Paloma is the leading venture studio in ANZ. Our 100+ team has forged an AUD $250M+ Venture Portfolio, and helped steer firms like Afterpay to billion-dollar acquisitions.
At Paloma we work with founders right from the very start. Pre-product, pre-revenue is our sweet spot and we love to get our hands dirty from the outset to help shape ventures with the potential to go big (think $100m ARR and beyond). However, like any investor, we are looking for early signs of potential before signing term sheets.
This can feel like a bit of a chicken and egg situation to some founders- how can you prove potential without a product?
It’s a fair question and it can take some navigating. So here’s some clarity on what we expect to see from pre-product founders when it comes to validation.
Level One: The Basics
These are the bare minimum things we expect founders to have done at the validation stage, usually before speaking to us.
Customer Discussions
At its core, validation is about finding a problem people are eager to pay you to solve. We often speak with founders who are deep domain experts who have personally felt the pain they want to fix (we love these founders). But true validation comes from getting out into the world and proving your solution resonates with real customers as well.
At a minimum, we expect to see evidence of customer conversations. Even without a product, founders should be having meaningful, preferably cold (your warm network is more likely to tell you what you want to hear) conversations to test their assumptions.
Market understanding
We also expect founders to have a deep understanding of global market trends, competitor dynamics, and, crucially, an opinion on why they are positioned to win. We like founders who go beyond the surface-level, and have ideas based on thoughtful research, have tested competitor products, and have a clear view on how they can be 10x better (not just 2x).
A solid grasp of the business model Pricing specifics can (and should) evolve, but we expect founders to have conviction in the general direction of their business model and benchmark it realistically (for example, freemium-to-paid conversion is often much lower than founders assume in pitch decks). The best founders deeply understand the dynamics and incentives at play and have built a business model that is not just palatable but desirable to customers.
Level Two: Intermediate
Once you’ve covered the basics, the next level is demonstrating real demand.
This could look like:
A customer waitlist (especially for D2C or community-based ventures)
Customers chasing you up for launch timelines
Signed pilot customers or early collaborators
These signals show you’re not just solving an interesting problem, you’re building something people actively want. Having customers chomping at the bit for your product before it’s built is a nice problem to have.
Level Three: Expert
A paying customer is the best validation. Typically ventures are not at this stage when they first engage with us and a large part of our role is to help founders get there, even if it’s through “Flintstoning” (where the product experience is largely manual behind the scenes). A paying customer is the clearest signal that founders have tapped into something people value enough to pay for and is when we start thinking about bringing on a fuller team.
We’ve worked with ventures at all stages - from early whispers of customer demand to ventures already servicing their first paying users. If you’re validating a venture and want to chat, drop into our inbox at hello@palomagroup.com. We’d love to hear what you’re building.
