Customer Acquisition Strategies for Startups

Customer Acquisition – it’s easy to waste a lot of money in the wrong channels, especially ones where you go hand-in-hand with the big firms and can easily be outspent. As a startup, the majority of your time should be spent on customer acquisition and product development – the things that will move you forward. “Startup growth happens in spurts. Initially, growth is usually slow.

 

Cold emailing? SEO? Content Marketing? but at this point you’re just shooting in the dark. What works initially might not work later on, and what doesn’t work now might be worth revisiting in the future.

1. Establish your Goals
2. You create a process / system to work within
3. Then you fill it with strategy / ideas to align with your goals,
4. Lastly, you’ll break those down into specific tactics to execute…

1. Define your Ideal Customer - Prospect and Analyse your user and user markets.
2. Define your Goals = S.M.A.R.T. Goals may be monetary, user count, or activity based goals.
3. Define your Acquisition Funnel = Running multiple landing pages and you’re sending traffic to them from SEO, content marketing and paid acquisition, funnel to be measured individually
4. Know your Metrics = Start implementing Campaigns, you’ll know fairly know whether something is worth pursuing or not
5. Track everything from day one = Most Startups don’t begin this process early enough, and they pay for it later, start to build the history as early as possible. The best customer acquisition plans have measurement strategies organized in advance.
6. Reverse engineer your Growth = Look for bottlenecks in your metrics: is your visitor to trial rate low? Is your churn rate high? Do you need to drive traffic?
7. Create your growth ideas list = Prioritize your plans
8. Execute your plan = By using the following (some more) strategies

• Using Big Content to Generate Buzz
• Focusing on Long Tail Keywords
• Tools usage and Analytics
• Engaging in Forum Marketing
• Tracking and Reacting to Competitor Mentions
• Developing Online Partnerships
• Networking
• Reviving Old Customers

Treat Angel Investor as if you are on a Date!

A smart founder tries to reduce the reasons why an Investor can say no!

The initial request for a dialogue is generally by email, so draft it nicely. Most of the investors are happy to converse with Co-Founders, so try not to muddle this up. It’s best to go through LinkedIn or reference, to capitalize on your best chances of getting a foot in the door. Nevertheless, do commit to memory that angels are busy, and you need to respect their time. It’s a good idea to propel a deck, so he knows what to anticipate, and can plan for the meeting.

This is very unlikely to be a one-time communication, where the investor is so intimidated with you and your pitch that he whips out his cheque book and hands over your cheque. It’s much more like wooing a girlfriend, and the purpose of your first date is to set up your next one.

You should spend time listening to his interests and passions, and judge whether you fit into his goals. During your process of raising money, one will come across all kinds of stuff, and not all of them will be right for you. While you are trying to earn his trust and confidence, you should also be thinking about – Is this the class of person who I want to be a part of my company?

While it’s usually easy to get the first appointment, some investors can play hard to get. The best way to open the door is through a warm introduction.

What about the dynamics of the meeting?

Please don’t ask for a NDA – no one uses them anymore because they are not worth the paper they are written on. Make sure you are on time, please respect time. Also, be professionally attired. First impressions count, and you don’t want to turn him off by being sloppy or casual – you are not Mark Zuckerberg! Show that you have done your homework about the investor, this is a mark of respect, and flattery never hurts ! The worst thing you can do during your first meeting is to ask for money, so please don't do this. The irony is that investors will give you money only if they think you don’t need it!

The agenda of the first meeting should not be to raise money – it’s to establish trust and get permission to set up the next meeting. How you conduct the meeting depends upon many factors, and you need to be flexible and play this by ear. If he hasn’t seen your presentation, you may want to start by going through this. However, in a one-on-one meeting, this is usually not a good idea, because you then spend more time looking at the computer screen, rather than establishing eye contact. Also, please don’t read your slides; don’t parrot your canned pitch; and don’t use your slides as a crutch. It’s far more effective to pay attention to his body language, so you can address the areas he is interested in. You need to focus on his responses, so you can tailor your presentation to his interests. Every investor is different, and while you may have slaved over your pitch and have 20 slides crammed with facts and figures to show him, please remember that he will not be interested in all of them. There’s no rule which says you have to complete your presentation, and you should not do a data dump – it’s far more effective to be focused!

Please take notes during the meeting (ask for permission to do so). This will differentiate you from most of the other founders, and shows that you value his opinion and his time. It shows that you are well-organized and thoughtful; and will also help you extract more value from the meeting, because you don’t have to worry about forgetting key points. If things are going well, ask for a follow on meeting – he is much more likely to say yes at this time.

Send a thank you email within 24 hours, where you summaries the highlights. What were the questions he raised? Do you have the answers? How will you find these?

