In the early 1980s, entrepreneur Michael Dell began selling computers from his bedroom, but he did not

sell any of them before receiving payment upfront. He later raised $18,000 by selling subscriptions to customers,

a prominent example of customer-funded business—the type of financing John Mullins explores in his book:

*The Customer-Funded Business*.

From the outset, Michael Dell understood that raising venture capital (VC) is not the only option

to secure funding. There’s a smarter alternative: customer financing—getting financial support and funding

directly from customers.

But don’t think Dell was the only company to use this approach to secure support and funding. Other major companies

started this way, including Airbnb and Banana Republic.

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A Strong Product and Customer Funding

If an entrepreneur decides to pursue customer funding—seeking financing and support from existing or

potential customers and consumers—they should understand that it is neither easy nor inexpensive. While this is a smart and innovative approach, it is not right for every company

or every product.

Only a strong, compelling, distinctive product that fills a genuine gap in the market can bring customers to you and attract them,

not just to use your product, but also to fund your business and contribute money.

So, the product needs to be compelling, make a real difference, and offer added value to customers so they’re willing to pay some

of the money upfront, or pay the full price before receiving the product.

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A Unique Marketing Advantage

But customer financing offers another advantage: the focus is not on investors and venture capitalists to

attract them to fund and financially support the company. Instead, the focus is on the product itself, which means the company benefits in

two ways. First, it is motivated to deliver a high-quality, distinctive product, giving it a strong chance of outperforming competitors. Second, it can

encourage those same customers to support and fund the company.

Throughout this process, the company can not only attract new customers, but also turn its customers into loyal, long-term users. What would make them leave

or stop using its products, as long as the company is consistently and systematically working to improve and refine them?

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Before Taking the Plunge

Let’s agree upfront that this approach to funding may seem unfamiliar, if not entirely unsuitable, at a time when people are striving

—almost obsessively—

to get discounts. So before asking customers to pay upfront through subscriptions, make sure you’re offering them a product worth paying for.

You can only do that by getting to know the market and researching it thoroughly. This will help you identify the gap

you need to fill. Once you do, you can secure funding from customers while ensuring you deliver a quality product

that keeps them coming back.

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