When founders think about capital, venture capital or angel investors often come to mind. I’ve always thought, though, that customers are the best and cheapest source of capital (that’s why I bootstrapped my company). Most people think of selling a product or service as the only way to obtain money from customers. It’s not. (It’s just the most common way.)
If a company’s solution solves an extremely painful problem, customers may be willing to provide capital in other ways. If the solution creates an enormous amount of value, customers will pay for it and may also be open to becoming investors. When you think about it, it makes a ton of sense. Who better to understand the potential upside of a company than someone using its solution? Obviously, this is less likely if your customers are small businesses, but you never know. A company I’m familiar with has an amazing solution that has the potential to eliminate tons of labor expenses. A large customer that spends a lot of money on labor invested and helped refine the solution. The investment was a win–win.
Customers can be a great source of capital. This is just one example. Early founders, don’t forget about them when you’re thinking about raising capital.