For some time now, I see start-up founders fond of attracting investors more than customers. A couple of days back; I received an email from one of our clients, a start-up promoter asking this: “Is revenue an important factor for investors”? He did pull some article from the web as a defensive to his awkwardly odd question. I was puzzled. How on earth can a promoter ask such a question! But later I could observe that, like most new-age founders, he was just reciting the voice of the market.
In another incident, a lead prospect approached us for arranging VC money. Later, we discovered that it’s not going to work. We advised him to avail debt for the time being, and later explore a larger funding round with equity. “If I take debt, how do you guys think I’m gonna repay”. His reply made our hairs go against gravity! Do promoters these days have a notion that VC money is cheap? – we murmured. But for a sec think about this chap. He is a typical sample case for a start-up founder survey.
I read elsewhere that success for most founders these days is marked by their ability to raise money. The person who wrote that article wasn’t advocating this argument though. In fact, he was expressing the same concern that I’m trying to bring to light. This success, marked by the ability to raise money, comes with a score card. Score cards vary depending on the muscle and brand name of the investor. More marks for VC, less for angels. Founders believe that a better scorecard helps them attract more customers and hire the best talent.
I don’t know whether it would make sense for me to give some gyan to these guys. I am not a fan of Yoda: so “giving it a try”. J
I happened to sit over a session with someone retired from industry. We were having a casual chat; but our objectives were clear – How the heck do you make money? He gave his perspective about business: you buy cheap and sell high; collect early and pay late. No strategy gyan; no nonsense. He left the room. Even today, I wait to see him again ‘coz he did not explain the “how part” to these two perspectives.
I slept over that night with this thought. Is that so? – is that all about business? I was enveloped with doubt. What about customers? Who are they and why are they paying you? Isn’t that important?
After repeated rounds of cross examining, I came up with a three point rule book of priorities for start-up owners.
- Make a good product (or) package a great service
- Make it available at the right place at the right time
- Keep your customers and prospects informed on the above two points
The order of rules matter here; I presume a devout follower of me to go by the numbers.
If this sounds academic, I’d assume that you are just out of college. If you got hold of this, but are wondering on the “how part”, come over and sit with me for coffee – I haven’t figured it either.
This was not the reply I gave my client (case #1 cited above) though. BTW, our engagement with him is limited to what he was expecting out of us: raise money for his start-up. Hence I don’t intend to pull his leg. I quoted a recent twitter post (cited below) made by a leading VC Partner.
The caption to this tweet was even more interesting: “saw this on a start-up discussion room board”. If this hypothesis stands, so will my rule book.
Customers are your de-facto investors
An Article by,
Hari Kumar P
Associate – Transactions & Consulting
+91 98 8490 4686 | hari@saspartners.com
