How to get and manage non-strategic multiple customer investment?
I am looking for people who have had success on converting customers into angel investors. I am *not* referring to strategic investors like Cisco.
Background:
I have a pitch that works very well when talking to customers. Prospects get and understand Amplafi and can't wait to use it. VCs and other techno-philes types (who are *not* our target customers) hear the same pitch, their eyes glaze over and they tune out. Clearly a bad match if the investor does not understanding the customers!
I am seeking angel level investment ( > $1M ) and would really like to turn a set of happy customers into investors.
My ideal situation would be 20 customers investing $10K each. So a customer council with skin in the game. These customers would be non-traditional angel investors. ( not the Ron Conways of the world )
Obviously, I would be then taking on a investor expectations management project. But compared to managing a traditional investor's lack of understanding of my target market, how can it be any worse -- at least they are customers!
Clarification added 6 months ago:
I am assuming that the narrow customer set approached for investment would be doctors, lawyers, etc. that would be looking to spin off some money for investment purposes.
I regard this investment being structured:
* to get key customers to have "skin in the game".
* only offered to community influencers whose recommendation and active promotion would result in 50-100 new sales with no/little sales effort
* be more in the form of a note rather than an equity stake ( could be paid off )
So an example would be the president of a city's local Chamber of Commerce or Downtown Business Association. A customer with no business association connections would not be given an opportunity, nor would a C or S corporation. (Although I suspect that a C or S corporation should have no business making such a side investment).
Good Answers (1)
Aditya M
Client Partner Manager at TCS | Cofounder & Director, Headstart | President, Mumbai Chapter, IIM Bangalore Alumni Assoc
Best Answers in: Business Plans (3), Starting Up (3), Business Development (1), Sales Techniques (1), Computers and Software (1)
Congrats on a product that's doing well!
On raising money from customers - its not easy. First, the person who makes the purchase decision doesn't make the investment decision for his/her organization. The person who makes the investment decision may have the same issue as the VCs. Second the investment climate for a customer is probably worse than that for a VC. They would want to use the money for their own business rather than on yours.
Having said that, there are some ways out. First get money from people who are convinced about you/your product. Some of them may be people who buy your product and are open to put personal money at stake. Others could be friends and family. Second, get customers to pay upfront rather than at the end. Many of them understand that its the price of being at the fore-front of innovation. Third, use customer success stories as your pitch to angels and VCs rather than the product itself. Show traction in market over time. They'll understand $ even if they never get the tech.
Managing expectations - its the same. Make a promise and then meet it. If you think at any point that things have changed and that you can't meet your promise, communicate and reset expectations.
