By Carter Williams, President, CEO and Investment Committee of iSelect Funds
In chapter two of Mark Twain’s The Adventures of Tom Sawyer, Tom’s Aunt Polly makes him paint her white picket fence. It’s a Saturday morning and the last thing Tom wants to do is work while his friends are out on “delicious expeditions.”
Being the enterprising young man that he is, Tom sets out to convince his friends to do the painting for him. He feigns complete engagement with his painting while his friends pass by and, sure enough, his interest in painting the fence proves contagious. Each of his friends wants to try his hand at the “awful particular” task, and they all end up trading valuable “worldly wealth” in exchange for time painting the fence. Tom reaps, among many other items, “a kitten with only one eye, a brass door-knob, a dog-collar – but no dog – the handle of a knife, four pieces of orange-peel, and a dilapidated old window sash,” all very prized possessions for a boy in Hannibal, Missouri circa 1876.
Ostensibly, Mark Twain’s story is for kids, but it also contains some valuable and transferable lessons for old folks, as well. Tom learns that to persuade someone to purchase something, he needs to make it as valuable and as desirable as possible. He says to his friends, ““What do you call work? . . . Does a boy get a chance to whitewash a fence every day?”
Tom Sawyer offers a keen insight on entrepreneurship. What does every startup need? Money? Technology? No, those are good, but not sufficient to sustain a business. Every company needs customers! The best entrepreneurs win customers by making a product so valuable that people start lining up to buy it.
When we were growing Gridlogix in the early 2000s, being in the Midwest made it difficult to raise money. So we didn’t. Instead we focused on winning large purchase orders first. That pressure forced us to focus on what really mattered to our customers. Ultimately, we won a large purchase order that propelled our business to success and enabled us to raise some investment capital we needed to grow.
At iSelect, companies with customers, even paid with “One Eyed Kittens”, pique our interest. A notable example is Tallyfy, a company that started in the UK and moved to St. Louis. Tallyfy makes it easy for companies to track and improve critical business processes. Tallyfy followed Tom Sawyer’s lead, landing two Fortune 50 companies in St. Louis as paid customers. By winning customers first, Tallyfy is right to expect investment capital to follow.
Some startups have sellable products like software, others in biotech might signal customer interest with grants or contract research. Finding someone that cares enough to offer a bit of “worldly wealth” Sends a loud signal to potential investors. Instead of raising capital to find customers, entrepreneurs find customers to raise capital.
In our last newsletter we talked about paying it forward. Paying it forward can mean helping an entrepreneur find a customer. Big companies seeking to invest in venture should first learn to be good customers, letting in the new innovations already knocking at your door. Exited entrepreneurs, investors, literally anyone ban help a start-up by becoming a customer.
We like this approach. iSelect is in the business of financing early-stage companies, but to be successful at that we believe that we have to help companies throughout their lifecycle. In many cases, this means facilitating customer acquisition before investing.
Help an entrepreneur paint their fence, buy their product.