I hear lots of questions from lots of startups. The hardest question everyone has is the same.
“How do I raise money?”
Almost all startups need to raise money. We measure startups in the amount of money they raise, and at what valuation. We hear about funds being raised and opened to invest in startups. We look at VC’s like prom dates, and fret about who to ask, and who likes us. The focus on money becomes a set of blinders that startups wear when working in the ecosystem.
The “M” word seems to bring a sense of distortion with it. Money is important, but the focus on raising capital makes us forget what business is about. Startups are a business. Businesses need to make money. Businesses outside of the startup sector never dream of trying to raise a million dollars to get started.
My first business was an IT services company. I built and managed networks. When I started out, I didn’t think about raising capital. If I wanted capital, the only real option was applying for a Small Business Administration (SBA) loan. The SBA exists because banks hate to loan money to start companies. The SBA process is like raising capital; business plans, projections, and mountains of paperwork. I ran my first company for 11 years. How did I get started, if I didn’t raise money or get a loan?
Customers. Everyone forgets that a company doesn’t exist without customers. You cannot call yourself a business without customers. Even non-profit organizations have customers.
Your startup needs to raise some customers before you raise capital. Finding customers for a new business is hard. Finding customers without a product seems impossible.The paradox is that VC’s rarely invest in anything without customers. You need to have a product to get customers.
How do we solve this paradox? The only way to solve an unsolvable problem is to change the variables. For startups, we can change these three variables to solve our paradox.
What do you need to show your idea? Startups can use wire framing and other tools to create “codeless” platforms. A startup could use forms to get customer requests, and have humans generate the answer. In the early stages, a platform can be an illusion. Our job is to create a great illusion of our idea. Stretch your ideas about prototypes that are not code.
Customers come in all shapes and sizes. If you can build an illusion of your platform, you can find potential customers. You might not sell to them, but interacting with them starts making your platform customer focused. Get them to “pre-commit” to your product. Find out what they would pay. The goal is showing that we can find customers, and they would pay for the product.
Getting customers to commit is easier when you look established. A startup can improve confidence from customers by building out a digital “footprint.” VC’s want to see a good footprint. Spend the time getting a website, email, social, support, and brand established. A footprint can be built with little money.
Startups that focus on raising customers never have trouble finding money. VC’s chase companies with customers because customers bring money. VC’s only invest in companies that generate money. When I’m asked how to raise money, I ask about your customers. I can’t help a company look at raising money without knowing how they get customers.
How do you get a platform, customers, and a footprint? I’m running a free “Zero to MVP” workshop series that will help early stage startups get customers. Zero to MVP is a 5 part workshop to help early stage startups; setup a footprint, build an MVP without code, find contractors, pick a tech platform, and how to manage coders for non-coders.
Our goal is for your startup to attend and learn some of my methods for getting an idea to market on a tight budget. Our workshop series will be in person, and also streamed online via Google Hangouts. For corporate Cintrifuse members, the zero to MVP approach can help you validate ideas, without getting into budget or compliance challenges.
Eric built his experience working in the tech sector for 20 years. He is CEO of Campus Suite, a content management and communications platform for schools and colleges across the US. Eric is also COO of Soundstr, a Brandery graduate backed by Gracenote, and COO of Craftforce, a skilled trades marketplace. He helps Cincinnati startups as a advisor for Cintrifuse. Eric brings his experiences and methods from running multiple companies to the startup ecosystem. His key skills include team management, platform design and development, process design, and inbound marketing. Connect with Eric on LinkedIn
Feature image credit Lig Ynnek. Image has been cropped.