Diligencing the Customers in the Market

Diligencing the Customers in the Market

April 7, 2022 by investor

Diligencing the Customers in the Market

In diligencing the customers in the market, check for the following:

1. Who is the target customer?  
2. What is the ideal customer profile?
3. What is the customer acquisition strategy and cost?
4. Do they have a standard process for acquiring customers?
5. For pre-revenue companies, what is their go-to-market strategy?
6. Have they priced their product appropriately for the target market and channel?
7. Check their Cost of Customer Acquisition vs. Lifetime Value number. Is it better than 1:3?
8. How many new potential customers are coming into the market?
9. Are there high switching costs that must be overcome for customers to engage the company’s product?
10. Does the ideal customer already have a budget set aside for the product, or do they need to find a budget for it?
11. Is there any virality built into the product or the business model?
12. 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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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.