In SBIR/STTR solicitations, you will often see the question, “can the applicant demonstrate traction with paying customers (or potentially paying customers)”? What does this mean for SBIR applicants, especially Phase I applicants, who are typically pre-revenue?
#1. Customer Traction
If you are applying for funding of any type right now and are a company in a pre-Series A stage that has paying customers, congratulations! You can skip the next section, pat yourself on the back, and know the commercialization and revenue plan section of your proposal will be easier to fill out. The problem is that most companies at this stage do not have paying customers. A few may have a small group of proof of concept users to collect feedback from, but these “customers” often represent real-world sales poorly. This means most applicants will have to focus on the other option, “potentially paying customers,” which is slightly trickier.
#2. Potentially paying customers
Get ready to get your people skills on! While the introverts among our reader base are busy cringing at that last statement, let’s talk about letters of support as a tool to demonstrate potential paying customers. Letters of Support are a common component within SBIR/STTR, but serve a purpose in any funding opportunity wherein the funder is asking you to demonstrate commercial viability and potential customer traction. Letters of Support are actual letters, written and signed by actual people telling the funder how excited they are to give you money for the solution you are developing to the problem they currently have. This involves talking to people. A LOT of people.
People who probably at first think you are selling something or they are contractually obligated to buy something in the future if they speak with you now. This fear may make said people inclined to slam the door in your face or hang up on you. If you are persistent, you will eventually find some that understand the logic behind the exercise and are good-natured enough to set aside ten minutes of their day to help a stranger out (believe me, they are hard to find – we have had countless clients over the years attest to this fact).
These Letters of Support are positive proof to funders that people want to buy your product or service. The best types of people to get for Letters of Support are large customers within your target market segment. (e.g., If you are selling a medical device, focus on getting letters from medical providers OR if you are developing a new digital twin product, target building managers, etc.). Find people who need and want what you are going to make and get them to write down why they want to buy it and why. It could be that the new product solves a problem, saves them time, saves them money, or adds some other value to what they are currently doing. Use these letters of support to bolster any segments you had to write in your proposal surrounding commercialization and marketing. You can now posit that a certain type of customer is likely to buy because of certain variables. Use the letter as support or reference. Now find out how many similar customers there are in your area, and you have a strong foundation to accurately assert how many potential customers there are in your market reach.
The market/revenue/customers section of any proposal or funding request is often one of the hardest for our clients, especially those with a technology or research background (which is most of our clients). Our advice to them is always you handle the innovation aspect and outsource the marketing sections. To outsource this well, you will need someone well versed in not only market research and customer traction best practices but also someone familiar with the funding world and working with a variety of different funders and solicitations.
We work with high-growth startups and organizations that support the startup and innovation ecosystem. We build highly specific non-dilutive funding menus, provide proposal preparation services, and measure outcomes of funding through evaluation. Schedule a consult call with us HERE.