Here’s a hypothetical for you: If your business suddenly took off - I mean like accidentally monopolizing your market and seeing exponential growth overnight - would you be able to handle it? Or would you crumble into a stressful wreck?
When I was building my company, Flowtown, I remember one of our potential investors talking about Expansion Revenue. I thought “Uhh… okay. What the heck is that?” You don’t wanna learn about this stuff FROM potential investors. Staring at them wide-eyed when they outsmart you doesn’t exactly scream ‘good investment’. But now I know how to use upselling to increase customer retention and leverage Expansion Revenue. It makes a real difference. I’ve used it in my own businesses and now
Years ago I attempted to raise money for my first company, Flowtown, with my co-founder Ethan. You know what we did? We cold emailed investors. We figured “We have a startup, they invest in startups... so surely they want to hear from us”, and hoped our confidence would cut through the noise. It didn’t work. Obviously. They didn’t even bother to reply. So we hunted for advice and came across Naval from AngelList. Everything he said about fundraising just… clicked.
I’ve seen this happen before… A business that’s already growing decides to start their own SaaS. It always seems like a great idea. You’re already serving your customers, you know their problems, and you’ve got company resources to work with... So it’s gotta be easier than starting from scratch, right?
Funding. The day will come when you need it for your SaaS. You’ve grown your startup, got a brilliant team and you’ve got a great product you can actually take to investors as proof. Now it just needs that push. But before you even think about trying to fundraise or approach investors, you’ll need to know how to value your SaaS and decide on how much you should raise.
And it goes like this: How much is it? - It's not that bad… Look, it's simple. Just give me a number. OK? - It's 20% - not that bad, right? WOW… Your churn is 20% monthly? *issues a small prayer to all the SaaS gods* The above is a conversation I recently had with a potential coaching client… GOOSEBUMPS! Let me put this into perspective...
Imagine the following… You’re growing fast and you need to hire a new biz dev guy. He’s convinced that he's going to add a lot of value to your company, and asked for 1% of your startup, so you give it to him. After a few months, you pivot the business and he’s no longer needed (plus he didn’t actually do anything while he was around). Next thing you know, you are just about to raise the first round of
I recently got on a call with a potential coaching client who asked me the best way to create momentum during the fundraising process. And it got me thinking… “what’s been true in my own successful fundraising experience… as well as the 150M raised by those I’ve mentored/advised?” Turns out, there were some consistent (and repeatable) markers that can make the difference between a fast and effective fundraising round…
I’ll never forget one of the first times I pitched an investor. I was literally pacing in the back alley of a SF coffee shop with one of those ugly pre-2007 cabled headsets plugged into my iPhone. I had a warm intro to the investor. Things were going smooth. But with just ONE single misstep, I got those gut-wrenching words no founder ever wants to hear:
Back in 2008, Warren Buffett was approached by a struggling insurance company. He asked them to fax over their financial data to the hotel he was staying in (in Edmonton, Alberta)... Within just a few hours he was able to put together a proposal to acquire them. How did he do it?
