes from focusing on a tiny niche of desperate early adopters.
✅ Fix: Pick a narrow, well-defined customer who feels real pain—and talk to them.
3. Waiting to Sell Until It’s Built
If you’re waiting to build before selling, you’re doing it backward.
✅ Fix: Pre-sell with mockups and validate demand first.
4. Raising Money for the Wrong Reasons
If you’re raising money just to survive, you’re probably not ready.
✅ Fix: Raise to accelerate growth, not to cover basic costs. Better yet—fund early growth through pre-sales.
5. Ignoring Real Feedback
Asking “Would you use this?” isn’t enough. People say “yes” to be polite.
✅ Fix: Ask, “What would you pay for this today?” and “What problem is this solving for you?”
Why This Matters for Early-Stage Founders
If you’re pre-seed or pre-revenue, this advice is gold:
You don’t need to burn money building a product that won’t sell.
You don’t need to guess if there’s a market.
You don’t need to “hope” investors will give you money.
You need to talk to real customers, validate real problems, and sell them a real solution—even before it’s built.
And if you do that, everything else gets easier—raising capital, building the right product, and growing fast.
Final Thoughts: How to Get Started
Here’s your quick action plan, straight from David’s playbook:
List your potential customer niches.
List the real problems they face.
Score those problems—how much they care and how much it costs them.
Pick one burning problem in a tight niche.
Build a high-fidelity mockup showing how you’ll solve it.
Start selling.
If people buy—or are eager to—you’re on the right track. If not, you’ve saved yourself months (or years) of wasted effort.
Until next time, Ciao.
Want More on How to Test and Refine Your Startup Idea?
Check out my episode on pre-pivoting your startup, where I share how to refine your idea before you waste time building the wrong thing.
Bio
David Hirschfeld is a 35-year software development veteran with a unique perspective on technological innovation and business growth. A former physics student from UCLA, David's career spans leadership roles at tech giants like Computer Associates, Texas Instruments, Intel, and Motorola, before launching his first startup—which grew to 800 customers across 22 countries and was successfully sold in 2000. Since founding Tekyz Inc. in 2007, David has emerged as a strategic advisor specializing in AI-driven workflow transformation for scaleups and in the design & development of startups. Having collaborated with over 70 startups, he developed the Launch 1st Method—a systematic approach that minimizes risks and accelerates software company success with reduced reliance on investor funding. David's expertise bridges cutting-edge AI technologies, workflow optimization, and startup ecosystem dynamics. When not transforming business strategies, he enjoys woodworking, golfing, and drawing leadership insights from his experience raising four successful sons. - What makes an exceptional software development team.
Where to find David
https://x.com/tekyzinc
https://www.linkedin.com/in/dhirschfeld/
https://www.facebook.com/dmhirschfeld
https://www.instagram.com/tekyzinc
Transcript
Lance Cottrell (00:00)
David, welcome to Feel the Boot.
David Hirschfeld (00:02)
Well, thanks for having me, Lance.
Lance Cottrell (00:05)
I really am looking forward to this conversation. We've talked a little bit right before this episode about your approach to streamlining the startup and development process. But let's maybe start with a really quick background on how you got to this spot.
David Hirschfeld (00:20)
Yeah, sure. You bet. So I've been in the software development world for over 35 years. Originally, I started with enterprise, in the enterprise working for computer associates in Texas Instruments. And then I ran software projects at Intel, Allied Signal, Arizona Public Service, and Motorola. I came from an enterprise background. But then I started my own software company in early 90s in logistics, route distribution, and inventory management.
And despite every effort on my part and my partner's part, we grew it anyway, to 800 customers in 22 countries over the next eight years and sold it in 2000 to a publicly traded firm. I later started another software company in 95 for wholesale, networking wholesale auto dealers. And that one failed. I didn't follow the same playbook as I did with when I started my first company.
And then out of the ashes of that, I started Techies, the company that I'm currently CEO of 18 years ago. And I've been working with startups ever since, startups and mid-size companies. But I've worked with over 90 startups during that period. A few of them really successful, most of them failed. And it's out of those failures that I identified the patterns that people that fail commonly have in the ones that are successful.
consistently have and that's what led me to create Launch First methodology.
Lance Cottrell (01:52)
Got it. So what do you think was the key learning or difference between the first startup and your second one?
David Hirschfeld (02:00)
Well, there is, and that's easy to distill out. The first one, we built a very, very light MVP and we put it on the market immediately and started selling it and got feedback from customers that it was sellable. And it was very, very limited in features. We didn't try to build in a lot of features and make it a truly highly engaging product. We just did the minimal possible.
and got it on the market and tested it and saw that people were buying it. The second time around, yeah.
Lance Cottrell (02:33)
So that first one really
just delivered that core value proposition, the one kind of capability that people were looking for.
