Brad Kingsley, CEPA®, CFP® | Certified Value Builder

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Momentum Is The Key To Success

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Demonstrate Your Startup's Momentum

Image courtesy of jscreationzs at FreeDigitalPhotos.net

I meet with a lot of startup founders on a regular basis. Sometimes these discussions take place at pitch events and sometimes at a more informal coffee or lunch. Since the point of the talk usually has something to do with their venture, the founder gives some basic information about their status. How many staff they have; How long they’ve been working on the venture; How many customers they have; How much revenue they have; etc.

Information about startups is most often presented as a snapshot in time – and the data being as recent as possible because those are usually the more appealing numbers. Even if you go to a site like AngelList, Microventures, or Wefunder, the data is mainly presented as a snapshot in time of where they stand as of that most recent data reporting period.

Snapshot data is only useful though for that short period in time. It shows what the venture looks like “today”. To most investors, and reputable mentors/coaches, this has very little value in really understanding the business. With a single snapshot you have no idea how likely the business is to fail or succeed. You have no idea what the business might be worth. You have no idea if the founders are executing well or not. Why do I say that?

Because momentum is the key.

To you want to really show value in your startup? Do you want to convince people that your team is executing well? Do you want to demonstrate how likely the venture is to succeed? Then show the momentum.

Show momentum in customer acquisition. One of the hardest things in a venture is actually getting the new customers and getting those customers to pay. That’s why smart investors want to know about the customer acquisition strategy and the customer acquisition cost. Tell me how many customers you had three months ago, how many you have now, and how many you expect to have three months from now. And if that future number seems out of line with the lead-up to today’s number (historical growth), be prepared with a really strong explanation for that variance – because it’s going to be hard to convince someone of an unproven trend change. How many new customers do you sign up each week? How many of those stay (retention)? How many of those customers leave (churn)? I want to see steady, explainable growth in the customer base.

Show momentum in your financials. This is one that many founders just don’t seem to get. And I don’t know why because it is super-obvious. I’m not impressed if you say that you have reached $5k, or $10k, or $100k in monthly revenues. Unless you want to be valued at that exact level (monthly revenue times twelve months, knowing the EBITDA margin, then working out a reasonable industry multiple) then you need to demonstrate the financial momentum. How much new revenue are you adding each month? For how many months has that trend being happening? What do you expect the forward monthly revenue increases to be, and why?

Show me that the business is growing. Every founder I speak with wants their company valued at some higher future revenue amount, but they can’t all demonstrate why I should have confidence in reaching that level within a reasonable period of time. Understand this for yourself because it is a key part of running your business, but also come prepared to show this momentum and explain it.

Show momentum in your execution. This is something else that generally gets ignored when founders are talking about their business. I want to know that your team can execute though. Great ideas fail from poor execution. Sometimes a mediocre idea though can succeed with an excellent team that executes magnificently. What milestones did you set over the past year? Which did you hit? Which didn’t you hit? Why? BTW don’t claim you hit every single milestone you set. That’s super-rare and often assumed to be dishonest when investors hear that. OK, great, now tell me the future milestone you’ve set – what are they and what timelines have you assigned to them? What type of contingency plans do you have in mind if those milestones aren’t reached? (What? No plan B? Bad idea.)

See. It’s all about momentum. I’m not saying it is about HUGE momentum with amazing traction on all fronts (though that would be nice) but certainly you need to show momentum. Show that you are hitting most of your milestones. Show that you’re adding more clients that you’re losing and that the overall base is increasing X% per month (or even per week). Show that you’ve got a positive and consistent financial trend, and know why. Convince me that the venture is moving in the right direction and it would be smart for me to get on board (investing, mentoring, or whatever – people like me don’t want to waste our money or time).

Show me the momentum and I just might share your excitement and confidence in the future.

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angel, customers, Finance, Investing, startups, venture

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About Brad…

Professional:
Certified Business Value Builder
Certified Financial Planner

Previously founder & CEO of OrcsWeb, CloudServers.com, and Cytanium (all sold).

Personal: Christian, husband, father, philanthropist, entrepreneur, and mentor.

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