When you have customers you don’t need a good story

Approaching early stage investors is about presenting a good story. Sometimes a fairy tale made of dreams, sometimes a dominant change in the market. Many times, the story is bad, and shouldn’t mean a startup can’t succeed. The ultimate reply is selling.

Early stage investors can’t predict the future but they try to mitigate risk. The go-to-move for that is looking for a believable story. “The 2nd time entrepreneur that knows the job”, “The huge market led by old companies that can’t innovate”, “The tech genius that wrote this great line of code”. But too many times, entrepreneurs try to raise money with terrible stories. Sorry brother, it’s just hard to believe you can create better targeted ads than Facebook with data you collect yourself on an app you built in 4 months.

Good thing is, this really doesn’t mean you are going to fail. It’s just going to mean you are going to suffer through many investors’ meetings, and probably will not raise money on good terms. Lucky you, there’s a cure to all of that: get customers.

I’ll share my personal story. In my company, we claimed to have an idea that will disrupt the ERP software market. It’s a huge market led by huge old companies (primarily SAP and Oracle). We had no relevant experience and you just had to be crazy to believe we know what Oracle doesn’t. We got a “no” from over 20 VCs. Maybe more. It wasn’t a pretty sight. What ultimately broke the chain for us was the first 3 signed, paid, contracts. We managed to raise with great terms and from our #1 choice of VC. It took tremendous effort to get these contracts signed, but it made us face the true needs of our customers, made our product way better, and landed us perfectly positioned to raise capital.

I’ll say this again: it’s not the easy way. It’s the best way.

If you find yourself going from one meeting to the other and no term sheet is in sight, I would suggest focusing your time on your customers. You catch more flies with honey and you catch way more investors with customers.

Entrepreneur (Approve.com) and VC (Entree Capital). Love the startup hustle.