David Hirschfeld (02:41)
Exactly. we, and we did it in about two months. I mean, it really was a minimal MVP, but we went out and sold it to see that we had the right message and we were targeting the right early adopter. and people needed what we had for the reasons that we thought. And so we thought we knew what we were doing. the second time around, I thought I would knew what I was doing too. And I built a, a business to business network of auto dealers and auto wholesalers with the idea that.
people looking for a car go to a dealer and that dealer then tries to source it and there was no good network for doing that without going to auctions. So that's what I created a website called Dealer Crossing where I built this dealer to dealer network and I got traction and people were getting on but I thought I would not charge them for the use of it and I would build a critical mass and I would raise money, you know, the classic process of
going forward and I did get offered money right at the beginning. I was looking for $1.25 million, but they wanted a huge amount of equity and I wasn't willing to give up that much equity, but I then never got another offer and eventually I ran out of money to fund the company and so failed. And I see this all the time. Not that they get offered usually, but that, you know, just, instead of going out and selling the product right from the beginning, like I did the first time,
and proving I have product market fit and getting buying, paying users to help me build the network because they're invested in it, which is what I should have done. I went the critical mass route, which was just a big mistake. And because it was a good product, it had value and people really liked it, but I just ran out of money. And I didn't wanna start charging for it, so I didn't feel like I could charge enough again.
That was a mistake. I should have charged whatever I needed to charge for the business to be able to generate enough income because people would have stayed on it. The amount that I would have charged would have been trivial for the value that it was providing. Anyway, it's a lot of mistakes I made that I didn't learn from the most important lessons the first time around that caused me to fail. And I didn't even realize what those...
lessons that I missed the first time that made me fail the second time, I thought they were just two completely different things. I've since learned the difference, yeah.
Lance Cottrell (05:05)
And that's a funny thing that you don't learn
from successes. It's hard to know what is it about the success was the important piece. And it's when things don't work, they're like, that's what was important.
David Hirschfeld (05:09)
No.
Right, right. I thought I had a vision. I really believed in this vision. It made sense to me. That's all that it took as long as I stayed true and focused on my vision. And those I've learned are code words for I'm gonna fail.
Lance Cottrell (05:34)
Got it. So tell me a little bit about this process that you've developed now and how does that apply to startups and are there any particular kinds of startups that it's particularly relevant to?
David Hirschfeld (05:46)
Yeah, and that's a, and that's really the right question too, because this is, um, uh, do this is all about doing prelaunch sales. Now what I've learned is you don't even need a product to start to generate revenue from the product. You can generate revenue from a well-developed concept where you can show enough value that you're providing to a stakeholder who's suffering from some problem that you're solving. So
And what we do is we build a but like we call a high fidelity prototype, but it's basically it's a it's a mock-up prototype that looks like real software So when you demo it to somebody they cannot tell that you're demoing an animated mock-up. They think it's real product It's not an MVP it shows the to your the whole to your roadmap of the product, but it's just a design mock-up it's just a very realistic one and it's a critical success factor because you
people need to believe you can deliver the thing you're selling them if it's not because you haven't built it yet. And as long as it's realistic enough looking, they believe it. If it looks like just click through mockups, then they don't know that you can build it. And so you can't sell in that case. this came out of the fact that we've been doing these animated design mockups for about 12 years. And we did it because it reduced the amount of iteration.
that we would have during development. Because founders didn't realize when they approved the mockups what they were committing to in terms of the entire workflow. And the developers weren't exactly sure how they needed to deliver the user experience. And so we'd have all this rework during development. Once we finally adopted this animated mockup where we go into incredible detail in the design process, all that iteration went almost completely away.
And the development went much faster. The founder knew exactly what to expect when they got pieces of the product to test. then, and it was just more efficient. So these mockups were so realistic. I thought to myself, why don't we go to the potential target market and do some prelaunch sales, use that money to help fund development, improve the product market fit and validate what the pricing model should be and all those sorts of things. That's how, that's where.
Launch first came from and watching so many startups fail because they waited way too long to start selling their product to only to find out they built the wrong product for the wrong market
Lance Cottrell (08:20)
Okay, so with this approach, the super high fidelity mock-up, it really means there's no hand waving over any detail. Every piece of the onboarding, every piece of the interaction, every single possible click has been drilled down at that phase before you're actually writing any code.
David Hirschfeld (08:36)
every piece of that workflow that's critical to the user experience of using the product, including on-screen behavior and things like that. Actually, the question you had asked me was if there's certain type of startups that this really applies to. So this is great for B2B startups, SaaS products, B2B to B products, or B2B to C products.
B2C if it's a high value C, high value customer that you can target. Not really for e-commerce. There are things in e-commerce if you have a product that are great crowdfunding and Kickstarter type of things, right? So that's a similar concept where you're pre-launch selling something just to a mass market instead of to a very specific user where you're solving a specific problem. So it's ideal for B2B.
That's the really the sweet spot for this.
Lance Cottrell (09:36)
it. And do you find that this approach of leading with the pre-sale sort of forces a higher degree of product market fit? That is, it's harder to sell something that doesn't exist and something it does. So does that force the founder and the developers to hone their idea to the point where it's attractive even in theory rather than actually being in front of someone?
