How Investors Will Look At Your B2B Tech Business
This week, I came across something interesting that I wanted to share with you today.
The Ladder of Proof, as introduced by James Currier (Venture Capitalist in Silicon Valley), which shows how VCs see your company. It's the mental framework by which most VCs will evaluate a founder's company and investment proposition.
While *I'm a big fan of bootstrapping* (self-funding) a business, I found this ladder a useful reminder for tech companies to understand what they should focus on next.
*Unless you need to raise capital like when the market growth rate is higher than your company's organic growth rate.
Over the past two weeks, I have caught up with several founders of tech companies who are leveraging this current time to explore new revenue streams. So whether you are creating a brand new product, or whether you're finding new revenue streams, you will find this ladder useful.
To paint a picture, right at the peak of the ladder, you have what is called rapid growth. This is where most companies aim to build towards to develop a high growth company that can get a fantastic evaluation. But to get there, we must first tick off a few other boxes.
The success of a company is often attached to key metrics such as having a high lifetime value of customers and pairing this with a low customer acquisition cost (minimum of 3 to 1 actually). Demonstrating good unit economics is also an integral part of an attractive investment opportunity or as a stage-gate for new revenue stream opportunities.
We can also take into account a company's competitive opening in the market, its channel partnerships, and association with reputable advisors, experts and angels that are associated with the company.
Now before we get to the above metrics, we need to start at step one, and that is assessing whether there is a market need and whether you have identified a market opportunity.
It's almost like a systematic approach to identify the next focus area in your business development and to understand how you are tracking in finding a new revenue stream with rapid growth.
The ladder in reverse, starting with the bottom first:
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Customer need,
big market,
great team,
fresh & good idea,
expert advisors,
ability to build the product,
customer waitlist,
active users,
customer retention,
paying customers,
good unit economics,
scalable acquisition,
reputable investors,
channel partnerships,
low CAC,
High LTV,
competitive opening,
business (not product),
network effects,
a good company name,
other defensibilities,
rapid growth
The aim is to drive up the ladder and get to rapid growth as quickly as possible.
Over the past decade, I have learnt that there are four stages of business growth.
While most founders and business owners want to immediately jump to scaling the revenue stream of their new-found product, the first step you need to focus on is exploring then predicting (via metrics) your market as represented in this ladder of proof by Currier. This way you can build something truly scalable and profitable.
It's going back and reevaluating the opportunity, the customers and the money model. Only then should you look at scaling.
I have put together a new 90-day programme where I work with tech business owners to go through this process rapidly.
The programme starts with understanding your market and proposition, then to build the money model and sales process.
Get Building.
Flavio Hangarter
PS: Whenever you’re ready, I help clever founders to set up their sales and marketing systems, generate leads and close more sales.
There are numbers of ways I might be of help to you:
Create a product that stands out.
Get guided through the market validation process to help you figure out your market, your product and your business model.
Sales Strategy and Systems.
Crystalise your sales systems to attract more customers and grow your revenue with stand-out marketing.
Let's work privately.
Let’s work together and help you stand out.
