Having a good working product is definitely important, for one it brings more trust towards the project itself. Members will feel more comfortable with investing in a project that has an physical product. If a working product is not available, then a prototype or a demo is needed that will show how the actual product will work.
Absolutely, good products will attract investors right away. The success of the projects always depends on how good the product is and how beneficial to the users. Specially if the product is really working in the line with the packaging to the actual usage.