By Eetu Helminen, Project Manager

Here’s how we solved the funding-customer dilemma for startups by bringing startups, buyers and investors to the same table.

How is growth built? It’s simple: a company needs funding and customers. But there’s a catch. Most often, you can’t secure funding unless you have customers, and it’s challenging or even impossible to acquire customers without resources to sell, deliver, and expand. In other words, without funding. This is the chicken-or-egg problem faced by growth companies.

Solving this problem would be significant. It would provide buyers with new innovations for renewal, establish a foundation for startup growth, and offer investors new, lower-risk investment opportunities.

So, how do we solve this problem? We decided to bring startups and buyers together. Why? It all started when Mia Toivanen, the leader of the KIRA growth programme, and I happened to meet at the coffee machine, and we talked about our frustration with Finland’s lack of renewal. We found wisdom in a comment from a startup founder: “It’s nice that our product development is supported, but why can’t the same money be given to customers so they can buy from us?”

From there, the solution to the chicken-or-egg problem became simple. We began an initiative to help large companies purchase innovations from startups. This initiative is Smart Business, Big Impact, which we have been developing at Urban Tech Helsinki in collaboration with the KIRA growth programme and KIRAhub. It’s been successful, by the way. The initiative works to ensure that large entities adopt more innovative solutions from startups. For example, we’ve successfully created over 200 sales opportunities.

During this journey, we made another discovery. When we brought together potential buyers and startups, investors become interested as well. They benefit from startups gaining customers, which creates growing businesses for investment. Additionally, they learn what startups are actually doing with their customers. They gain more insight, making it easier to invest.

A winning concept: three birds with one stone

In the Smart Business, Big Impact initiative, we brought together startups and buyers in several ways. This approach helped us address two major obstacles experienced by startups, at least partially. We built trust among the stakeholders and provided large organisations with information about startup solutions. At the same time, startups learned how to communicate with major entities, how to alleviate their risk concerns, and what to consider in an initial sales meeting.

We organised events where a large number of startups pitched their sales presentations to several key industry players, as well as events where a large organisation and a startup interacted in a speed-dating format, with 15 minutes at the same table. This led to the next insight. Would it be beneficial to invite investors as well? They would be able to see startups interacting with major industry players, observe how the solutions are received, and identify what is new or innovative about them. They could see where potential customers are and evaluate the readiness of the solutions.

As I explained the new concept to Damon Hernandez, a U.S. investor and startup entrepreneur, he practically shouted, “Eureka!” His eyes lit up with understanding. In a traditional pitch setting, a startup presents its idea and growth potential to a group of investors in three minutes. As Damon put it: “What can investors really grasp from a three-minute pitch?” Of course, an expert who has seen multiple presentations can easily notice many things, but rarely does pitching directly lead to an investment decision. Instead, it begins a longer process. Nonetheless, it is valuable for investors to see startups making deals with potential buyers. They learn more from this interaction than from almost anything else.

Urban Tech Helsinki and Aalto Startup Center, as well as incubators and accelerators in general, often practise pitching to investors. Three minutes to sell yourself and your idea to secure funds. The formula is usually clear and repetitive: What problem do you solve, how do you solve it, how do you make money from it, and who are you? All this in three minutes.

Pitching to a customer—the sales pitch—is a bit different. You have to be able to articulate the value of your solution specifically to the listener. We practised this for the events. One startup founder noted that this was the first time he had gone through the sales pitch with an outsider. It was valuable. This lesson aids both in closing deals and attracting investors.

When the room was filled with startups, representatives from large companies, and investors, everyone benefited. The chicken-or-egg problem was solved.

Three key takeaways:

Focus on selling. When a startup gains customers, investors become interested as well. Organise events where a large number of curated startups and industry experts are present. Create a safe environment where there is no pressure, but rather a collaborative atmosphere to develop startup solutions. Through this, trust is established between startups and large entities. As we all know, trust leads to transactions.

Investors benefit from new knowledge. It is valuable for them to see startups engaging with industry experts. This allows them to make better investment decisions.

A fourth party that brings buyers, startups, and investors together is immensely valuable. This entity can create trust among all the different stakeholders and thereby promote both the acquisition of startup solutions and investments. Everyone benefits.

Investing in intermediaries is worthwhile. Their work returns multiple benefits to society, large companies, and potentially investors. Naturally, I had to add this last point. (Some personal interest here.)

Before Christmas, we will share further insights from the Smart Business, Big Impact initiative—what we’ve done and what else we’ve learned. We will publish them in collaboration with KIRAhub. If you’re interested, follow them, Urban Tech Helsinki, and myself. If you’re interested in doing something similar, send our Project Manager Eetu Helminen a message.