Your plan of action should be to interact over a period of 3-6 months, during which time you can show him that you are making steady progress, and are listening to his feedback. This will show him that you are persistent, responsible and responsive.

Best Wishes

Who are Angel Investors?

They are non- institutional, they are wealthy individuals who invest a lot of capital into a startup and motivated in the technology, business model and market as part of his or her return on investment.

The Checkbook Angel: A check book angel is passive in their investment and will invest in the area of $5000-$25000.00

Capital Active Angels: A Capital angel is active and usually is seeking a strategic role as, a mentor or member of the board

Super Angels: While Super angels are also active they invest anywhere in the range of half a million to $2M

Angel investors provide necessary seed funding to startups and raise capital for startups anywhere in the range of $20b annually in the U.S. There a number of different angel investor categories.

The Enthusiast – They like to do the deals, successful and established in their business and professional careers

The Professional – These folks are looking for a job and looking for a company to invest in and work for at the same time

The Micromanagers – The micromanager are business savvy with a strong business acumen they want a board seat and bring with a wealth of knowledge. It can become a problem when the micromanager does not agree with the business owners on business strategies or future business endeavors

The Corporate – These are people who have come out of fortune 500 companies as executives or members of senior management, and looking to invest in a startup that can turnaround profit

The Entrepreneur – People who have started their own companies and looking to invest in a new startup, they are willing to take risks, pride themselves on the ability to start a new venture and their ability to help a new startup grow and sell at the appropriate time.

Funding Stages:

Startup Stage – In these stages fund comes from personal investments, families or angels. First round of cash infusion is less than $1million.The business has no history of customers or generated revenues.

Seed Stage –This is funding towards R&D, customers are using the product or service but there is no cash flow. The funding range is usually under $5million.

Expansion/Growth Stage – This category is for companies that are up and running with a tested product or service. The business is seeking market expansion, product development and additional working and operational funds.

Buy out Stage – Current shareholders sell some portion of their current shares. This can involve acquisitions, change of ownership, exit strategies. The funds can be used for expansion or consolidation of the business.

Below are some terms used in startup funding:

BURN RATE: Negative cash flow on a monthly basis

SWEAT EQUITY: Value in a business based on hard work and know how rather than capital invested

SEED CAPITAL: Capital invested in the early stages of a business

DOWN ROUND: Stocks purchased from a company at a valuation lower than previous valuation by earlier investors

PRE-MONEY VALUATION: The value placed on your company by investors before you receive the money

PRO-FORMA: Forecasted financials of a business based on the projections of the performance of the business

DEBT SECURITY: This is money owed to another party, an obligation to pay back capital that has been borrowed. It is a binding document with terms of agreement attached to the debt.

BOARD OF DIRECTORS - These are elected or appointed individuals responsible for making major decisions and can take action with regards to issues such as executive remuneration, hiring and firing of executives etc.

CASH FLOW - Cash generated less cash expenses. It is the difference between the cash you started with and the cash you are left with at the end of your accounting period. Positive cash flow means the cash coming in exceeds the cash going out, otherwise it is negative.

TERM SHEET - Is an invest document outlining the terms of agreement; it includes certain items like the amount to be raised, pre-money valuation etc.

Raising capital from Angels is not an easy task. The whole process of raising capital can disrupt entrepreneurs from doing the actual work of building their service or product and getting in contact with customers. Entrepreneurs should postpone the idea of raising funds for as long as possible, so that they can build value and get a higher valuation for their company .Angel investment is a great way to get raise capital.

Some Legal essentials for Startups

1. Incorporation and Co-Founder Agreements

As a startup u need to have a company registered in order to attract investment and limit individual liabilities. A company is more credible than an individual because a company cannot run, A company is a separate legal entity. Have a Co-Founder Agreement for faster resolution of disputes and making terms clear.

2. Licenses/Approvals

Before starting a startup you need to do full due diligence regarding the necessary licenses and approvals, for example if your are into food and beverages business you may need FSSAI License.

3. Contract with Vendors/Third Parties

Always have a contract with vendors like logistic partners etc so that your commercial transactions are on clear terms, employment contracts with non disclosure would protect company interests. eCommerce agreements with customers is a new emerging trends.

4. Accounting and Taxation

Having clear books of accounts and taxation leads a good impression on investors and protect company from notices from the income tax department.

 5. Enforcing Contracts

Recourse of litigation must be taken immediately in case of default by any party, to avoid latches and delays as you may not be able to enforce contracts after some time.

See the funny side of an Entrepreneur's Life!

An entrepreneur doesn't have good days and bad days; s/he has adventurous days! An entrepreneur's brain is differently wired from the rest. Here's a series of graphs that give you a little sneak peek into an entrepreneurs life.

Images: Inc. 42