David Hirschfeld (10:01)
Well, that's interesting that you say that because really it's not, if you've identified the correct, the ideal early adopter niche, and you, I've, you've identified the real problem that you're solving for them. and it's a high value problem and they feel very impacted by the problem, personally impacted by this problem. And you give them a high enough value opportunity to get an early and they know they're not.
they need the product, they're gonna buy it once it comes out and they don't wanna miss out on getting it early at this incredible value, then it's not harder to sell at that point actually. What it does force you to do is really nail down who that early adopter is. And we have a methodology for doing that as well, which is very metrics driven methodology, but then you test it against the market. if you've got the... like the idea is when...
When founders launch a company, when they come up with an idea and they want to execute on it, they have one job they should do at the very beginning. And all founders know this when you say it to them, but nobody's telling them this and they don't realize it. And that's, they have to figure out who is that niche they're going to focus on to begin with. And what is the number one or two, number one and two problems that that they struggle with that you're trying to address. And
You figure that out by listing all your niches and all the root level problem statements that you're solving and then scoring it in two ways. One is how much does that founder perceive they're impacted by that problem in that niche? So you end up with basically a spreadsheet with all these cells that you're scoring. And secondly, how much does that niche, how much does it cost that niche because of that problem? And those two numbers are independent of each other.
the perception of the problem and the actual cost. And you need them both high because if the impact perceived impact is high, then when you talk about the problem to a, um, to that niche, they'll lean forward because they, all of a sudden somebody understands what I'm struggling with and they'll want to know if you can fix it for them. And because the cost is high, you can charge for it and charge a lot for it. And so you need to find those two things. And that's how you nail that.
And there's other things that go into that too, but those are the two main things you need to nail down to figure out who is your early adopter niche is.
Lance Cottrell (12:32)
So when you're working with a founder, are they starting with sort of a specific problem or type of category of solution that they're looking at and then looking at all the different kinds of people? is this a wider net kind of approach where they're, how broadly do they go with this initial filter level?
David Hirschfeld (12:52)
Okay, well that's also a great question because a typical founder says, want to build this product because everybody needs this for this reason. I go, okay, that's cool. Okay, I don't care about the product. All I care about is the problem because the problem is really the thing that you want to focus on and how well you understand the problem. But they want to focus on the solution because they're past problem solving. They've already solved it and now they have this vision and they believe in themselves and all the
all the pitfalls, you know, they're wearing a black robe going out and preaching about their problem, right? So I gently peel that black robe off them and then sort of delicately put the white coat on them and try to turn them into clinicians and say, look, everything you believe is an assumption. So now we have to test all these assumptions and see which ones are right and which ones are wrong. And how do we make adjustments based on the testing that we do and the results of that.
So Launch First is about founders that believe in their vision and have a vision and think that they just stay positive and focus on their vision. They're going to be successful. Like I said, are kind of code words for I'm going to fail or I've got a unicorn. This is the next unicorn and everybody needs this product. Founders who are consistently successful and like serial entrepreneurs are ones that love the problem.
They just spend all their energy understanding the problem, focusing on the problem and talking to customers. They wanna talk to customers and they wanna focus on their problem. They never talk about the solution to their problem to customers. They just talk about the problem to understand it. The solution, the product is just the natural process of mitigating the problem. And when you think like that, you build products that people need and willing to pay for.
Lance Cottrell (14:42)
Yeah, I like that approach because I certainly see a lot of founders who will go talk to potential customers and they'll sort of ask them a leading question like, would this be useful to you?
And they'll often get a yes. Yeah, that would be helpful. It would be nice if it existed. But they're never asking, is this your most burning priority? If this was in front of you, would you buy it or would you go address some other problem? And so they got happy years, built the things and then they can't sell them because it's not the priority.
David Hirschfeld (15:10)
Exactly.
Right, exactly. Yeah, founders don't know how to ask those questions. What are your problems? I have a list of problems that I'm sort of focused around. How much do these impact you? Do you have different problems that impact you more? What have you done in the past to address these problems? Have those things worked well? How much does this problem affect you personally?
What's the cost, the actual cost of the company as a result of having to deal with this problem? Is there any political will around addressing this problem if there was a way to mitigate this problem? These are all the questions founders should be asking. And people want to talk about their problems, right? Because they're hoping that you'll be able to help them work through it. They don't want to talk about your solution. Yeah, you won't get honest answers from people when you say, well, I was thinking of creating, doing this, do you think that would help?
They may say, yeah, I think that would help a lot. That doesn't help you in any way because until they actually use your product to solve that problem, you don't really know if that thing that you built is going to help them. if you understand the problem really, really well, like at a cellular level, the chance that you build the wrong thing is much is dramatically reduced. And the chance that you won't be able to sell it goes way down because you know you can get their attention because you're talking about the thing they care about the most. And that's a
problem that impacts them personally and is costing them a lot of money. There's a great book, by the way, it's my favorite business book about this topic. It's called the Mom Test. Because whenever you go to your mom with a business idea, right, assuming you have a good relationship with your mom, you ask her what she thinks about the business idea, I've got this idea, I'm gonna have recipes delivered to you real time from an app.
