“So Jake, what kind of investments do you like to make?”
It’s a question I get on a regular basis from our Equifund members who are looking for guidance on their private market investing journey…
And even though I can’t give any personalized investment advice…
There’s one thing I look for in every deal I’m thinking about investing in.
I call it the Customer/Shareholder Flywheel”…
And I believe the businesses who understand how to use this powerful growth strategy are uniquely suited to raise money from “the crowd”.
Here’s why…
After nearly 20 years of being an entrepreneur, salesman, marketer, copywriter, and strategist extraordinaire…
In the end, I’ve noticed one major thing separates winning businesses from losing ones…
Vision!
The company needs to know where it’s going and have roadmap to get there. And that means they need to be able to answer two important questions in a startup…
#1) Who are we?
In the same way we as people have an “identity” – or a story we tell ourselves about who we are…
The business needs a story it tells about who it is.
In the beginning, all startups are a reflection of who the founders are as people.
And before I’d ever consider an investment…
I want to see a founding team who very clearly understands who they are (and how confident they are in their vision).
Because this leads to the second most important question they must answer…
#2) Who do we serve?
The purpose of the business is not to serve the selfish needs of the founders (or even deliver a return to its investors)…
The primary purpose is to serve the needs of a group of people – it’s customers – and ideally do so for life.
According to the brilliant W. Edwards Demmings…
Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.
But if the business doesn’t have complete clarity around who it serves (and by extension, how they serve them)…
It’s basically impossible to create exceptional products that sell themselves and deliver extraordinary experiences that turn the customers into advocates who help market and sell the product for you.
That’s why my #1 “hack” for scaling businesses is something shockingly simple…
Talk to your customers every single day!
And even though engineering types hate doing this kind of work…
I find it ridiculous how many founders try to build companies that sell products to people they’ve literally never talked to.
That’s why I want to see my founders “in the trenches” talking to their customers… every, single day.
I want to know their business decisions are rooted in a customer insight derived from actual feedback… not academic theory or guess work.
And honestly, I want to know that the founders are focused on solving a problem that people are willing to pay for.
Cause if they’re not… they’re probably going to burn through a bunch of that investor money trying to figure out how to achieve the illusive product-market fit.
But to build a great company, you need more than just PMF…
You need product-market-founder fit!
Otherwise, the company risks building products for an audience they don’t understand, and quite frankly don’t give two-craps about.
Which, in the end, means they either build the wrong product for the wrong people at the wrong price point… and it will never become profitable, no matter how much money you throw at it…
Or worse, you’ve got a founding team who is constantly looking for the exit instead of being obsessively customer focused.
That’s why I’m a huge believer in the idea of creating what I call the Customer/Shareholder Flywheel.
It’s a strategy that aligns all of the stakeholders in the business around the activities that matter most…
Acquiring, monetizing, and retaining customers for life!
And the stickiest customer there is? Someone who both buys your products, invests in your company, and refers you business along the way!
That’s what make’s crowdfunding so amazing.
Because in one campaign, a company can acquire both customers and shareholders at the same time…
They can then focus all their time actually working with those customers to make an exceptional product and deliver an extraordinary experience.
And with the new crowdfunding rules coming into place, we could see equity crowdfunding takeoff in the coming months.
Sincerely,
Jake Hoffberg – Publisher
Equifund
