Startup Funding

Funding for a startup is always a major challenge for the founders. Based on my startup experience and based on my observation of successful startups, in my opinion a startup must be funded by customers.

Well you may ask a question how is this possible, because many a times getting first customer itself will take more than a year's time. May be that is true, but if your product is really helping customer in cutting his cost down, or in increasing his revenues, there is no reason why a customer cannot fund your startup even when the product is in alpha stage.

We will think so much about the funding instead of focusing on customer and in the course we will create business cases which we know in many cases are not possible to execute.

This is where the quality of entrepreneurship has to really show up and we must strive towards solving a customer problem than getting worried about other things. In many startups founders define their roles well and plan things very well. Especially the experienced founders will start thinking about the engineering efficiency, the best possible technical solution etc etc. They become so busy in executing their plan and they slowly start ignoring the customer. On the day product gets launched they expect customer to sign the deal. And customer will not show any interest altogether an unexpected journey starts for the founding team.

Why this happens?

Customer engagement is a continuous process. Many entrepreneurs receive "WoW" feedback when they demonstrate their product first time. All certain done this is expected because you are definitely bringing something new to the market. But then will this "WoW" feeling really constant over a period of time. May not be? This is one area an Entrepreneur must focus on. And it is not a job of one founder it is the job of all founders of a company.

You need to build a relationship with customer and try to understand whether your product is cutting his cost down or increasing revenues. Here again you need to very careful depending on the size of the customer company you must weigh these factors. A small amount of cost reduction or a small amount of revenue increase may not give enough kick for customer to look at you and start using your product.

There is a very high likely chance that a startup will see success if it is has done this exercise really well and could get the customer funded their product.

Looks good, then the other question is how do I manage till I get customer funding for my product. Very interesting question. Is there one right answer well really I don't know. What I can say is that learn how to cut down your expenses, how to sustain with bare minimum money. Pay less salaries to employees but make them part of the company let them get a feel that the success of the company is contribution of every individual and not just the founders effort.