You know, and somebody will come and teach you how to do it and it'll be really inexpensive and they'll write. So it'll be Uber chef educator. That's my idea. and your mom's going to go, that's brilliant. You're so smart. know you'll make it successful. I would love that service. You're not going to get honest answers from her. So, right. So the question, so the book is all about how do you ask questions from your mom about your business idea and actually get honest, useful answers. That's why it's called the mom test.
And a lot of the things I've been talking about, he really articulates it and has a system around how you do this at different stages of your startup, from concept to selling your product.
Lance Cottrell (17:51)
So we started our conversation talking about this sort high fidelity mock-up and actually pre-selling that to customers. But your process then is starting actually much earlier than that when you're doing a lot of deep exploration and validation around making sure that you're even going to build the right mock-up.
David Hirschfeld (18:10)
That's exactly right. I mean, we start at the requirement stage to understand what the product, we always understand what the product is that they want to build and capture all those requirements. And then we spend a lot of time understanding what problem it solves. And very often founders really struggle to talk about the problem. say, so tell me what problem are you solving with this capability here? What's the problem? then they tell, or what problem are you solving? And they give me a feature.
And I say, well, that's not a problem, that's a feature. And then they give me a benefit. Well, it's going to help people in this way. I said, okay, that's great. But what's the problem? You know, and I usually have to dig down quite a bit before they actually can articulate what problem they're trying to fix. They, and they know it usually at an instinctual level, very often it's a problem they've been struggling with themselves. You know, those are founders that are trying to really solve an organic problem that they struggle with, but they have a lot of trouble. Once they started thinking of the solution, they can't.
step back and get back into thinking about the problem. It's an interesting, but it's consistent across almost all founders.
Lance Cottrell (19:16)
It feels like
it's related to that kind five whys sort of approach where you need to keep digging into it. I I see so many startups now that are pitching solving loneliness, which is just entirely too vague a concept to be an actual specific problem that you're solving.
David Hirschfeld (19:22)
Exactly.
Right. Exactly.
Right. Yeah, you can't solve. I mean, that's you're you can't solve that. You might be able to solve some nuance of it. Right. That's within a certain context. But you can't solve that. The five wise is exactly I call it the three wise. But the five wise is probably right most of the time. And you know, you're at a root level problem when the person says I I am afraid or I feel threatened.
be due because of this, because of this problem, because it will cause this. That's when you're at the root. And until you get there, you're not at the root. Until you get to, yeah, they have to feel threatened by the problem in there. You have to be able to express that threat. And the reason that matters is you only, I've learned, this is something I learned and I'm not sure exactly when I learned this, but I've.
Lance Cottrell (20:13)
I like it.
David Hirschfeld (20:28)
But because I used to kind of argue against it and eventually it just became obvious to me. You only are motivated to do something because you feel threatened at the survival level in some other way and you're trying to eliminate that feeling of threat. That's the only thing that motivates you to wake up in the morning, to eat your breakfast, to go on a vacation. You you see the beautiful Hawaiian vacation and the first thing you think is if I don't do that, I'm going to miss out on, you know, living a full
rich life and all the things, it's all fear drives it all. So, right, if you had no fear about anything and you felt perfectly satisfied, you'd have no motivation to do anything different than you do. I would go on that vacation. It's not, I'm not getting anything out of that. It's.
Lance Cottrell (21:05)
Yeah.
That's right. You're
just going to sit under the Bodhi tree and contemplate infinity for all your time.
David Hirschfeld (21:20)
Exactly.
Exactly. Pretty much right. Exactly.
Lance Cottrell (21:25)
So one of the things that I've been seeing is with AI being such a Swiss Army knife, it feels like people are just exploding with ideas for where to go, what kind of business to build, everything. We're just going to snap AI onto it. So what are your thoughts about how to validate that, what it seems like such a kind of universal tool to solve all problems?
David Hirschfeld (21:48)
Well, it's an amazing tool. mean, we are embracing it big time, both internally in my company, as well as with our clients. Adding AI workflows, building AI applications, I mean, it's amazing what, it's way farther ahead, much faster than I ever thought. I thought we'd be here in 10 years, not where we are right now. It just came up really quick.
So, when it comes to it being the Swiss army knife, it's sort of like having a best friend that just knows everything about everything, right? And you can chat with it anytime you want, but not everybody embraces, uses AI as effectively as they could. One way I try to explain to people when they're not using AI as effectively as they could is, you,
Reference, are you asking AI how you should be thinking about things and what questions you should be asking when you're trying to solve a problem? How you should approach something? Because it's, that gets the conversation and then, and treat it like a conversation where you're speaking to it like it's a person that just happens to be a really, or an advisor or a consultant. And let it frame things for you. So I'll give you a good example. Totally outside of the context of
software. So actually, I can give you a couple examples. These one was from two years ago and one just happened a few weeks ago. Two years ago in chat GPT was just a few months old. We had just bought our house in San Diego where my wife and I are standing in her backyard. And she asked me, you know, how many beds do you think I would need for growing vegetables? We she wants to grow all our vegetables. She loves to do gardening.
