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- ♞ Are you fundable?
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Can you raise venture capital?
Before anyone starts reaching out to VCs, preparing their pitch deck, asking for help, etc., you need to ask yourself the very simple question: Are you fundable?
The reality is that not every company and person is fundable. While some of us with incredible pitching skills can turn an idea into funding, for 99.999% of people, that isn’t possible. For you the tips and tricks that you get here are meant to increase your chances of raising funds.
0.05% of startups receive venture funding. If you are the average startup, that is a 1 in 2000 chance of raising. By working with someone like me you can increase that to 1 in 200. Most of the companies I work with are already in the top 1% of companies. They have a 1 in 20 chance, and I work to turn that into a 1 in 2 chance (my success rate with clients is 50%).
What I’m getting at here is that if you are a company with 1 in 2000 or longer odds of raising, then you need to know that before you start raising because your top priority should be making your company more fundable, not improving your pitch.
So how do you know if you are fundable?
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Scalability - I have a great business consulting for startups. I can make $1,500 to $3,000 per month consulting for startups that are raising. I can manage 8-12 companies at a time. If I went 100% all in on consulting and forgot the newsletters, research, networking, etc, I could help 30 companies a month. That might sound great, but realistically, it could be a $1M+ ARR business overnight if I wanted. This doesn’t mean it is venture-backable. My time is limited, and there isn’t a way to scale beyond $1M+ ARR. So it is a great business for me but not for an investor.
Cap Table/Structure - If you have problems with the way that your company is structured or who is invested in the business, then it may not be backable. Investors don’t want to get involved in dealing with the drama of numerous different family members, angels, etc. so you need a clean cap table. You also need to be incorporated in a jurisdiction that VCs trust and know they won’t invest in a foreign company with an incorporation they don’t understand, especially if that might mean needing to deal with foreign regulators.
Market size - Is there enough room in your market to accommodate VC-sized returns? Even at the Seed stage, if you want to raise $2M at a $20M cap rate, then for an investor to get their 10x return, you need to be able to grow to be at least a $200M company (assuming you don’t need further financing to get there). Is there enough room for growth to accommodate that? Again, looking at my market, I need to sell my services to companies that have raised or have founders with a previous exit but who haven’t yet nailed their pitch for larger raises. That’s not a significant amount of companies that can get their initial funding but struggle to scale their capital raises. There may only be a few hundred of those companies at any given time, so even if I could scale the company operationally, the market might not support a $200M company in this space.
Traction - Do you have any traction or track record? Over time, this has become less of a “nice to have” and more of a requirement. It is getting increasingly difficult to raise without company or personal traction.
Are you fundable? |
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Are you looking to grow your business? Here is how I can help:
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Onwards and Upwards,
