Customer development and gaining customer traction is vital to be able to build your startup successfully. Investors want to know that someone somewhere wants to use your product and that they’ll pay for it.
In the world of tech enabled startups, this is relatively simple. You can prove customer traction through having users signed up (or even better, paying customers) and interacting with your app or website within a couple of weeks.
However, in the world of deep tech startups, where the product may not be ready or usable for months, if not years, how do you prove customers want what you’re building? How do you show that a customer really wants your product?
A Letter of Intent (LOI) has become the typical way for a B2B deep tech company to show that they have customers who want their product.
Investopedia outlines a LOI as “in most major business transactions, a letter of intent (LOI) outlines the terms of a deal and serves as an “agreement to agree” between two parties.”
It’s a light legal document where the customer makes a soft commitment to potentially using your product in the future.