Demonstrate Growth Momentum, Even at Modest Scale

This week I’ve already had conversations with multiple seed stage entrepreneurs that are having a hard time raising money. In each case they have some modest metrics that show progress but don’t have enough revenue to get investors excited. Now, with limited capital, it’s a catch-22 where they need more money to get to the point investors where investors want to invest but can’t get there without investment. My advice: figure out how to show a growth momentum story, even if it’s a modest scale.

The goal is prove momentum and show month-over-month growth for the last 4-6 months. Here’s what that might look like:

  • Annual recurring revenue started the year at $100,000 and is now at $175,000 five months in growing 15% month-over-month (e.g. $100,000 in month 1, $115,000 in month 2, $132,500 in month 3, $152,000 in month 4, $174,900 in month 5, etc.)
  • Daily active users started the year at 100,000 and are now at 207,000 five months in growing 20% month-over-month (e.g. 100,000 in month 1, 120,000 in month 2, 144,000 in month 3, 172,800 in month 4, 207,360 in month 5, etc.)

In both of these examples the metrics are still in the seed territory (e.g. institutional investors want to see at least $1 million in annual recurring revenue for a SaaS startup) but there’s a clear story of sustained growth at a modest scale over several months. That sustained growth proves something is working and helps an investor believe that there’s opportunity for even more growth in the future.

What else? What are some more thoughts on demonstrating growth momentum as a way to get investors interested?

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