The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers' Cash

by John W. Mullins

Who needs investors? More than two generations ago, the venture capital community – VCs, business angels, incubators and others – convinced the entrepreneurial world that writing business plans and raising venture capital constituted the twin centerpieces of entrepreneurial endeavor. They did so for good the sometimes astonishing returns they've delivered to their investors and the astonishingly large companies that their ecosystem has created. But the vast majority of fast-growing companies never take any venture capital. So where does the money come from to start and grow their companies? From a much more agreeable and hospitable source, their customers. That's exactly what Michael Dell, Bill Gates and Banana Republic's Mel and Patricia Ziegler did to get their companies up and running and turn them into iconic brands. In The Customer Funded Business , best-selling author John Mullins uncovers five novel approaches that scrappy and innovative 21st century entrepreneurs working in companies large and small have ingeniously adapted from their predecessors like Dell, Gates, and the Through the captivating stories of these and other inspiring companies from around the world, Mullins brings to life the five models and identifies the questions that angel or other investors will – and should! – ask of entrepreneurs or corporate innovators seeking to apply them. Drawing on in-depth interviews with entrepreneurs and investors who have actually put these models to use, Mullins goes on to address the key implementation issues that characterize each of the when to apply them, how best to apply them, and the pitfalls to watch out for. Whether you're an aspiring entrepreneur lacking the start-up capital you need, an early-stage entrepreneur trying to get your cash-starved venture into take-off mode, an intrapreneur seeking funding within an established company, or an angel investor or mentor who supports high-potential ventures, this book offers the most sure-footed path to starting, financing, or growing your venture. John Mullins is the author of The New Business Road Test and, with Randy Komisar, the widely acclaimed Getting to Plan B .

Genres: Business, Entrepreneurship, Finance, Buisness, Nonfiction, Audiobook, Management

304 pages, Hardcover

First published July 3, 2014

About the author

John Mullins is an Associate Professor of Management Practice in Entrepreneurship and Marketing at the London Business School. He earned his MBA at the Stanford Graduate School of Business and his Ph.D. at the University of Minnesota. An award-winning teacher, John brings to his teaching and research 20 years of executive experience in high-growth retailing firms including two ventures he founded and one he took public.

Since becoming a business school professor in 1992, John has published four books, numerous cases and more than 40 articles in a variety of outlets, including Harvard Business Review, the MIT Sloan Management Review, and tJohn Mullinshe Journal of Product Innovation Management. His research has won national and international awards from the Marketing Science Institute, the American Marketing Association, and the Richard D. Irwin Foundation. He is a frequent speaker to audiences in entrepreneurship and venture capital.

John’s now legendary first trade book, now in its fifth edition, The New Business Road Test: What Entrepreneurs and Investors Should Do Before Writing a Business Plan, is the definitive work on the assessment and shaping of market opportunities. His book, Getting to Plan B: Breaking Through to a Better Business Model, co-authored with Randy Komisar, a partner at the esteemed venture capital firm Kleiner Perkins Caufield & Byers in California, was named to “Best Books of 2009” lists by BusinessWeek and INC Magazine. John's book, The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers' Cash, has been called "mandatory reading for every entrepreneur before even thinking about seeking angel or venture capital funding"; in it John offers the most sure-footed path to starting, financing, or growing your venture.

John has consulted with and done executive education on four continents for a variety of organizations both large and small, including Merck-Serono, Time Warner Communications, the European and African Venture Capital Associations, Pumpkin Ltd., the Young Presidents Organization, and the International Finance Corporation of The World Bank, among numerous others. He has served on the boards of fast-growing entrepreneurial companies in the United States, United Kingdom, Europe, and Asia.

Reviews

[Susan Ali · Rating 5 out of 5]

I have come across a review on this book says that all what the author should have said was to get your customer to pay you in advance. Dear reviewer, are you truly an entrepreneur? You would then know that the most difficult part of every product/service lifecycle is selling it.
This book gives you something that no other book ever managed to provide out there, the detailed recipes of how-to ATTRACT and sometimes PUSH your customer to pay you to solve their problem or pamper them. It's gold.