And, um, and I love when she does gardening and cause we got to have all these fresh vegetables and fruits. So, uh, I said, I don't know. Um, and she had some formula that she had heard of. I said, let's ask chat GPT. I've been telling her about this thing. She said, okay. And so I got out my phone and her sister called right then. So she gets on a call with her sister. They're talking about the move in the backyard. And I get on the conversation with chat GPT. I said, and I can say, we're, we're two people in our early sixties. have.
We eat a lot of vegetables, but not only vegetables. We live in this climate in Vista, California. My wife wants to grow all her own vegetables. This is literally the conversation I had. And she wants to know how to plan the garden and how many beds she's going to need and what size and all that. What questions should I be asking? And then it gave me a list of questions. Then I said, those are, those questions look good. Go ahead and answer them. And it answered all the questions. And I had a five minute conversation with Chachi P.T. at the end of it.
I had a year-round schedule for, I think it was six beds, six four-by-four beds, and what goes in each of the beds at what month of the year to plant and what month of the year to harvest. And it took into consideration companion planting where, you know, certain things in the beds grow with other things and don't like to grow with other things. And then succession planting, when you harvest those, what is that soil now ideal for?
what other vegetables go in after that, right? And because you don't wanna, you grow onions and there's certain vegetables that like that soil and others that hate it. And then what companion flowers do you put? Because certain vegetables attract certain types of bugs and certain flowers, you grow them alongside it. The bugs like those flowers, the same bugs like those flowers more and it keeps them off. Anyway, give us a schedule for the entire year for all the beds.
And she got off the phone with her sister and she said, what were we talking about? And I said, here, showed her the chatty PT and laid it all out in tables and her mouth, her jaw hit the floor. I mean, she could not believe she looked at it and she knows a lot about gardening. So it would take me days to do this. This is all looks correct. How did you know? She started asking me questions. So that's an example. that was two years ago. Technology is way better now than it was back then.
Just a few weeks ago, went to, my wife and I went to the Tucson Gem and Mineral Show. And for those of you who don't know what that is, it's the largest gem and mineral show in the world. Takes over the entire city. To give you an idea of the Tucson Convention Center, I think they have 40 or 50 locations throughout the city. The Tucson Convention Center is just one of the locations and it's nowhere near the biggest location. It's massive.
And people that go to this, complaint is they didn't plan it well enough. And so they feel like they missed a lot of it. And so I had a conversation with Chad GPT and their deep research tool had just come out and I asked it to do research. said, here's what our objective is. We want to try to find something for our entryway, this size, this type of thing. You know, so plan the trip so we see a lot of variety just in case we find something else we want.
but we want it to be large and where do we go and what's the order of places that we should go so that at the end of the show we're ready to make deals and it laid out the entire itinerary for us, which shows to go to what booths at those shows were known for these types of minerals and rocks and where to eat on each one and put them in an order so that we weren't driving all over town and at the end we followed it and we ended up buying exactly what we wanted. It was really pretty amazing.
Lance Cottrell (27:37)
It really is fantastic at those things. I think that also raises sort of a challenge for lot of founders who are wanting to do AI startups. Is it like, my God, AI can do this really well. And so they'll throw a wrapper around it. They'll put a little bit of secret sauce around, let's say travel. Help me plan travel itineraries specific to my interests. But the problem there, it seems to be that there's very little moat to it. Anyone can wrap chat GPT and
and throw in a little bit of fairy dust and get a tool that's really useful and can do these things. So when you're working with someone, how do you tell the difference between a viable AI driven idea and one that is just going to be a me too and fundamentally has no chance of standing out from the crowd?
David Hirschfeld (28:27)
Well, think the first thing and that's, you know, I think about that a lot, right? And the first thing is, are there already things that do that? Hopefully the founders already done some research, but it's surprising how many founders have ideas and they say, I want to build this and they have not looked research the market, you know, and somehow there's, they expect me to know what's out there. And in some contexts I do, but for most of them, I have no idea without doing my own research. So,
The first thing is research what's out there and how you would accomplish this right now. And if it's a complicated workflow to do the thing, you've got a chance of building something of value if that's a high value thing that you're delivering. And I can give you a lot of examples of what those things look like because AI cannot, there's a lot it cannot do yet, but all by itself. And it will be quite a while before it can do a lot of these things. So a lot of complex workflows. One example is I'm a,
I'm a distribution company and I buy, I sell and ship all around the world these parts and I buy of different categories and I buy them from different distributors. And so I get orders from customers and then I send out orders to a bunch of different distributors and then those distributors then send me invoices along with the shipping information. And I have to correlate and.
make all this match and work. And there's lots of discrepancies. right now, so AI is really good at if you build automation to automate this workflow at looking at the, because a lot of these orders come in in PDF and a lot of these other orders come in from like emails, embedded emails, know, the invoices and things like that. And so I can grab all those documents, have AI parse it.
