Meetul Shah has always known he could build things. An engineer and the founder of technographics provider DemandMatrix, which was recently bought by Demandbase, Shah started creating innovative companies at age 18. But it was his curiosity about marketing, in addition to his gifts at technological innovation, that helped him find his niche.
“I learned that you have to build things that people need, want and are willing to pay for. People ‘make it’ as founders because they have figured out how to reach customers,” he says.
That awareness motivated Shah to have potential customers fund his latest company, as opposed to going the more traditional investor route. He’ll discuss the ups and downs of customer funding in a fireside chat at fnSummit.“I learned that you have to build things that people need, want and are willing to pay for. People ‘make it’ as founders because they have figured out how to reach customers.” - @meetulshah Click To Tweet
Not just an MVP
His experience raising money for previous ventures set the stage for a fresh direction with DemandMatrix. “I feel that investors generally look for the ‘hockey stick,’ but the founder might be totally fine exiting five to 10 times off the revenue. So, things can get kind of misaligned,” he explains.
As a result, he decided that with DemandMatrix, he’d make sure there was a product-market fit and that the idea was not just “this MVP.” He explains that when customers fund, they become partners in the project, investing in growth and incubation.
He is enthusiastic about his recent experience with customer funding and sees it as a good option for other startups. “You keep the equity. You keep the growth within the company. You reward your employees, the people who are helping you grow, and you’re still able to make your own decisions.”“I feel that investors generally look for the ‘hockey stick,’ but the founder might be totally fine exiting five to 10 times off the revenue. So, things can get kind of misaligned.” - @meetulshah Click To Tweet
The ups and downs of customer funding
Still, he acknowledges that there are challenges, including the fact that growth can be slower with customers funding. “VCs come with a lot of goodwill and cache. You can hire people faster. People might say: ‘Hey, Andreessen Horowitz invested. That means, you must be sexy.’”
But he adds that if the product-market fit is not there, those benefits don’t really lead to long-term success. “You end up doing a disservice because VCs are asking you to spend money because that’s their job. If the market doesn’t want what you are selling – it can be a recipe for disaster.”“When you fund through customers, you keep the equity. You keep the growth within the company. You reward your employees, the people who are helping you grow, and you’re still able to make your own decisions.” - @meetulshah Click To Tweet
Keeping an open mind
Shah thinks customer funding could be a fit for a range of companies including enterprise companies where customers can pay money upfront; those already situated in an area that strategic customers or partners want to enter; and those looking to disrupt within a legacy industry.
Other founders often ask him whether they should try to fund via customers. Shah believes: “There is no right or wrong answer. It’s your journey.” He just suggests that entrepreneurs be open to the option.
For Shah, his openness to learning led him to innovate in the field of technographics as well as to discover out-of-the-box ways to fund his ventures. Through it all, he says that he has always focused on pursuits that he enjoys.
“Through starting at age 18, I realized that you can do what you enjoy and money is a byproduct. It sounds like a cliché, but I have found that when you spend time figuring out what you like to do, financial success will come.”
fnSummit, taking place from October 13-15, 2021, is an annual event where founders, investors and partners come together to explore the theme of growth. Located in a beautiful resort in California’s Carmel Valley, the event will offer participants a chance to network, share ideas and enjoy a variety of recreational and team-building activities.