Monday, July 18, 2011

10 Steps to Raising Institutional Capital - Step 2

David Martin, DragonFly Capital

(Click here for step one – Building a fundable business)

Step Two: Demonstrating Traction

The quickest way to prove your business to institutional investors is to show traction. This means you have real customers, or, if your product is free, real users.  A large, loyal, recognizable, or rapidly growing customer base shows investors that you are offering a valuable product, even if you are not yet profitable.  Without meaningful customer approval, even your most conservative financial projections will carry little weight with investors. 

So how do you know if you have traction? How many customers are needed? There is no hard and fast rule, but more will always be better. Whether that means 10 large customers or 100,000 unique users, understanding the value, or potential value, of each individual customer is critical in deciding when to seek institutional capital.

Next week: Formulating a Growth Strategy

David Martin
Dragonfly Capital
The Packard Building
1310 South Tryon Street, Suite 109
Charlotte, NC 28203
Office: 704.335.2192

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