Recently I was talking to an entrepreneur that’s built a sustainable SaaS business and really wants to grow it exponentially. Only, even though there’s good progress, there isn’t enough progress to raise money by today’s high standards (see Metrics to Raise a Series A). Institutional investors want to see a minimum revenue threshold (e.g. $1M in recurring revenue) combined with a growth threshold (e.g. at least 100% year-over-year). What’s an entrepreneur to do that’s made good progress, but not enough to raise institutional money?
Here are a few thoughts on available options:
- Angel Investors – If more money is absolutely required, angels are the way to go. But, they want to see fast growth as well, so if that’s a problem, angels will take a wait-and-see approach which leaves us with…
- Upgrade the Metrics – If the year-over-year growth numbers aren’t high enough, the next best thing is to upgrade month-over-month growth for several months and try to tell a growth story, albeit a short one.
- Customer Cash Flow – Finally, if raising money isn’t going to happen, growing the business via customer cash flows is always an option. Remember, most markets aren’t winner-take-most and have opportunities for several success stories. The key is to be relevant in the market, and sometimes that requires outside capital, and sometimes it doesn’t.
Building a sustainable business is an enviable milestone. Only, investors are looking for big exits, and sustainability with limited growth often isn’t enough to raise money. When that’s the case, figure out the options and choose the best course.
What else? What are some more thoughts on entrepreneurs making good progress but not enough to raise money?
One thought on “Good Progress, But Not Enough to Raise Institutional Money”
Consider revenue-based financing to further extend runway, accelerate sales and increase enterprise value – all with a view to secure the next large equity round at better terms. Lighter Capital provides up to $2M in non-dilutive financing for growing SaaS companies with flexible structures. To date, we’ve funded over 115 early stage technology companies. Reach out to learn more: email@example.com