Investor Access to Customers

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In the diligence process, investors may want to talk with the startups' customers.

Their goal is to determine how well the product works and how committed they are to the startup's solution.

This can be a sensitive topic for founders as their customer relationships are highly confidential and often kept close to the chest.

It’s best to have a few customers who will talk with investors and give them a positive review of the product and the company.

This can be accomplished by providing great service and, in some cases, an additional discount.

This can be a negotiated point between the founder and the customer.

The customer often asks for a discount, so the founder counters with an additional ask, such as taking interviews from prospective investors.

Keep the more sensitive customers off the list.

Also, make the customer interviews the last step in the diligence process.

The founder should continue the negotiations with the investor by indicating that if the customer passes the investor’s test, then the investor commits to funding.

This prevents too many investors from contacting the same customers with only a potential investment on the table.

Consider these steps in handling the investor interaction with the startups' customers.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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