The Secret to Raising Money- Three Magic Words (originally published 12.1.2017)
As a start-up guy, we are constantly raising money for new ventures.
To that end, I’ve learned the secret to raising money and am going to share that with you accordingly.
However, before I do, I must admit to you that simply knowing the secret does not solve the issue.
Bear with me and you’ll see what I mean.
When you create a company, you are starting from scratch; a simple idea that you have big hopes and dreams for.
So you go through the process of formalizing the company, maybe create a business plan , powerpoint or prezi, assemble your management team, develop the financial plan, settle on a go to market strategy, and then…….set up meetings for fund raising.
You walk into your first angel or VC meeting all ready to knock their socks off.
You fly through the presentation, cover all the basis and wait with baited breath for the response.
What is the first question that is invariably asked after a meeting?
I’ll give you a moment to take a guess.
Here, more often than not, is a variation of the question you will get;
“Who’s your customer”?
Meaning, who’s using your product? Who thought enough of your idea to buy into it? Pay you money? Sign up? Demo?
Yes, the bottom line, the secret to raising money, the THREE Magic words are;
Capital Follows Customers!
Think about that for a moment and let it sink in.
If you are raising money, what is it being used for? What is the use of proceeds?
The capital will usually be for things like sales, and marketing, and advertising, all things that are designed to drive customers and revenue.
Knowing that in advance, can alter the way you proceed in bringing your company to market.
If you have a concerted focus on who your customer is and how you are going to acquire them, you will be leaps ahead of others starting down the entrepreneurial path.
What can you do with your start-up to have conversations with potential customers? How can you get in front of your prospects very early in the process? How can you get them involved in your strategy, interface, value proposition, etc.?
The more conversations you can have with customers, the closer you can get to establishing the early adopters, and the more conversational traction you can get, the better you will be in answering the question when posed.
So, be prepared, have your answer, and always remember- Capital Follows Customers.
