David Cummings on Startups

Atlanta Startups are Funded by Customers

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David Cummings

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At last week’s Venture Atlanta event I was talking with a number of venture capitalists from outside of Atlanta. After the first day, in which several early stage startups did a great job presenting, one venture capitalist made an observation I agree with:

Atlanta startups are funded by customers much more so than investors.

Immediately I concurred and cited examples of local successful technology companies that took little or no outside funding and grew substantially by way of paying customers.

Can everyone build their business via customers only without outside funding? No. Startups that can do so, especially in towns like Atlanta that have the right ingredients but little risk capital, are at a significant advantage compared to those that are not capital-light.

What else? Do you agree that Atlanta startups are funded by customers much more so than investors?

Comments

3 responses to “Atlanta Startups are Funded by Customers”

  1. Mike Schinkel (@mikeschinkel) Avatar
    Mike Schinkel (@mikeschinkel)

    I agree completely. My take is that funding by customers forces the entrepreneur to have a valid business model from the get-go, but it also hobbles them from swinging for the fences. Many (most?) customer funded startups are usually making cash flow decisions and not the best strategic decisions. But, ying and yang.

    Of course I speak from experience with the latter.

    Reply
  2. swagner2 (@swagner2) Avatar
    swagner2 (@swagner2)

    I think that the Southeast as a whole has companies that are funded by their customers. In Greenville the same fundamentals are in play. The one exception to this may be Raleigh.

    Reply
  3. Adam Avatar
    Adam

    I agree with the comments. Being funded by customers trains you to operate a self-sustaining business. The trade-off is this sometimes forces your hand in pursuing cash-flow as opposed to bigger opportunities to grow your business long-term.

    Reply

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