5 Reasons Customers Matter When You’re Raising Capital

“You don’t have to swing hard to hit a home run. If you got the timing, it’ll go.” – Yogi Berra

A lot of things—sometimes including the sun and the moon—have to line up just right for a startup company to attract investment capital.

  • – The product has to work.
  • – The founding team has to be high quality, flexible, tenacious and coachable.
  • – The company has to solve a big problem for a large market.
  • – Investors have to see and believe that the company can make money when operations and sales scale up.

When you have the timing, as Yogi says, you don’t have to swing too hard. But if your timing needs a little work, there’s no better way to improve a startup’s odds of accomplishing critical milestones than by engaging with customers.

tom-walker
Tom Walker – President & CEO of TechColumbus

1. Customers will tell you if your concept makes sense and if your product works or not. It’s never too early to engage a potential customer—even if your prototype is made out of cardboard and glue. Start by describing the problem you think your technology can solve, don’t start by talking about the technology. Then listen, listen and listen some more.

2. Customers stress test an organization. The minute you have one customer—it doesn’t matter if they are paying or not, things get more complicated. Customers have timetables, deadlines and expectations. With a customer to answer to, you’ll discover whether or not you’re good at building relationships. You’ll learn how to balance the priorities and resources of the company you are trying to build with the markets you want to serve. It’s an opportunity to learn how to develop the trust and confidence that allow young companies and their customers to weather growing pains.

3. You don’t know as much as you think about the problems customers are trying to solve. Be assured, customers’ challenges won’t be exactly what you expect. Looking at a problem or challenge from the customer’s perspective out rather than through the lens of the solution you are trying to build will put a different spin on things and hopefully keep you from building a product no one wants to buy.

4. Early customers can serve as referrals for the future customers you hope to gain. There’s a certain loyalty that often takes hold between startups and their early adopters. Building something together can create a lasting esprit.

5. Customers pay the bills. There is nothing like revenue from early adopters to put a sparkle in a potential investor’s eyes. Or if your solution isn’t revenue ready, perhaps your technology is so promising that a potential customer would help fund development, supply materials, or loan you some engineering time. There’s no stronger indicator that your company’s value proposition makes financial and economic sense than when a customer puts some skin in the game.

We hear over and over from our client companies that many of the most rewarding relationships they have are with their early customers. And we hear from investors that startups with client relationships have an advantage over those that don’t.

If you have the timing, it’ll go.

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Tom Walker has been a leader in entrepreneurship and turning innovation-based discoveries into commercial opportunities for more than twenty years. As President and CEO of Rev1 Ventures, Tom applies his experience as a seasoned founder and manager of venture funds and entrepreneurial initiatives to accelerate Central Ohio’s innovation economy. Tom organized his first angel investment group and seed fund in the late nineties and has been involved with angel, seed and early stage investing ever since. He’s advised numerous states and the Southeast of England on the creation of high impact entrepreneurial ventures. He is the author of The Entrepreneur’s Handbook, an easy-to-understand step-by-step guide to commercialization for entrepreneurs with big ideas.