So, I was meeting with an angel investor on Friday and asking him what types of deals he likes and what he looks for in a startup. Besides the obvious, he talked about start-ups asking their customers to finance a bulk of the first round and talked about all the advantages.
1. First and most obvious, it’s another source of capital. That’s never a bad thing.
2. You get real advice. It’s great to ask customers to lend their expertise and tell you how much they like or dislike your offering and how it could be better. But, how much thought are they going to put into it just to be nice? If they’re shelling out tens of thousands of dollars to invest in your venture, they’re going to put some serious thought into how you can provide a product or service that their peers would actually want to buy.
3. You get immediate evangelists. If they have a vested interest, they’ll be a lot more motivated to tell all their friends in the industry how great you are.
I realize that this may be easier said than done, and not all industries lend themselves to this idea, but can you imagine how an angel would feel about your business if you had five or ten major customers not only advising you, but also telling everyone they know about your company?
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