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I have an opportunity to take investment (smaller check $25K) from a customer. What are the pros and cons with that?

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Written by Jasmine Sunga
Updated over 3 years ago

Answer from Hernan Giraldo:
Depending on your industry and stage it could be very good.  We have had a great experience with this.  Main benefit for us has been signaling to other investors.  Also,  if you are in earlier stage of product development, it is good to have a customer that is patient and gives you a lot of slack while you iterate on product.  At later stage and -specially if your customer base is small and very concentrated- it could be a liability to sign up other customers who compete with your customer/investor.   You may mitigate this by not publicly talking about it and asking your customer/investor to do the same.

Answer from Derric Gilling:

Just to add depending on how this is structured, I would also be careful about providing “Major Investor” rights to customers/strategics. These typically include things like information rights, pro rata, cosale, etc. It’s much more manageable if you have a certain threshold for these. I am unsure about accepting unaccredited investors though so you may need to check with a lawyer on that one.

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