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VIRAL Level 4: Attacking the Market
You’ve validated that your product or service is worth investing in.
You’ve defined your market, and now you’re planning on how you’re going to attack it.
What investors at this stage are likely to like about your business:
Your initial traction.
You’re going to want to highlight both a story of an initial customer–who did you sell to? Why did they buy it? How is their life different?–as well as numbers behind why that customer isn’t alone.
- Your market size.If you’re raising venture capital, venture investors will want to know that you’re attacking a market of at least $1B. You’re going to want to talk through how big the market is for products like yours, and how you can logically capture meaningful market share. NOTE: A best practice for this is to walk an investor through growth. “The market for human resources technology is $300B. The market for job-matching software is $30B. The market for job-matching software that attracts young people coming out of school is $10B.” is much better than “The market for human resources technology is $300B, and if we can achieve just 1% of market share, we will be a $3B company!” (It’s very, very hard to achieve just 1% of market share.)
- Your team’s experience in your market.You’re starting to get to the point where, in order to grow, you’re going to need major strategic partnerships for sales and distribution. You’re outgrowing the time where it’s charming and exciting to be inexperienced; now you need to prove your bona fide experience in the market.
What investors at this stage are likely to ask questions about:
Your team’s capability beyond the founders.
You’ve likely gotten this far because you have awesome founders. But teams build companies. Who is running your sales-and how are they “as good or better” as your founder? Who is running product? The founder or founders are probably getting to a point where they are stretched thin. Who is on your team–or who would you bring on your team if you could afford them? That’s why you’re raising money!
- Your unit economics. It’s possible, even likely, at this point that you are making revenue, but still unprofitable as a company. Investors will care, though, that you are profitable–at a unit level (each product or service you sell makes more than it costs). If you don’t know what your “customer acquisition cost” is, as well as your “lifetime value of a customer,” you should start to figure out–and make a case to investors that, as you grow, your customer acquisition cost is decreasing and the lifetime value of each customer is increasing.
- Customer validation beyond early adopters. An investor will want to know that you are able to sell to a large enough market to justify investment. How can you demonstrate that you are making progress beyond early adopters? Do you have data on customer satisfaction (a net promoter score?) Are you tracking customer referrals, and for new sales, do you track outbound versus inbound leads? An investor who wants to help you reach the next stage will want to know these numbers.