“How can a pre-rev startup prove to investors that they’ll be able to make money?”
“Do you prioritise the big fish clients or chase smaller customers?”
“What are the common pricing mistakes early-stage founders make?”
Serial entrepreneur and investor, Joyeeta Das, joined us for Week 3 of Seed Sprint to share how investors evaluate if your startup can make (or will be able to continue to make) money. Not only is Joyeeta an Associate Venture Partner with SuperSeed, she was also one of the Financial Times top 100 BAME leaders so we were extremely grateful to have Joyeeta for the hour.
Check out our 10 top takeaways below:
1. Want to know how investors take a quick temperature reading of your potential as a founder and a startup? It’s all in your understanding of the market and target customers, is it accurate and clear? What user testing did you do and what was the feedback? How do you view the criticism you received? Clarity is key!
2. Pre-rev and want to send some strong growth signals that you know will make investors sit up, and listen? There are two simple things you can do,
Use your users: Test your product with potential target users, ask if it’s something they would use and collect the feedback so when investors ask for your target audience, you can be specific with the data
Get some analytics: Test and track your website traffic and traction as this is a great way to determine how your user base is growing
3. Want to avoid the common pricing mistakes other startups make? Be flexible. Prices are not set in stone. In fact, all good startups experiment with price. That said, if you sell to a few thousand customers at one price and then drastically reduce it, you’ll make early-adopters feel short-changed which could reduce word-of-mouth spread and create distrust.
4. How do investors view atypical gaps between a Seed and Series A round Investors know the time frame will vary from months to years but the longer you leave it the more investors will want to know why. As a rule:
24 months between rounds is very good
2-3 years is the ideal amount of time
3-5 years is when investors may ask why
7+ years means you’ll need an excellent story as to what happened
5. You’re generating significant revenue...but it’s all from one customer. Good or bad?
It’s great you’ve got revenue, but investors will view this as a high risk, regardless of the cash coming in. Simple reason, if this customer leaves, then what?
6. Interested in bootstrapping?
B2B? B2C? If you have the means, go for it! Bootstrapping allows you to retain more ownership over your company, and be the decision maker.
7. Do you spend your time chasing the big fish or the smaller customers?
Your first customers should represent your future. After all, that's why it’s called a ‘seed’ stage - do you have customers that will eventually become the plant? Do what makes sense for your business. If you’re chasing the money and rushing to get a big fish but it doesn’t make sense for you to do that, investors are going to notice.
8. Does being a sole founder matter to investors?
This question comes up a lot, especially from sole founders, and of course there will be an element of subjectivity with investors, as with everything. However, objectively, according to the book ‘Super Founders, What Data Reveals About Billion Dollar Startups’ there is no evidence to support that being a sole founder, versus a team with 2, 3, 4 or 5 founders makes any difference to how successful you can be.
9. On that note, does your age (as a founder) matter to investors?
Again, objectively it shouldn’t, as there is no evidence to suggest that age makes any difference to success. However, bias is real, and ageism can be a hurdle. If you feel age (or any other bias) is the elephant in the room, then address it up front and control the narrative. By pointing it out yourself, you are ensuring the investor is aware of any potential bias, which should reduce it influencing their decision. Age is a massive asset - you have years of experience! Highlight that it’s a positive factor and that you’re proud of wanting to give back.
10, Are you thinking long term?
Each new sale should cost less. Passion is great fuel, but what are you doing now to improve your product, sales cycle and strategy in the future?
Be sure to watch the full replay of the session here and listen in on the many more additional insider tips she shares.
Sign up to Seed Sprint here to gain access to all of the workshop replays PLUS our Sprinters WhatsApp chat and Slack channel.