Hey Founder, Here Are 3 Metrics You Can Use to Wow Next Level Investors
Photo by Boxed Water Is Better on Unsplash
Funders look at lots of things, but these matter most.
Let me guess. You’ve worked your tail off for three years and, now, your product is in dozens of natural products specialty stores, while your direct to consumer sales online brings your total sales up to the magic million-dollars-a-month level. Congratulations, you now have every right to say, “I am a survivor. We’re making it!”
But now you’re thinking about moving to the next level. You want to reach many more people and also introduce new products that fit with your strategy. To do this, you’re going to need an infusion of investment capital. Your revenues alone will likely earn you a serious look from more than one investor, but to get them to invest in you will take more than this — three things more, according to my friend Mike Burgmaier, co-founder and managing director of Whipstitch Capital.
“Remember, private equity investors are looking at your $10 million company and wondering whether it is set up to go to $50 million,” Mike told a webinar I conducted for founders. Then, at the next level, “strategic companies want to know whether that $50 million company can go to $150 million.”
Mike says that while investors look at many facts and figures about your company, three stand out as critical. They are:
Brand: Your brand should be about more than a product or an ingredient. Products and consumer taste change over time, but a brand that stands for something larger stands a better chance — in an investor’s eyes — of outlasting trends and finding new markets.
Velocity: How fast the brand is selling off the shelf. A steady rise in velocity tells investors you’re on the upswing, with room to grow. Promotions should be used to raise the bar on velocity, not simply cause an upward blip. The best time to sell is during a velocity bump!
Gross margin: At some point, companies need to be profitable and accumulate cash. The more margin you have, the more secure investors will feel about your company’s future prospects. And yes, there is a typical range for margins based on the category you are in.
It’s pretty easy to see that these three things are interrelated: the stronger your brand, the faster it flies off the shelf, supporting larger gross margins, and allowing you to expand into new channels, etc. What I like about Mike’s approach is its simplicity: no matter what else is going on and how crazy things get, you can track your company’s health and growth consistently over time.
Check out the video in this blog for a deeper look at Mike’s thoughts and, as always, know that we at ScalePassion are on standby to help you scale your change-the-world company.
We’re online, nimble, and completely committed to the strategic success of founders like you.
Sincerely,
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All credit to my ghostwriting partner, Dave Moore, who is instrumental in getting my thoughts out in a coherent manner & into these blogs. Thanks Dave!