Investment Prep. – Working With A Startup That Went From 0 to 500k Subscribers In A Few Months.
How traction really changes the narrative in startup fundraising.
Last week, I worked on an ideation startup with a founder who had raised over $100 million. This week, I’m working with a startup whose founders didn’t raise as much previously. However, their MVP went from 0 to 500k users in two months.
If I had to choose between those two in terms of a more lucrative offer for an investor, I’d go with the 500k user growth startup any day of the week. Here’s how to look at it: You have two options:
Go eat in a new burger restaurant with a very famous chef who is known for making amazing salads.
Go eat in a new burger restaurant with over 5000 customer reviews saying that the burger is fascinating.
If you’re investing and not just having a random meal, you’ll go for the second option.
Let’s chit-chat about how I’m working out investment documents (whitepaper) for a post-traction pre-revenue startup.
Traction is king for a reason.
Advisors can always step in.
Additional: Moving models to the blockchain is peaking.
(For Paid Subscribers) How the investment document’s narrative changes
Traction is king for a reason.
It’s one thing to tell a story. Another is to live a chapter of it. Getting traction (or user growth in this case) is the first chapter of the story—and it’s actually the most interesting one.
The reason why traction is more valued than anything in this startup world is that it provides validation – People are buying your product.
Validation answers many questions you (and investors) would think of, for instance:
Is the team capable of turning this idea into a reality?
Is there a market for this product?
Is the idea creative enough to be accepted in this environment?
Is it going to be culturally acceptable?
You’re starting the investor conversation from Chapter 2; this gives you quite the edge. I always advise my clients to raise post-traction.
You need to know that post-traction does not necessarily mean post-revenue. Facebook didn’t make that much money when investors were flocking to them. But they had user growth that was unseen.
Advisors can always step in.
Experience is all around you. There are CEOs, advisors, and experts. They just need a paycheck.
You know what’s not around you? People who are ready to buy what you want to offer.
Advisors can support, but they can’t create.
CEOs can operate, but they can’t invent.
Experts can consult, but they won’t get their hands dirty.
They can take your company from 10 to 1,000,000. But you need to take it from 0 to 10 yourself.
So, instead of scheduling a meeting with a LinkedIn advisor, schedule one with a customer who might be interested. Schedule ten meetings with random users and ask them about their experiences.
(Additional) Moving models to the blockchain is peaking.
Focus on traction; that’s a given. However, the means are quite critical. There’s a reason why at least 60% of my clientele are working on implementing some blockchain perks for their products. That reason is the future.
Suppose you go back in time and see Amazon going online. You have a couple of options:
Continue with your offline methods (Everyone was offline. Online was uncommon.)
Take a gamble and start working online with no noticeable customers for five years or so.
Now, we’re at a time when some technologies like AI and blockchain have been established into many technologies. You have two options:
Continue with your online methods (everyone is online, and blockchain is uncommon).
Take a gamble and start operating your services on the blockchain with no noticeable results for years to come.
The choice is yours.
(For Paid Subscribers) How the investment document’s narrative changes
So here I am, writing a whitepaper for this company. The first thing I do, as usual, is storyboard the heck out of the product. This stage involves more thought than many might perceive.
But how is it different when it comes to a company that went from 0 users to 500k users in a couple of months?
Keep reading with a 7-day free trial
Subscribe to Al Anany to keep reading this post and get 7 days of free access to the full post archives.