Earlier today I was watching a video where Mark Suster (entrepreneur turned venture capitalist) was interviewing Scott Painter, the CEO of Zag. The best part of the video was where Scott lays out his company’s dashboard and talks about the metrics that drive his business. Take a look at minutes 43-48:
In the video, as part of talking through his company’s dashboard, Scott hits on the number one reason startups can’t raise money, without mentioning it directly. The main reason an entrepreneur isn’t able to convince an investor to invest: the entrepreneur can’t demonstrate defensible, metrics-driven data on how he/she is going to build a large business. Scott’s dashboard includes the following information for the past 30 days:
- Unique visitors
- Active prospects
- Sales (cars sold)
While this idea makes sense, it is amazing to see how many entrepreneurs don’t fully realize it, spend a good bit of time trying to raise money, and end up disgruntled with investors by the end of the process. My recommendation is to build a story, with metrics, of how you’re going to build a big business, and then paint the picture for how the investor is going to make an out-sized return investing in your company.
What else? Do you agree?
Note that this is especially true in markets that are more conservative with startup investing like Atlanta.