As I mentioned last week, Nelson Chu gave a great presentation at the Q3 MoneyTree meeting.

The title of his presentation was Tips for Entrepreneurs: Know Your Customers! Nelson was kind enough to share his presentation with me. From Nelson’s point of view are are three reasons to get close to your customers. It enables you to identify big waves, it drives focus, and it creates value.

Big waves are important. Many thing the most important element to success. By knowing your customers it enables an entrepreneur to be specific about the target customer. To know:

Who is going to sign the check?
What is their burning problem?
Why your product is a need to have and not a nice to have?
When they are going to buy due to urgency?
Where you are going to sell it and the implications for the business?

Focus really does two things. It builds excitement among investors and sets the business focus. The latter enables you to build the right team, build the right product, and build early customer validation.

When you combine the above you create value. Big waves drive investor interest and exciting valuations. And actually having customer traction typically, but not always, drives valuation reality.

Nelson gave good food for though for any entrepreneur wanting to start a company. He is also the type of VC that I think any CEO would want on his side. He is smart, strategic, and most importantly measured. I have a hard time seeing Nelson blowing up if things are not going as planned.