And I have to do with a really high level of confidence that it's understood everything in the email. And the part that I got an order for, then when it comes back from the supplier, it's named something different because that's how they refer to it. And I have to be able to become smart enough to know that these are the same products in the case of this supplier, but it wouldn't be the same product in the case of this other supplier. This is an example of where AI can, you can build automation that's really smart and has huge value.
because it literally is eliminating mistakes and reducing the need of having all this manual review of these invoices and orders from these different groups and reconciling them all together. But you couldn't just ask AI to just go out and do this for me right now, right? It can't do that. You have to feed it information. You have to do it in a certain sequence. And then when it's done, I need to update my ARP system, right? With the change, because it found a discrepancy.
Confidence that this is the correct thing is under percent. No and now can go and automate the update Lots and lots of those are being things like that are being built automated outreach and That's personalized in marketing. Those things are all very real and valuable We're building stuff internally for example managing projects one of the big thing whenever you're managing complex software project is
You always have these status meetings. have this list of things you're working on and list of things that have been completed. All these different builds that you're scheduling with different pieces being included in each of these builds and they're scheduled out several weeks. And whenever somebody reports a bug, it goes into the system.
a founder or the person you're doing the development for report the bug directly in the system, or do they send an email that somebody has to interpret and put in the system? And if they want to know the status of that bug, who are they going to ask? So we're building a a voice front UI for this that will know, learn the person's project, all the details and stay up to date as the details change. They can say, I have a bug and it can say, that bug was already reported. It's medium priority. Do you want me to change it? And they'll say, yeah.
When will that be scheduled to be out? And it'll tell it when it's scheduled. If it changes priority, can come out sooner or later. Here's what the build schedule is, right? Stuff like that. Huge value. To my team, it's a big value. To my customers, it's a big value. And it's something that development shops all can use. So this is something we're one of several things we're building right now.
Lance Cottrell (33:03)
Okay. So let's think about a non-technical founder who's gone through your process. They've talked to the customers. They've done this high fidelity mock-up. They're doing some pre-sales. Now they actually need to build this thing. What is your suggestion for how to approach
that step in the process, putting together the team, what kind of a team do you need? Is it important to be bringing in the ultimate rock stars or do they just need sort of a competent group of people who can execute? How do you guide people through that?
David Hirschfeld (33:36)
I mean, I tell them to just hire me and my team because that's what we do. And we're really good. But if they want to build their own team, if they can find a rock star that won't require most of their equity and a crazy salary, then that's great. The problem is how do they and their non-technical founders, how do they know if they're rock stars? A lot of people will claim to be rock stars because they came from some big success and they really weren't.
a critical factor in that success. You just don't know if you're not in this world. They find, they say, okay, I can just go offshore and get a really cheap, it's built and those are 99 % of the time disasters, not because they're offshore, but because the non-technical founder has no idea how to validate the skill of the team and their ability to deliver just because they have a portfolio of stuff they can point to doesn't mean that.
their three month estimate doesn't turn into 15 months of misery. the best thing I could say would be just feel free to give me a call and I'd be happy to coach you. Even coach you not to hire me if what you want to do is do something else. And I would do that at no cost because I hate to see people get stuck in these disaster projects.
Lance Cottrell (34:56)
Yeah, there's nothing more frustrating than seeing someone who's got some really good fundamentals but gets mired down in some specific aspect of the business that ends up holding them back in a big way. So when you're coaching or working with founders, how do you suggest that they think about their role evolving over time from sort of the earliest days through until they're kind of launched and getting well into the market?
David Hirschfeld (35:24)
So I was just talking with somebody else about this. There's this concept of one to 10, 10 to a hundred, a hundred to a thousand. And that's in terms of generating customers or generating X times that revenue. it's a logarithmic kind of effect where to get your first customer is not the same effort, same process that you need to get your first 10. And once you've gotten 10,
Now what you need to do to get your first hundred is different. You know, the systems that you have for getting those 10 are not quite what you need. You need more scale and automation now. And once you get to a hundred to get to a thousand at that level is another level of infrastructure and growth and change that you have to implement in your organization. So, but all those things you don't, you really can't anticipate, unless this is your fourth company.
in the same market that you've been successful in the past and you know what that trajectory looks like exactly. So what I say to founders is work on, you know, focus on that first initial sales. That's what, and how do you repeat, get a repetitive predictable process where you can keep selling in this pre-launch model? Because that will fund your development and it will create a large group of very invested beta testers who will give you the kind of feedback you really need.
once the product comes out. And once the product's out, you're focusing most of your initial efforts on what I call product solution fit, not product market fit. Product market fit you already have because you know how to sell it, right? That's what product market fit is. Product solution fit is now are people getting the value out of the product. They're engaging. You're going to keep these customers long-term because you've delivered something that's usable and cost them less now to use your product.
