Over the past month I’ve talked with several entrepreneurs that are trying to raise money for their startup. Often, there’s some initial success from a couple friends or a rich uncle that will put in $25,000 or $50,000, and then, when talking to angel investors, there’s not much luck. The challenge: angel investors are requiring that entrepreneurs have the start of a repeatable customer acquisition process in place. No longer is having a product with a handful of paying customers enough. Now, more investors need to see how acquiring the first 50 customers is going to translate into acquiring the next 500 customers.
Here are a few thoughts on investors requiring a repeatable customer acquisition process:
- Entrepreneurs that only have a product, or a product with a limited number of customers, are going to have an increasingly difficult time raising money (it’s already hard to raise money)
- More entrepreneurs are going to realize the importance of distribution sooner (e.g. using tools like SalesLoft to proactively reach out to prospects)
- Investors are always looking for ways to de-risk an investment, and more proof of a repeatable process helps add confidence
Investors are requiring more of a repeatable customer acquisition process from entrepreneurs before investing. Entrepreneurs would do well to plan for this and ensure that they have enough progress to satisfy investor requirements.
What else? What are some other thoughts on more investor emphasis around a repeatable customer acquisition process?