Aligning Funding Sources with Customer Benefits
Moving to the Eighth question that every founder needs to ask themselves ( for a deep dive into other question(s) in this series please subscribe to my blog)
This and 24 other questions are covered in a chapter in my recent book ……and it is now
The Question Is:
Have I explored funding sources that align with delivering high- quality customer benefits? Funding sources may have their own agenda, or they may have a clear focus on domains and technol- ogies that may or may not align with the benefits you may ought to deliver to your customers. Your investors may come from domains where they may not understand your market or the benefits. This misalignment may be overlooked out of urgency or desperation to raise funds but can impact your focus in short, medium or long term.
Now lets dig in:
One of the most critical decisions you will make as a founder is choosing the right funding sources. While securing capital is often the priority for many entrepreneurs, it’s equally important to consider whether the funding sources align with your mission—specifically, your ability to deliver high-quality customer benefits.
Sometimes that means saying no to the wrong investors, even when funds are needed.
In the rush to secure funding, it’s easy to overlook potential misalignments. Investors may have their own agenda, a focus on particular domains, or preferences for certain technologies that may not necessarily support your vision of customer benefits. While capital can fuel growth, the wrong funding source can steer your business away from its core mission, affecting your ability to serve customers in the short, medium, or long term.
Alignment with Investors Matters
Investors provide money but more importantly bring influence, expectations, and pressure to deliver returns. If your investors don’t share your vision for delivering customer benefits, there can be conflict down the line. Investors who push for fast growth, a quick exit, or a focus on profitability at the expense of customer experience may lead your business in a direction that diminishes the value you provide.
Alignment between your funding sources and your customer-centric mission ensures that your business can remain focused on delivering the high-quality benefits that set you apart in the market. The right investors will support your long-term vision, understanding that sustainable growth comes from happy, loyal customers who see real value in what you offer.
Potential Pitfalls of Misaligned Funding
Let’s explore some of the potential challenges that arise when there’s a misalignment between your funding sources and your focus on customer benefits:
1. Pressure for Immediate Profitability
In many cases, investors push for quick financial returns, often at the expense of long-term customer relationships. If your goal is to build a business based on customer trust, satisfaction, and high-quality experiences, this pressure for immediate profitability can result in shortcuts—such as reducing customer service resources, cutting back on product quality, or neglecting personalised service.
A SaaS company that prioritises customer success and long-term retention may find itself at odds with investors demanding immediate upselling tactics or premium pricing strategies that alienate customers.
Actionable Step: During the due diligence process, ask potential investors about their expectations regarding profitability timelines. Make sure they understand and support your approach to balancing growth with maintaining strong customer relationships.
2. Misunderstanding the Market and Customer Needs
Investors from domains outside your industry may not fully understand your market or the specific benefits your customers seek. This can lead to misguided advice or pressure to pivot in ways that don’t align with the needs of your customer base.
Example: If you’re building a company in the health and wellness space and your investor comes from a tech background, they may fail to appreciate the importance of trust and authenticity in customer relationships, pushing instead for rapid automation or cost-cutting measures.
Actionable Step: Look for investors who have experience in your industry or have a deep appreciation for the market you’re serving. “Ask them” about their previous investments and their understanding of your customer’s needs. Alignment in values and goals is critical for long-term success.
3. Pushing for Fast Scaling
Investors often favour scaling quickly, seeing it as the pathway to increased revenue and market share. However, scaling too quickly can dilute the customer experience if it leads to growing pains such as stretched resources, reduced quality control, or customer service bottlenecks. The faster you grow, the harder it can be to maintain the personalised, high-quality experience that customers have come to expect. Premature scaling can be dangerous.
Example: A company that built its reputation on personalised service may face challenges if investors push for aggressive expansion before the company is operationally ready to handle the increased customer volume.
Actionable Step: Ensure that any growth strategy you agree on with investors includes measures for maintaining customer satisfaction, product quality, and service levels. Prioritise sustainable growth that allows you to continue delivering high-quality benefits to your customers.
How to Choose Funding Sources that Align with Your Mission
Choosing funding sources that support your customer-focused mission requires careful consideration. Here’s how you can ensure that your funding sources are in line with your long-term goals:
1. Look Beyond the Money
It’s easy to focus solely on the capital an investor offers, but it’s just as important to understand their values, their approach to growth, and their level of involvement in your business. Will they support your mission to deliver customer benefits, or are they primarily interested in short-term financial returns?
What to ask: During conversations with potential investors, ask how they’ve supported customer-centric businesses in the past. How do they balance the need for profitability with delivering long-term customer value? Their answers will give you insight into whether they truly align with your goals.
Actionable Step: Create a checklist of non-negotiables related to your customer-focused mission. Use this as a framework to evaluate potential investors. If they don’t align with your priorities, they may not be the right fit, regardless of the size of the cheque.
2. Understand Their Expectations
All investors have expectations—whether it’s regarding timelines, profitability, or growth. To avoid future conflicts, ensure that you understand these expectations upfront and that they align with your own goals, particularly when it comes to delivering value to your customers.
What to consider: Will their timelines allow you to build a business centred on customer loyalty, retention, and satisfaction? Are they open to investing in initiatives that may take longer to deliver returns but are crucial for maintaining high-quality customer experiences?
Actionable Step: Be transparent with investors about your focus on long-term customer benefits. If they’re pushing for short-term gains at the expense of customer satisfaction, they may not be the right partner for your business.
3. Seek Investors Who Add More Than Capital
The best investors offer more than just money—they offer expertise, connections, and mentorship. Seek investors who understand the importance of customer benefits and can provide valuable guidance in this area. The right investor will help you stay true to your mission while also offering the resources to grow.
What to look for: Investors who have experience building customer-centric businesses or who have supported companies that are aligned with your focus on delivering high-quality customer benefits.
Actionable Step: Look for investors with a track record of supporting businesses that prioritise customer benefits and experiences. Ask for references or examples of how they’ve helped similar businesses succeed.
Capital and Customer Value Alignment
Raising capital is a critical step for many businesses, but it’s about securing the right kind of support that allows you to stay true to your mission.
The most important investment you can make is in yourself.
Warren Buffet
For founders, this means investing in partnerships that allow you to focus on what really matters: delivering high-quality customer benefits.
By carefully selecting funding sources that align with your customer-focused goals, you’re setting your business up for long-term success, ensuring that every decision—whether it’s about growth, product development, or customer experience—is made with the end user in mind.
This topic is an expanded article from my book THE ‘BENEFIT’ BLUEPRINT FOR STARTUP SUCCESS Chapter 3, Question 8.
© Sameer Babbar
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Disclaimer: This is for information only. It does not take into account your objectives, financial situation, or needs. The author, his company, his associates, his directors, his staff, his consultants, and his advisors do not accept liability for any loss or damage, including, without limitation, any loss that may arise directly or indirectly from the use of or reliance on the information provided