Bringing in That First Sale, Partnership or Investment: A Guide for Startups
How to develop an accurate story that will resonate with customers.
Startups don't operate in a vacuum — like all businesses, they need someone to buy what they're offering, whether it's a technology, product or promise of future profits. A startup may be on the cusp of a world-changing technology or business model, but without customers, it likely won't stay in business too long.
But for many startups, customers are not just the traditional entities involved in a traditional buying and selling relationship, in which they pay for a product or a service. They could also include an investor willing to pump money into a startup (even if it is currently losing money) or a network of backers willing to promote a startup's product, service or technology in their own organizations or industries. The customer could also take the form of another tech company willing to enter into a partnership with a startup, a relationship that could eventually lead to an acquisition.
Achieving a deal with any of these means that a startup is on its way. But getting that first customer to bite is a major challenge. How should startups approach the issue of getting their first purchaser, investor or corporate partner? The short answer is to know themselves and their market, and how to tell that story.
As in so many other areas of life, it's much easier to convince someone that your company is a winner if you believe it yourself. Developing an understanding of how a startup can help others, and whether that benefit will be felt immediately or only in the future, is key here. Only when a startup is able to clearly articulate that for itself can it verbalize that message for potential buyers, corporate partners or investors.
Indeed, industry studies show that the most common reasons for startup failure revolve around a lack of mission clarity: 35% fail because there was no market need, 19% fail because of a flawed business model and 20% fail because they got outcompeted — and so on. All of these reasons ultimately show that many startups fail to understand their role in the market and what they need to do to carry it out successfully. Clarifying what a startup is doing, why it is doing it and whom it is doing it for is key to avoiding the steep failure rate that is the fate of the large majority of startups. Developing an accurate story that will resonate with customers — whether they are buyers, investors or potential partners — is essential.
Here are some ways to make that happen.
Before trying to connect with anyone, startups need to understand what they are trying to accomplish. What is the value proposition involved in your product or service? While founders likely feel that they know that, they need to test and expand their knowledge with data relating to prospective customers' actual needs. A plethora of tools, including analytics, event tracking and sales and support programs, have made gathering this data easier.
Test out your proposal
Once that value proposition is established based on data, startups should begin pitching their product or idea to “significant others” in the industry — including mentors and advisors, VCs and angels they may have met, design partners and even potential buyers who may have already expressed interest in the solution. This will likely result in feedback and questions to help startups better clarify what further research they need to do, putting them in a better position to determine how to present their product, service or technology to others. And there's an extra benefit in doing this so-called practice pitching: The people or groups they reach out to may end up being their initial customers or backers.
Tailor the offering and the message
With the information gathered from this preliminary pitching, and a better understanding of whose pain points their solution solves, startups can begin to shape their offering for the market segment most likely to respond positively. That “market” could, as mentioned, be actual customers, corporations they might seek to partner with or investor groups. But knowing whom to approach is still not enough: Startups will need to craft different messages for different sectors, entities and investors. Online tools can help startups clarify this information based on their data, providing them with ideas on how to present messages in the most effective manner to specific audiences.
All of this preliminary work will help your startup with whatever goal it is trying to accomplish. Whether it’s direct sales, applications for partnerships or fundraising, a startup’s clarity of mission — what problems it is trying to solve and for whom — will help it reach out to the market more effectively and bring it that much closer to closing its first “sale.”
Entrepreneur Leadership Network Contributor