[Truls Ljungström · Rating 4 out of 5]

Långsam läsning, väldigt bra bok. I princip en genomgång av tekniker för att starta ett företag utan alldeles för stora initiala kostnader.

[Murat Eskiyerli · Rating 2 out of 5]

Unlike what he recommends in his book, the author could never decide for whom the book was written for: entrepreneurs or angel investors. The book also suffers from the fact that there are very long descriptions of cases, but not enough of author's own insight.

[Nash · Rating 5 out of 5]

Great book on various possible models to pick if you don't have access to funding right away (which is the case in Pakistan). It talks about 5 possible business models that can work in this mode which are not capital intensive (for example, you can't make a power plant like this, you need lots of capex upfront.)

Some key models discussed were: marketplaces (a la Airbnb), subscription businesses (like SaaS with monthly recurring revenue), service-to-product (think Netsol's journey to LeaseSoft), scarcity model (like Zara or Banana republic and all the Flash Sale sites), pay-in-advance models (think air ticketing, dropshipping, threadless)

The book is written by an academic but he does a good job of talked about 2 successes and 1 failure in each model and their causes.

[Guillermo Echeverría Miller · Rating 4 out of 5]

An important read for any entrepreneur

It was very interesting learning about the 5 different customer funded schemes that the author identifies in his book. Being an entrepreneur, I believe this is a must read for anyone developing a new idea into a business. It is definitely crucial to validate your idea and business model with customers’ money before seeking to raise VCs’ capital. I don’t give it 5 stars because I found it repetitive at times.

[Kelly · Rating 3 out of 5]

This is a good way of reframing the lean/scrappy startup concept through five models of funding your business through revenues: Matchmaker (two-sided market - i.e. AirBnB), Pay-in-advance (i.e. Threadless), Subscription (i.e. Costco, TutorVista), Scarcity (Zara, flash sales, Vente Privee), Service-to-product (GoViral)

[Thomas Jr. · Rating 3 out of 5]

This book is excellent overall. Unfortunately, they dismiss reward based crowdfunding which undermines their credibility. If you realize that they totally missed the crowdfunding boat, the rest of the book is very useful. I would love to see a second edition in a few years with a chapter added on Kickstarter with case studies from Pebble and Exploding Kittens.

[Daria Zheglo · Rating 3 out of 5]

The book is full of insights on how to establish a customer-funded business. All is good, but it is too repetitive and there are no enough examples from different business areas. Basically each model gives you two-three success stories. This is not sufficient. Not enough pros-cons.

[N · Rating 5 out of 5]

Well-structured book!
The chapters that focus on a certain customer funded model provide you with many examples of businesses, that have both succeeded and failed, which I consider it's the most important aspect.

My favourite part, and the one I'd like to have as a pocket book, is the last chapter; which is an extensive summary of what has been talked about throughout the book, while also providing a set of characteristics to look out for when choosing to pursue any of the models.

[Andrea Niznikova · Rating 1 out of 5]

And stay poor.

What a waste of time and money is this book.

Forget about it this book will not show an effective business system to make something successful.

Starvation is what you will face after reading this.

Save your time and save your money

[Lera Colesnic · Rating 5 out of 5]

Unparalleled book on business models and financing for startups/early growth companies. When you understand the customer funded business, you understand that it's the optimal way for any business. The bonus is getting a lot of great case studies of successful companies in their early days.

[Jonathan · Rating 4 out of 5]

4.85

[Marijan Lesko · Rating 5 out of 5]

Excellent read for any entrepreneur ...
Instead of selling yourself to VCs or selling your soul to banks, use this idea.
Trust me, it works big time!

[Pronam Chatterjee · Rating 3 out of 5]

Repititive.

[Arif · Rating 3 out of 5]

This book talks a type of business financing model (versus venture capital based financing) that using customers' cash as fuel to drive further growth of their business. They charge customer early, making a good margin from that, sells just enough services/products that customer needs, then use the flow of cash to make improvement of their offering, or expanding its business. Good example for each types of customer funded model such as: match making, subscription, pay in advance, etc. Interesting discussion.

[Mani · Rating 4 out of 5]

This is definitely a very good read for entrepreneurs and investors. The customer funded models are discussed in a really amazing way. Enjoyed it!!