VCs turn down 99% of the companies they’re introduced to. Most of those don’t make it to a face to face meeting. If you’ve made it to an in-person meeting, here are the numbers you need to know to get a VC excited:
Customers — In most cases there’s a collection of important numbers reflecting your customer base: site traffic, downloads, signups, free trials, paid pilots, current subscribers — the list goes on. You should know the details on the 2 or 3 most relevant to your business, e.g. 500 signups, 50 on free trial, 100 current subscribers.
Revenue — Top line revenue and lifetime value (LTV) are essential but it helps to have high level data on your margins and your cost of goods sold (COGS). Even if you’re an early consumer company, you’ll need some insight into the revenue potential. For example: $15k monthly recurring revenue (MRR), COGS of $3k (excluding payroll) and LTV is ~$4k per customer.
Growth — Your monthly growth rate will be the obvious question but most VCs will be looking for how the company has grown over the last 6 months. It’s also important to know how and why your growth has changed during the last 2 quarters. e.g. average growth of 15%/month for the last 6 months, it’s increased in the last 3 months due to reliability improvements.
Engagement — Monthly active users (MAU) are a requirement but it’s a positive sign if you bring in-depth knowledge of user behavior. Daily active users and other deeper engagement metrics demonstrate customer reliance on your service, e.g. 250 MAUs, of which 100 are active daily.
Churn — VCs expect churn based on cohorts and customers, with a simple calculation they can verify. You can mention dollar churn if it’s negative to demonstrate up-sells. For example, Average 2.5% monthly customer churn for last 12 months, since Q2 it’s dropped to 1.5%.
Burn and Cash on Hand — VCs want to know how much runway you have left which indicates how much you need their money. They’ll want to verify you’re spending cautiously and if the burn number seems high for your stage, you can expect to justify the expenditure. Example: we have $500k in the bank and burn $50k a month, we have about a year of time given modest revenue growth.
Look to the Future
Distribution — Many founders show up with healthy business metrics but a weak plan on how they accelerate growth. Bring data on your existing channels, their cost of acquisition (CAC), and how many more customers they can provide. In addition, you should bring plans for future channels, with positive test data. Examples —
- Ads — 40%, CAC $150/customer — has 2x room at current CAC
- Content Marketing — 15%, CAC $50/customer — hire writer to increase 3x
- Referrals/Word of Mouth — 45%, CAC $0 — currently growing 10%/month
- Radio Ads — CAC ~$200/customer — 10k new customers/quarter
- Distribution Partner — CAC ~$100/customer — 5k customers, contract in Q1.
Fundraising History — How much you’ve raised, when you raised it and who you raised it from. Most VCs have ownership requirements (or guidelines) and this info helps them judge if they can get what they want. It’s also a great source of off-list references, so you can expect interested VCs to ping your existing investors.
Projections — VCs want to know what they’re getting for their money. Explain where the company will be in 18–24 months, how you plan to use the money and how that changes over time. They want to see you can plan ahead, everyone knows plans change but this is a helpful guidepost.
Fundraising from VCs is one of the most competitive professional environments you will encounter. If you collect and understand your company’s data in advance, you’ve got a much better chance of beating the odds.
This article is part of a series on Seed Fundraising.
1. When to Raise Money
2. How to Build a Deck
3. VCs vs. Seed Funds vs. Angels
4. How to Get a Meeting
5. How to Request an Introduction
6. How to Get Early Momentum
7. How to make a Good Pitch Great
8. The 5 Most Common Pitch Mistakes
9. Meeting Requirements
10. The Basics of Meetings
11. How to Handle an Angel Investor Meeting
12. Know these Numbers for your VC Meeting
13. 4 Investor Gotcha Questions
14. How to Follow-Up After an Investor Meeting
15. How to Close the Lead Investor
16. The 4 Stages of a VC Process
17. How to Raise a $2 Million Seed Round
18. Go from Investor YES to Cash in Hand
19. When Investors Say Yes but Mean No
20. When and When Not to Use an Investors Name
21. Stop Making These Common Fundraising Mistakes
22. How to Avoid Bad Terms that Kill Startups
23. What to do After Receiving a Term Sheet
24. Term Sheet Problems Part 1 — Money Talks
25. Term Sheet Problems Part 2 — Boardroom Blues
26. Term Sheet Problems Part 3 — Side Letters
27. 10 Traits of Successful Founders
Sterling Road invests in pre-seed B2B startups based in North America. Full process here: sterlingroad.com/process.
You can reach me here: email@example.com
Thanks to Kaego Rust and David Smooke for reading drafts of this.