Show the system behind your goals
Today, we’ll talk about establishing a growth story for your startup
Investors fund deals based on the team, the market, or the technology. While these are popular investment thesis, the investment decision often comes down to what I call “the Growth Story”.
This is your operational revenue model showing how you acquire customers and how much they pay for your product/service.
If you have substantial revenue say a $1M then the investor assumes you have a growth story. Growth stage investors will look at the model to see how much you can grow that business and what constraints you will face and when.
For pre-revenue or low revenue companies you can sho in unit economic numbers the proven repeatable business model you have up and running.
If you haven’t done so already then take $5K and prove out the unit economic model.
For example, let’s say
-You can generate leads for $1/lead from Facebook ads
-Through a followup email you can convert 1 out of 50 leads into a paying customer
-Each paying customer buys on average $250 worth of product
-You can take these numbers and render a basic economic unit model as follows:
CAC: LTV is 1:5
-You then add the time it takes for signup and fulfillment and you have a unit economic model.
The fact you know your numbers will impress investors. Investors look for the system behind the goals. This is one way to demonstrate your growth story.
Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.
Let’s go startup something today!
Copyright (c) 2020, Hall Martin and investorconnect.org. All rights reserved.
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.