You have denied your Keynote skills, you’re excited that you’ll finally be able to start paying yourself a living wage, and you’re excited to start pitching your startup’s next round of funding to investors. your private. It’s a tough time for sure, but hit the other pedal there for a moment, pal – you might be forgetting something.
After working with hundreds of founders on fundraising – including Pitch Deck Teardown Series here on TechCrunch+ – there’s a slide that almost every founder makes the unfortunate mistake of. Slides are often referred to as Ask. Or, as one investing friend calls it, “what is my $10 million going to buy me”? to slide.
Asking is a sensitive topic for a lot of inexperienced entrepreneurs, which makes a lot of sense. Trying to properly size the funding round can be overwhelming, and there are thousands of different ways to build a startup. If you have successfully raised $8 million, you can do things one way. If you raise $12 million, perhaps you can roll out more features of your product a little faster, or test more, or go into an additional market sooner. Do you know that. Your senior staff knows it. Your investors know it. But regardless, you need a Plan A.
What should those key metrics look like for not this funding round but your next?
What do you need to do?
A lot of founders will tell you they’re trying to raise enough money to last for the next 18 months. That may be true, but it will be true no matter how much money you raise. A better approach is to think about what you need to accomplish to improve next funding round, and then work again from there. This is probably a combination of indicators and milestones.
Data are the measurable parts of your business that grow and evolve over time. One of the best metrics you have is revenue, but there can be many more: number of sales, average order value (AOV), monthly or yearly recurring revenue (MRR or ARR, respectively), customer conversion cost (CAC), lifetime customer value (LTV), daily and monthly active users (DAU and MAU), retention rate (usually expressed as by inverse ratio, churn rate) and more. What should those key metrics look like for not this funding round but your next?
Important milestones are also measurable parts of the business, but instead of tracking them over time, they tend to be binary: You’ve hit a milestone or you haven’t. For startups, these can be key employees; Finding the perfect, experienced CFO that can help take your company public is one of those milestones that many companies need to achieve at some point. Product launch (beta coming soon), launch in specific markets (launch in California only), and localization (e.g. launch your app in Spanish and French) are also important milestones. Financial milestones are also common; The first time you earn a dime from any customer is a big change in business. On average, when a customer starts making you more money than you spent to get them, it’s a different story. For early-stage companies, completing the customer validation phase by talking to, say, 100 leads is a major milestone.
As you’re raising money, you’ll map out a series of milestones that you need to achieve to validate your company. In addition, you will set a number of trigger points for the metrics – hit $1 million ARR, have 5,000 daily active users or find a combination of customer acquisition channels, meaning you can get customers at a reasonably matched CAC, for example.
So let’s take a look at how to create a great “ask” slide by determining what it takes to determine how much you need to raise, how to create a specific set of goals, and how to combine it all. together in a unified whole.