You Don't Need VC Funding to Grow Your Startup. Here's How to Turn Customers Into Investors.
Only time will tell whether today's downturn and VC hesitancy is fleeting. Either way, there's no reason to stagnate.
It's not easy to grow from a beta or entry-level product into a mature enterprise solution when you lack funding, but it's doable and all part of being an entrepreneur. Frankly, you may have no choice.
Take my company for example. We grew early on through our ability to add marketable features nimbly without outside funding. We didn't have the excess revenue to build critical elements, but our CEO figured out some practical ways to get the job done without closing a VC round. As a result, we discovered that you don't always need outside funds or a bank loan to grow your product suite. Instead, you can transform customers into investors.
Here are a few takeaways on how to do this.
1. Never give an outright no about what your product or business can do
Instead of saying "no, we can't do that," respond with an optimistic "maybe." If a customer asks about a feature, it means they have a problem that needs solving. They may be ready to commit upfront subscription fees to offset the new feature build. Have this negotiation. It could be a win-win.
2. Answer with the sales team, not the tech team
Tech employees usually have a long backlog of things to do, and they aren't going to mince words about what you currently do or don't offer. On our team, coders and even coder-founders will characteristically give a flat yes or no.
These all-important builders of the actual product often work in a world of binaries and are not always in a soft-skills or entrepreneurial mindset. Let your sales team — who live in the wild world of instincts and opportunism — explore the possibilities to keep the conversation from hitting a wall.
3. Ensure that your client sticks around
Turning clients into investors can be as simple as getting assurance they'll stick around if you build a new feature for them.
If they're not willing to commit — either in writing or with advanced payment on usage — don't waste time building just for them. Their unwillingness to commit may signal they don't need the solution that badly. That doesn't argue well for investing in that new feature until you gather more evidence of demand.
4. Get evidence that others want the feature
It's not enough for just one client to want the new feature. Your fundamental goal should be prioritizing quality builds that many people will use. Find out if the newly requested feature piques the interest of your other paying customers. Send surveys and make calls. Just because one client is willing to pay for and commit doesn't guarantee the investment is worth it.
Real-world examples to consider
Riot Games wanted to use our SaaS product in tandem with a new version of Google Cloud Dialogflow, a conversational AI framework. After our CEO analyzed 1) our team's bandwidth, 2) the demand from other clients and 3) the amount Riot Games was willing to commit to upfront, he decided to greenlight the integration. The situation checked all the boxes, and the upfront amount paid for the build made the client an "investor" of sorts.
Here's another: The University of Birmingham needed a way to add our chat messenger to Canvas, a leading platform for online classroom environments. So we sprinted to create a Botcopy/Canvas integration. At the time, we hadn't heard of Canvas but discovered it's one of the world's most popular online classroom suites. As a result, we determined that our other education customers would be interested in this integration. In addition, the integration wasn't challenging to build quickly, so we didn't need much upfront to make it happen.
However, I suggest providing service like this on a case-by-case basis. No founder wants to get pegged as a service agency or generate disproportionate revenue from service work, which could be a red flag during VC due diligence. But early on, providing occasional services is a clever way to fill the new-feature coffers and ensure that your most important customers get the highest and best use of your product.
Plus, most clients love it when you go the extra mile for them to build new features or provide value-add services. They enjoy knowing they influenced your product — it makes them feel like part of the family, and more likely to stick around and refer others. More importantly, this approach may be the only way to build revenue when you're small and new. It's a path to bootstrapping your way to that $1 million many VCs want to see.
The best part is, once you get that level of predictable revenue, depending on your overhead, you can turn down VC terms you don't love. Until that day comes, remember that you already have investors: your customers.
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