What are your thoughts about having the first customer also be an investor? Should I not go this route and only try to find funds elsewhere?

If you need funding for your business one way or another then I don't see anything being wrong with having your client on board as an investor.

Not only do they already know about your business, therefore saving you a fair bit of time and effort that you'd otherwise put into pitching your business to outside investors, they (likely) also have some first hand industry experience, which is probably going to be an asset for the business.

Cheers,
Bryan

This is naturally a relationship that you'll want to preserve, especially if this client is a family member, friend, or connection somehow. Your first customer's experience can make or break you as you go out and see additional customers. That being said, in my personal experience, the fact that your first client has initiated the conversation of coming on as an investor, is a very strong sign for your business. There are a lot of factors to consider when evaluating bringing on an investor (place more emphasis on the type of person he/she is, their marketplace relevance, access to funds, and connections they have that can be beneficial to you). If taking your initial investment from this first customer means you'll have a direct line into pitching your services to 10 more similar potential clients, then that could be a huge win for you.

In summation, there's no reason you should be any more careful in taking on your first client as an investor, than you should be careful in your evaluation of any potential investor. I'd be happy to chat this through with you further and help paint a more clear picture with more details on your relationship.

I've seen this occur multiple times to my own startups and in my consulting business. Investors come in all shapes and sizes, and at varying times throughout your startup. Whether the first customer or the lady next door, true investors believe in your vision. That being said, no business ever succeeded without customers. I believe your priority should be on exceeding your first customer's wildest expectations. Deliver your product to solve their problem first - and do it well. Investing is secondary and will naturally occur if you succeed on making them a loyal customer. A very common problem for entrepreneurs is to get easily distracted away from building your business and customer base. Capital will always flow to successful businesses. Please call if you would like to discuss this, or anything else, associated with starting your business.

What will happen if a passenger becomes a part owner of a cab. He'd save money every time he use the cab. But, it will be a missed earning opportunity for the cab driver. The same applies to your situation. In my more than a decade of experience I've seen startups making such early mistakes. If funding is the only panacea to your business growth then there's better ways to seek investment, and through relevant investing bodies.

A customer should be served, retained, and served better to be able to create experience story and engage new customers. Making your customer an investor in the business is akin to offering life time service coupon against raised capital. Opportunity cost, isn't it?

Need to discuss anything? I am just a clarity away.

Getting seed money from people that know you and your business is a blessing in disguise. I've done it ONLY this way to increase the size of my business or buy real estate and it has always worked out well for me personally. I've never gone to a bank and this April I will have been in business 25 years. I feel it's a must way to do business. Good luck. B