Raising Capital From Customer Validation

The customary pitch to angel investors involves disclosure about the company’s product, management, marketing strategy, industry competitors, and financial projections. All the while, investors are wondering if you will lose their money by failing to find customers.

Your new corporation is more likely to obtain angel investors by providing details about your customers. An investment is more attractive when there is customer feedback. This gives you real data to present that supports what you expect to achieve.

The first step in this process is testing your product with customers. This is essential even if you give away the product. Your goal is raising investor capital. To achieve that, you are seeking customer validation.

Users of your product should provide testimonials. This helps you identify enhanced features demanded for the product before you seek investor funding. Therefore, you can even present an unfinished product to prospective customers. Offer them some advantage for giving their advice in creating a final product version. You can guarantee a discount on the finished product or offer free support.

The key is getting out of your office and conducting a first-hand market examination. As part of the process, you’ll learn the scale your product can achieve in the market. From there, you can provide convincing evidence about the concept for your corporation. There’s no more guessing about what customers want.

Even better is the chance that you will find investment sources among the prospective customers. A little seed money from your customer base makes a compelling case for more funding from angel investors.

Most importantly, your pitch for capital acquisition then includes conveying the lessons you’ve learned from your market. Mere hypothesis is eliminated.

Don’t be afraid to show prospective investors the story of your customer validation. Explain what you thought customers wanted and what you actually discovered. Wise angel investors will want to hear about your journey. They will learn that your corporation is not based only upon assumptions. Instead, you have genuine data showing that your startup is focused on customers.