Negative Working Capital: Using Customers to Fund My Startup
Okay, hear me out. We decided to go full bore with Wyzza after a phone call with a partner's client confirmed we had customers ready and waiting for a better solution than the one they were using. It was clunky and shutting down in the near future. We know there's a market. Whether or not our product and their market are a fit is yet to be seen.
Here's the part I need the community's advice on:
I've been laid off for the better part of 7 months- savings are running out. But Wyzza (or whatever we end up calling it) is going to happen. Currently we are going to implement two subscription plans our customers can choose: $15/month or $150/year (they get two months free for paying for the year up front.). My thought: fund 2 months or $20,000 by selling the yearly subscription fee to the folks I know are waiting for it. In return, they get a lifetime membership and get to keep their profits from platform. It's called "negative working capital" and is pretty common.
You wrote "a partner's client confirmed we had customers ready and waiting for a better solution than the one they were using", so there is at least some initial appetite for Wyzza.
Because these users are ready and waiting, instead of selling a lifetime membership for the cost of one year of the annual membership, why not sell a further discounted "early adopter" annual subscription for say $75/year to these ready and waiting customers? In exchange for this additional discount, you can require that these "early adopter" customers provide product feedback to your team to improve Wyzza or let your team observe them using Wyzza.
This kind of strategy won't net you as much income and therefore runway as your proposed negative working capital plan. However, this plan helps you not lose all of the lifetime recurring revenue from these customers, and provides you a ready-made base of users to get substantive product feedback from.
This is a really good alternative that I oddly hadn’t thought of. Thanks!