Growth, revenue, focus: How to get an investor's attention
Growth, revenue, and data are all great ways to catch an investor's attention, but it all comes down to focus.
When it comes to courting investors, especially venture capitalists, for your startup, the recipe is simple: stop worrying and start focusing.
Most investors have a singular goal -- to fund a startup that eventually becomes a large, independent, defensible company. Finding an Evernote, Airbnb, or Instagram provides the kind of return that makes or breaks a venture capital firm.
But how do VCs find a company that is going to become big? It's not an easy task, but there are a few clues investors look for in order to determine your chance at hitting the jackpot. Here are a few of the important ones:
- Previous exit: Nothing makes investors salivate more than having the chance to back a founder who has already had an exit. Previous success is the best predictor of future success.
- Growth/traction: Pinterest famously failed to convince investors to drop their money on it. But once it went viral, investors began fighting for a seat at the table. Investors look for "durable traction," says Josh Elman of Greylock Partners. Short-term bumps from press coverage don't cut it -- a product has to be sticky, and friends have to tell their friends about it organically.
- Revenue and a business plan: Despite what The New York Times says, investors love startups with revenue, especially if revenue is rising. It's even better if a startup can show it has a reasonable opportunity to make significant amounts of revenue from a big market.
- Data: Data is monetizable -- just ask Domo, Metamarkets, Cloudera and TellApart. It's the entire premise of the big data movement. Companies that show they can gather and analyze vast quantities of data have a clearer path to funding.
Having investor traction, intellectual property or a strong team with domain expertise also helps, but in the end, they're all clues that you have the ability to focus:
"In the really early stages of a company, it's hard for the team to focus on one thing and do it really, really well," says Elman. Trying to acquire users is a completely different task than generating revenue, and splitting your attention on both may result in your startup not doing either thing well. If you're successfully acquiring users at a rapid pace though, most investors won't doubt your ability to eventually monetize those users.
So how do you grab an investor's attention? Keep focused on something you can deliver in a big way, whether that's growth, revenue, or data.