Diligencing the Customers in the Market
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
In diligencing the customers in the market, check for the following:
- Who is the target customer?
- What is the ideal customer profile?
- What is the customer acquisition strategy and cost?
- Do they have a standard process for acquiring customers?
- For pre-revenue companies, what is their go-to-market strategy?
- Have they priced their product appropriately for the target market and channel?
- Check their Cost of Customer Acquisition vs. Lifetime Value number. Is it better than 1:3?
- How many new potential customers are coming into the market?
- Are there high switching costs that must be overcome for customers to engage the company’s product?
- Does the ideal customer already have a budget set aside for the product, or do they need to find a budget for it?
- Is there any virality built into the product or the business model?
- What is the channel through which the company contacts customers -- web, direct, partners, or other?
From these points, you can learn more about the customers for the target startup and how strong they are.
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