Rating Your Deal Flow

Rating Your Deal Flow

July 29, 2021 by investor

Deal flow is the lifeblood of the startup investor.

It’s important to assess the deals in short order to prioritize follow-up.

One way to help this process is to apply a rating to each deal.

Here are some key factors and how to calculate them to use in your rating:

– Revenue run rate – take your current monthly revenue and multiply by 12 to annualize it.
– Gross Margin – take your Cost of Goods Sold, divide by the revenue, and subtract 1. 
– Burn Rate – monthly cash expenses minus monthly revenue.
– Cohort Analysis – take the number of users who join the program and track the outcome of each. 
– Cost of customer acquisition – monthly sales and marketing expenses divided by revenue from the customers signing up that month.
– Payback – number of months of recurring revenue to cover the cost of customer acquisition.
– Magic Number – revenue over two months multiplied by four and divided by sales and marketing costs over the same timeframe.
– Sales Cycle – average number of days from first contact to customer signing up.
– Lifetime Value – the total amount of revenue generated from a customer.
– Total Available Market – the total amount of money spent in a target market.

Give each factor a score, say 1 to 10 with 10 being the best.  

Add up the factors to give the deal a score on a scale of 1 to 100.


Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.


Let’s go startup something today.


Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.

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