How to Collect Investor Feedback, Monetize your First Customers and Understanding Cap Tables

The Startup Help Desk

In this episode we answer questions submitted by founders just like you, including:

• How do you get useful feedback from investors?
• How many investors is too many?
• How do you get your first customers to pay you?

You can submit questions for us to answer on our website https://www.thestartuphelpdesk.com/ or on Twitter @thestartuphd - we'd love to hear from you!
Episode Notes
Reminder: this is not legal advice or investment advice.
Q1: How do you get useful pitch feedback from investors?

• Most investors are very hesitant to provide feedback, because a lot of time founders don’t accept it and can become hostile.
• If you do get any feedback notes - you actually shouldn’t care unless feedback repeated.
• So ask but don’t expect too much - for example, some investors will happily provide feedback at the end of a call but will not provide feedback over email.
• Ash provides a website link with the most common feedback. This helps avoid a lot of back and forth.
• Best place to get feedback is when investor isn’t necessarily concerned with investment but is supposed to be providing feedback. Some accelerators provide this via their mentor or events programs.

Instead of asking for feedback, seek to understand the process and what's next. Ask:

• What's your typical process to analyze a deal?
• What's the next step?
• What about our pitch would prevent us from getting to the next stage?

This can help you understand the steps it takes to convert from pitch to a successful fundraise
Q2: What challenges are caused by having too many people on a cap table?

• Everyone on your cap table has a lot of influence on your company. They can cause a lot of trouble for you, such as refusing to sign docs.
• It’s not about the number of investors, it’s about whether you trust them and can work with them. The more you have the less likely it is that you know them well enough to trust them.
• There is a point where you are limited by the number of investors you have, but that is at the very late stages and there are plenty of solutions at that point so don’t be concerned about them early.
• An individual can cause a lot of drama if the documents from later rounds are not perfect. Usually around moderate acquisition outcomes, they will appear asking for special terms. Good lawyers solve this problem - so it’s not needed if you have one of those but certainly good protection.
• Roll up vehicles are SPVs and they require mgmt
• Overall though, more people on the cap table is preferable to going out of business - so usually the best advice is "TAKE THAT MONEY."

Q3: Should you charge your first customer and, if so, how do you convince them to pay?
The first people to try using your software aren’t customers, they are helping you build your product. Thus, with customer #1, it is more important to…

• Learn if your product solves their problem
• Collect proof (through testimonials and case studies)

When you start to see the software used the way you expect, without you pushing people to use it, you have something to sell. Then you should sell.

• Anyone will try something for free, paying is how they really tell you if it’s valuable.
• Start with a low price if you’re nervous, and increase the price for each customer.
• People pay for value, if they don’t want to pay you then you haven’t built something of value yet so keep going!
• Price it similar to existing products.
• See if you can understand the buyer’s decision process and what approvals they need at certain price thresholds: price it low enough to make the approval easy.