mitigate the problem than what the problem cost them. And so that's what you're trying to nail down in the early days with an MVP as product solution fit. Once you've got that and you start to build your marketing systems and you start to build some infrastructure for growing your partnerships or whatever your marketing plan is, then that's where your focus shifts to. And you can't really see much past that. You can build a five year plan, right? And show these hockey stick curve forecasts
and they never come to pass. And that shouldn't be the thing that, but you need to do that if you're trying to get investors. But if what you're trying to do is build a really sustainable business, then you want to get to a million in sales and you want to get to three to five million in sales, right? And this might be a first year, year to two years, then three to five years. You get to five million in sales. Now you're working at growing that to 10 to $15 million sales and you've got a cash flowing profitable business that has huge value.
in the market if you were to sell it. That's what people should be focused on. And if it turns out that you got hit the nail on the head, you're the one in a thousand, and it takes off into 500 million in sales in three years, and you have all these VCs throwing billions at you, great. Just don't plan around that because you'll just be disappointed and you'll be focusing on the wrong things.
Lance Cottrell (38:41)
Yeah, so how does that play into the question of if and when these companies should be thinking about fundraising?
David Hirschfeld (38:46)
My philosophy is you shouldn't fundraise because you need money to run your company. You should fundraise because you now have a model that works and you want to accelerate it, accelerate the growth and capture market share faster. That's a good reason to fundraise. Or if you just happen to be,
in the right place, in the right time, with the right technology, in the right market, like in healthcare, biotech, and you've come out with an AI nurse or whatever, and you have connections in that world so that you're talking with state Medicaid organizations, for example. Okay, now that's a different story because you need big dollars to prosecute that business. But again, that's the one in 1,000. That's tiny percentage of companies are.
set up like that and have the, where a CEO has the gravitas and the reach to pull those kinds of relationships together early on. So, but what most people try to do is they build an MVP and a pitch deck and they try to raise money from investors and they just suffer and struggle and they do friends and family round, you know, and, and, and struggling to sell their product, which is what they should have been focusing on right from the beginning. So.
So if you need the money just to run, you probably shouldn't be trying to raise money. If you need it to grow and to accelerate your growth, then that's a good time to consider because you're also in a powerful position because you're showing traction and product market fit, and then people want to invest in you and you can do it in a leveraged way.
Lance Cottrell (40:28)
It's the classic story that the correct time to raise money is when you don't need it. You you may be able to use it, you may want it, but if you need it, you're over a barrel and there's always some real challenges there.
David Hirschfeld (40:34)
Right. Right.
Yeah, pivot, step back and pivot if you actually really need it. and I'm not saying that's always true, but that's probably 95 % of the time true. You know, if you need it, it's probably not the, well, first of all, it's going to be incredibly hard to get it if you need it. and secondly, you're not getting it for the right reason. I, you know, I've, it used to be a lot easier to raise money and founders that had, were in the right market at the right time with the right background. People would throw a lot of money at them and then they'd blow it all.
Such huge failures, you know, in the last 10 years, I can think of several, you know, where they got $30 million in a seed round and blew it all.
Lance Cottrell (41:24)
Yeah, I mean, I remember I had a lot of competitors that got heavily funded in the late 90s, you know, on a wing and a prayer and then things got tight and, you know, they went into the ground with their afterburners on because they had no way to pull up and it was completely inviolable. And this probably also explains why it's so difficult to do fundraising for, for example, hardware companies. With a SaaS company, the cost of producing the solution, particularly a very limited focused one, is usually pretty straightforward.
but a lot of hardware companies, they're capital intensive. They literally can't even come out with a first prototype without spending some significant dollars.
David Hirschfeld (42:03)
Right, exactly. Hardware companies, that's, you know, I don't spend my energy there because I'm a software developer. But software companies, even still, it still costs money to build something of value that is scalable, that is appropriate for a large market, you know, or for, mean, to penetrate a market. It still costs money to do that. So that's why it makes a lot more sense to have your customers fund it.
fund the development instead of trying to raise money from investors to get the initial anchor in the market and position in the market and then raise money because you're in a good position to do it. That's assuming you even want to raise money. You might have figured out a way of prosecuting your business without having to raise money and now you don't have anybody you have to answer to. You can just grow it the way you want.
Lance Cottrell (42:57)
Yeah, because absolutely, right? Once you start taking money, particularly from venture capital firms, you are absolutely making a commitment to a certain kind of path and a certain kind of growth.
David Hirschfeld (43:07)
You're on the hook and you need to grow at a very accelerated rate or you'll lose control of the company because the VC won't get involved if they don't have that ability to pretty much take it away from you when you fall short.
Lance Cottrell (43:20)
That's right, yeah. And they're looking for
that 30 % month over month sustained over a number of years, which is a big commitment.
David Hirschfeld (43:26)
Right, is great,
which can happen, but it's the rare founder that is in that position to deliver that. Yeah.
Lance Cottrell (43:34)
Yeah, no, I think that's very true. Most companies are never, most very successful companies are never going to be in quite that spot.
David Hirschfeld (43:42)
Right, right. Yeah. And plus your chances, all the time you spend trying to raise money, none of that goes into actually building your business in any, in any measurable way. Um, uh, and your chances of being able to raise money from VCs are so tiny. Uh, um, the numbers that I had corroborated a couple of years ago from several VCs is they'll see 3000 pitch decks.
