Editor’s note: “The Angel Connection” is a regular feature in WRAL Local Tech Wire. LTW asked consultant Bill Warner to share advice for entrepreneurs seeking investment. He is chairman of the Triangle Accredited Capital Forum, an angel investor network with over 100 members throughout the Southeast. The Angel Connection is published weekly.
RESEARCH TRIANGLE PARK – One of the most compelling things an entrepreneur can do to convince investors that their company has a viable business model is to have real customer examples that show true interest in the company’s products and services. Customer testimonials will bring reality to your business model and increase investor confidence that you will actually be able to achieve early sales traction and sustain it.
Of course, a company that has not yet achieved a sale is not going to be able to talk about customers that have purchased their products and services. However, you can explain the results of your discussions with companies that would be likely buyers. In this situation, providing insight from potential buyers will help bring needed life to your business model. The story you tell about what your potential customers have said needs to confirm that:
• The market you are pursuing is real
• They have the problem you say you are solving
• The problem is high enough priority for them to spend money solving
• Your solution will solve their problem
• They have real interest in buying the solution at your offering price
Still at a pre-revenue phase, your company may have engaged in a program where your customers have early use of your product or service; commonly known as a beta program. Having testimonials from these customers is even more powerful because they have actual experience in using your solution. In addition to the confirmation points above, these customers need to confirm that:
• The product or service actually does what it claims to do
• They anticipate getting the financial benefits that they expected
• The product or service is of high quality
• They will purchase the product when it becomes available
Of course, the best story to tell is about paying customers, but that might not be possible for an early stage company. If your beta customers have paid for your product or service, or you have actually achieved sales, you definitely need to describe that experience with your potential investors. These customers have shown the ultimate in confidence in your solution. In addition to the above confirmation points, these customers can also confirm that:
• They are achieving the financial benefits of your solution
• They are referring your company to other companies they know
• They will provide marketing testimonials
• They are willing to talk to your potential investors
Bring Your Value Proposition to Life
In your business plan, you are making many claims about the size and growth of your selected market segment, the compelling problem you solve for the buyer, what the buyer preferences are, the priority the solution will have for buyer purchase and the financial benefits your solution brings to the buyer. The best way to put all these claims to bed is to have real customer buyers tell the story for you, especially when they are already paying for your solution.