VC Minute – quick advice to help startup founders fundraise better
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Allyson Plosko:
I recently participated as a mentor for a startup accelerator. All of the companies were pre- or early-income, and as mentors, you met with the founders back-to-back to brainstorm how they might overcome company challenges. The meetings were short, and the goal wasn’t to completely solve the problem but to point out potential blind spots the founders might be missing in the day-to-day of running the business.
Not surprisingly, the top issues for companies in the program were how to build the top of the sales funnel and convert customers quickly. While some of this was reflective of normal, early-stage sales challenges, when probed deeper, it became clear that a portion of this was a symptom of a target customer base that was just too broad.
Few founders could clearly articulate exactly the type of customer they felt was most acutely experiencing the pain associated with the problem being solved. We’ve discussed how important specificity is in relation to the problem value prop, but my recent mentoring experience got me thinking about how important narrowing down the profile of the initial target customer is.
It’s not enough to say that the focus is on banks or hospitals. In the early days, it needs to be laser-focused on the profile of those who are in the best position to buy. This is why customer discovery is so important. It’s critical to understand who gets the problem solved and feels the urgency to purchase today, versus those that are going to need more time and proof points.
That’s not to say you shouldn’t be talking to people who fall into the latter category, but you should understand how they fit into your go-to-market strategy. During diligence, a key area an investor has to get a conviction on is the potential of a business to quickly scale.
A founder needs to paint a picture of how the company starts with a segment of customers and ladders up to a larger opportunity. Successfully doing this shows an investor that the founder knows the market and their customers, both of which are essential traits that investors look for when evaluating founding teams.
A big part of startup success is quickly validating or invalidating assumptions, they get the company one step closer to product-market fit. Being very precise in customer discovery and effectively communicating your customer focus instills confidence in investors that founders can lay the groundwork for scalable growth and build a fantastic business.
About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast – get to know AVL Growth Partners at avlgrowth.com. (Sponsored)
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