And out of 3000 pitch decks, they'll invest in 30 of those companies of which 70 % fail. right. So out of your chances of ever seeing any money from a VC are incredibly too small. One in a thousand, guess, is what it roughly works out to.
Lance Cottrell (44:24)
Yes.
Absolutely. I mean, I know from as an angel investor, I get cold pitched something like a thousand times a year, right? And I'm not making dozens of investments. I'm making a couple. And so the numbers are insane. So any other sort of closing thoughts, advice, any questions I missed here that you think are important to share?
David Hirschfeld (44:39)
Exactly. Yeah.
I'll give you a prediction. If you're into your audience, you think we'd be interested in predictions, but don't invest in parking lots or in multi-level parking structures. I see own in a some three, four, five, six years, probably not three years, probably more like five, six years with self-driving cars. the, there'll be a critical mass at some point and it will be much bigger critical mass than like Uber and Lyft and things like that, because.
Lance Cottrell (44:56)
Perfect.
David Hirschfeld (45:22)
because it won't be dependent on people driving them and it will be much cheaper and safer and people will just stop buying cars and stop driving their own cars for most things. It'll just be a point of critical mass. We'll already start seeing a little of that with millennials and Gen Z where they're not as interested to have a driver's license. Where that was such a, when we were kids, I don't know anybody that wasn't like desperate to turn 16 and get their driver's license.
But now it's like, there's no hurry. Because it's just so easy to get around. And when you don't even have a driver you have to deal with. And that means the cost is going to come down. There'll be competitive pressures. there just won't be. these lots and these parking garages are just going to be empty. They'll start building homes differently, I think, where the idea of a two-car garage is like a crazy luxury because nobody needs to.
because even a one car garage is kind of a luxury. That's just storage. know, driveways and I mean, it's so there's a prediction. It's one of the few predictions I feel safe I can make. The rest of them is really tough to make.
Lance Cottrell (46:32)
Yeah, people talk a lot about drones and all these air taxis, but the shift towards self-driving vehicles that you just summon, don't need to, right, it doesn't need to park somewhere, you don't need to worry about maintenance tails, there's no cost of ownership when you're not using it. That just feels like an economic imperative that's gonna be hard to avoid.
David Hirschfeld (46:54)
I think in 10 to 15 years, then those drones will be a reality because we'll have the battery power so that they can fly pretty good distances without ever needing to worry about being charged. But there'll be a premium. So you only do that because you're in a hurry to get somewhere. You have to go all the way across town. You want to get out of all the traffic or whatever. But they'll be just part of the whole transport.
constellation at that point. But the self-driving curves, that's just a no-brainer in cities, obviously not in rural areas. Maybe that'll come too, but that's gonna be much farther out.
Lance Cottrell (47:35)
Right, yeah, if the nearest one that's going around is a 15-minute drive to get to you, to pick you up, suddenly the convenience equation changes pretty substantially.
David Hirschfeld (47:44)
Right. And I don't think there'll be 15 minutes. Yeah, right. You're saying in rural areas, right? But like, right. But like right now, if I go to Phoenix, which I go every month because my mother still lives there. And so every month I go and I do a day trip out there and I've been taking way most for the last few months. I've been using the Waymo, which is a great experience. And they are never more than two or three minutes away. So in, in and around the airport.
Lance Cottrell (47:48)
Yeah, in rural areas, exactly.
David Hirschfeld (48:14)
And even in the north part of town, they're often available within five to seven minutes, even in the north part of the Phoenix area. And now they kept expanding their area so that I could get to my mother's, but it was all surface streets and they now just enabled the freeways. So I can get there just as fast and it's half the price of taking an Uber or a Lyft to get in a Waymo and the experience is excellent.
Lance Cottrell (48:42)
Yeah, mean, things are changing fast. I live out in the booties. It's a 10-minute drive from my house to the gate of my community, so it'll be a while before we get that.
David Hirschfeld (48:43)
Yeah, so yeah.
wow. That is, you're
in the Boonies and you're getting community. You're in the Boonies. That's pretty funny. Yeah.
Lance Cottrell (48:58)
Yeah,
no, we're way out there. awesome. So where can people find you? What should they, where should they look you up?
David Hirschfeld (49:06)
Well, thank you for asking me that. And there you can find me at techies.com and techies is spelled T E K Y Z T E K Y Z. Anybody made it to the end of the show, I'm happy to give you my email address. It won't be in the links, but it's David at Techies. And I just like to talk about technology and startups and AI and automation. And if you want to just chat, I'd be happy to, or look me up on LinkedIn. I'm easy to find on LinkedIn, David Hirschfeld.
Lance Cottrell (49:35)
Thank you so much. really, that's very generous. I really appreciate that. Hopefully some of the viewers will be able to take you up on that. And it's been great talking with you. Thanks so much.
David Hirschfeld (49:42)
Yeah. Yeah.
Thank you, Lance. I really appreciate you having me on your show.
