Whether to focus on finding customers or finding an investor – a conundrum that seems to be an issue for many of the businesses that I am involved with currently, not least those involved in the technology space.
For me though, it isn’t a difficult problem to solve. Let me explain why…
If you don’t have potential customers, willing to pay hard earned cash for the solution that you provide to their problem, then you don’t have a business worth investing in to begin with I would suggest. Worry all you like about valuation, but ultimately you should always see external funding as a part of the journey towards building a sustainable business and not the end goal no matter how tight funds might be right now. Sure enough, you may want to build a team, develop a product or market your incredible breakthrough and think you need cash to do so (and you may well be right), but think about this for one minute.
An investor isn’t really taking a view on the technology or product you are building – they are actually taking a view on your ability to sell and market your product, and hence your ability to earn them a return on their money, preferably in a short a time period as is possible, particularly where institutional investors are concerned.
One of the most interesting things I learnt on my recent market information visit to Silicon Valley was that many VCs there now insist on prospective investee companies interviewing as many companies as they can before an investment will be made or even considered (some asking for in excess of 100 customer interviews). Not to be sadistic or to see if the management can pitch – no, first of all simply to test market demand and find out if it exists, and secondly to force management to refine and develop their product (in Silicon Valley speak = pivot their product) to ensure it adapts to the market at which they are pointed.
I think this is a tactic worth bearing in mind for any team, regardless of scale, seeking to find investment right now in a risk averse market. In reality there still remains a lot of capital waiting for a home in the UK – if you can prove your product sells, and it really does meet demand, then surely the power is on your side when it comes to finding and closing an investment, as well as finding it on your terms? Go and find those customers who will buy your product!