10th Way to Get Money to Chase You: Prove the Dog will Eat the Dog Food

Know More: Raising Money, Venture Capital 2.0, Venture Capital

The tenth way to get money to chase you is to prove the dog will eat the dog food. This message is especially important to early stage businesses.

Revenue is the best way to prove that customers will buy your product. Not just revenue--growing revenue. An order backlog also helps to validate your product offering.

Positive gross margins are imperative to show that at some scale your business can be profitable selling its products. In contrast, a business, even with growing revenue, that doesn't have much if any gross margin on sales may make a fine not-for-profit business, but won't provide much return on invested capital.

For early stage businesses, there are some ways to evidence that the dog will, in fact, eat the dog food. Pre-orders from real, target customers help a great deal.

Short of selling the product, one can simply ask a prospective customer her opinion of the product. This is easy if your customers are consumers, but much more difficult if your product will be sold to corporate or government buyers protected by well intentioned and well trained gatekeepers who seek to protect their buyers from riffraff entrepreneurs. The payoff from getting the validation of your customer just may be the capital you need to deliver your product!
A few words of caution:

The first sale is the easiest. I used to think that the first sale was the hardest. Not so. The first sale will almost always be low hanging fruit, a friend, a former colleague, a college buddy, someone who will give your product a shot as a courtesy. A former client who was developing a multi-family residential neighborhood quickly sold one unit to a wealthy friend. A year later, that was still his only sale. Remember, your mother will eat anything you serve her--and tell you she loves it! She doesn't count.

A starving dog will eat anything. YouTube was really the first on the scene to offer its product. Nobody realized before YouTube that there was big, starving dog of a market there. Now there are dozens of other players competing. In two years, will YouTube still be the dog's favorite?

Devin,
excellent posts,all the ten ways you give us.thank you .
carefully,I read all these posts and try my best to acquire what I need.
continuely, I pay enough attention to your perfec articles.

Posted by: bill | August 31, 2006 9:07 AM | Permalink to Comment

Bill,

Even I don't think my articles are perfect, but I'm pleased to have them read. I welcome input from folks who are in the trenches and have a different view, too!

ddt

Posted by: Devin Thorpe | August 31, 2006 3:58 PM | Permalink to Comment

Middle Market Deals and how to buy, sell and raise capital from $5 to $500 million

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