When founding your startup, it is important to have a growth story. While investors may invest in teams and technology, they’ll still need to see your operating cost model, how you are finding customers and how much they pay for your products and services.
If you’re bringing in a lot of money, the investor will assume that you do have a story to tell. These investors will look at your business model to see how much you can grow as well as what challenges you’ll face and at what point.
If your company is low revenue or pre-revenue, you can show in economic units the proven and repeat business you have. If you haven’t already, take out $5K and prove the unit economic model.
Let’s say you can get a lead paying $1 for a social media ad. You then send follow up emails which give you one lead out of fifty. Your lead then spends an average of two hundred and fifty dollars for your products or services.
You can then take these numbers to come up with a basic financial model. It tells how much it costs to get a customer and the value of the loan.
Knowing your numbers and being able to tell investors how you’re growing is a key to fundraising.