Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 1 down vote favorite

we have a relative small project and although it is going slow , there is some progress and good signs,but still far away from feature complete

Anyway my question is when to pitch for VC or when when to pitch for customers... I want to be strong against the VC and has some money circulation till then. but this approach will/might show us a bit weak against the potential customers.

So which way is the best for a fresh startup ?

more details might be helpful.. :

we have got any money yet but we got some good feedback from potential customers, and does it make sense to try them before going for any investors ? because it sounds like proof of concept for us to be able to sell to few customers

share|improve this question

3 Answers

up vote 1 down vote accepted

As for whether you should get customers or funding first, the answer is simple: Having customers will make it easier to get funding.

Here in NL (where the OP is based) the rule of thumb is simple. When you're turning over 5 million and need to take the company to 50 million, you pitch to VCs[1]. Less than that, they're typically uninterested in giving you money (although, it doesn't hurt to approach them early and keep them up to date).

Assuming you're not there yet, you'll be looking for an Angel or Accelerator. When you have either of these, they'll be able to advise when to start talking to VCs, and hopefully provide introductions.

[1] I attended the first "Capital On Stage" event in Amsterdam, where a dozen or more VCs all said the same thing.

share|improve this answer
thanks nick number made it all clear – altuure Mar 3 '12 at 18:17
up vote 0 down vote

I'm sure you're not expecting a one-size-fits-all answer, because there isn't one. But what served us well was to not fund-raise until we had created some traction. If by "some progress and good signs" on your project you mean some tangible realization of your product, actual customers/users, and actual customers/users who pay you - those are the key milestones to hit. Before you even consider VC money have you approached angels, pitch competitions or any other means of acquiring capital? If your goal is to build for a VC round or any larger capital rounds, showing that intelligent individuals invested in you AND having actual product with actual customers builds a much stronger case than "we've got this great concept...."

share|improve this answer
up vote 0 down vote

There is no rule of thumb as to which one is best.

You obviously understand that if you have a working product you will be in stronger position asking VC or Angel for money, so the question you have to solve for yourself is can you get your product to an initial release without the VC? If you can it is to your advantage but you don't have you and you may be able to sell them on a partially developed product.

As far as customers go the issue is slightly different. The product that you want them to buy has to be available to them immediately as you may actually have to give a demo. Of course you can try and get early adopters for your product but the incentives have to be sufficient for them to do it or your product has to be so much above the rest of the field that adopting your product will give them such advantage that even an early beta will do.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.