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We are an early start up (7 months old), and we are in talks with 3 - 4 clients. We are building an E-learning kind of tool and looking for building the content as well.

I kind of sensed one client may be willing to invest in our company if asked (my gut feeling only). We are in a stage where we are in talks with this particular client who is very excited about our product - however, they are not yet ready to test/buy the product. So I was wondering if we can get the investment from this institute then we can achieve lot of things and faster. But I am not sure whether to ask them or not, and could it lead to some other problem like they might not buy your product at all, etc.

So I need suggestions on how to go about this? And if I can ask them, what is the best approach and when?

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3 Answers

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I would say that you should only ask for payment from this company (NOT investment, that might be an embranglement) for the opportunity to be the first institute that gets to test your product. Think of it more like an advance rather than an investment.

That means that they need to be willing to test and buy your product. If they're not, then it's a wash - you're not going to get investment money from them.

So, turn around and offer the opportunity for another company to be your beta tester and one of the first to get your product!

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up vote 0 down vote

Yes (*)

Customers are often discarded as a source of investment because they are supposed to buy your product.

However they have several advantage over other (often passive) investors:

  • They know the market & domain very well. They are a part of it.
  • They often know other customers like them that are willing to pay for your product.
  • They know how your customers think. They can help you figure out what to do to attract more of them.
  • They will use your product AND will be involved in it, which is IMHO an asset to get high quality.

(*) The problem arise when the customer in question is perceived as a competitor by too much of your other customers.

That's why it only works when your market is fragmented into smaller local markets.

Example:

  • if you create a sandwich bar application, having your local sandwich bar as an investor will not hurt much and will give you credibility.
  • however if you build a product for companies with global audience, you could prevent your from getting their competitors (on the same global market) because they are investors.

Is your customer's market local or global?

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Our Client is known in the local market and doesn't have global presence.. However we are targetting the local market initially but would go global in few years! And main concern is a possibility of ruining the relationship with client, as they get annoyed by the investment approach? – Karan Mar 4 '11 at 18:58
Yes that's another way to see things. I would not recommend to take that customer as your investor in that case. – user3997 Mar 4 '11 at 21:12
up vote 0 down vote

Customers who use your app and want to invest in your app is a big boost to your start up and when you go to investors and say that your customers invested in your app they may get an idea about how good the product is and also how imp the product is.

Go a head and ask them if they want to invest in your company

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main concern is a possibility of ruining the relationship with client, as they get annoyed by the investment approach? – Karan Mar 4 '11 at 19:00
hahahaha why do you think like tht? – bhanu prasad Mar 5 '11 at 5:48

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