They say you should know your audience before you make a pitch. So what do VCs and investors really want to know when you’re raising funds for your company?
Investment isn’t just about money – it’s also about creating a partnership built on trust. Investors want to know they’re making a good decision, and it’s your job to tell them why they are.
The business idea itself and who’s on your team are probably the two biggest influencers that make an investor fund or fold. But let’s not forget about your numbers, because they’re an indicator of the viability of your company’s business model, your level of fiscal responsibility and your depth of knowledge into your market.
How do you tell those stories in your metrics? We asked some of Canada’s leading venture capitalists and investment firms to bring you the answers.
Be ready to talk specifics
Extreme Venture Partners
“Some startups have no metrics other than expenses, which makes traditional financial analysis difficult,” says investor Ray Sharma. “The specific metrics are highly dependent on the situation. Valuation is very sector specific. For a SaaS company, we are looking at monthly recurring revenue, and for a mobile app, we are looking at lifetime value-type metrics.
“A pro tip is to go a level deeper to the ‘serviceable’ total addressable market and provide insight into the business that your product can actually address. So instead of saying mobile games, you go deeper and realize that your game is casual, appropriate for a certain demographic.”
Keep your numbers reasonable
Golden Triangle Angel Network
“One of the things that’s big for me is the valuation of the company,” says Stephen Carpenter, a GTAN investor. “When you invest in a startup, you have to take a stab at it. Normally they don’t have much revenue, so you say I’ll loan you some money and we’ll decide what the value of the company is once you’re farther along.
“What I have found is, in many cases, the startups are very excited. They think their product is the latest and greatest and they will put on a valuation that’s too high. To me, that’s just a turn-off.
“I’m very skeptical of the numbers. The out-of-thin-air numbers and creating that hockey stick, I tend to dismiss as not very realistic. If you’re going to sell 100 units, you better show me that you’ve got at least 100 potential customers.”
Go beyond the financials
Business Development Bank of Canada
“Financials alone do not tell the whole story for early-stage companies,” advises the BDC. “As such, it can be important to consider non-financial metrics such as the company’s product and market fit, the quality of its customers and overall user data, its competition, the track record and synergy of its team and impact of the company in the ecosystem and industry it operates in.
“Those metrics provide valuable insights about the company’s performance in terms of executing on their plans and its product-market fit. This in turn ties into the overall story of where they are currently and where they aspire to go.
“When presenting your numbers, provide current financials along with past financials and internal forecast side-by-side on one page. Including some commentary on the variance (forecast vs. actual) and highlighting growth (previous vs. current year) is always recommended. A summary of capital raised to date and spent since the inception of the company helps to understand its evolution over time.”
What story do your numbers tell? If you’re not sure, or if you need help putting everything together so your pitch is specific, reasonable and comprehensive, you don’t have to slog it out alone. We can help bring those metrics into focus and develop the message with the most impact to wow the investors you talk to next. Book your free 30-minute consultation now!
About Element CPA
Element CPA is an innovative accounting partner that’s 100% focused on helping Canadian startups and small businesses get their books in order, operate more efficiently and plan for the future. We handle the day-to-day financial operations that make your business run, tell the story behind your numbers and provide advice as you grow.