VC Question: What are your milestones for the next round?
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What they mean
Unless this is your final round of investment before you go to IPO, there is always another investment round. The next round of investors will want to see that you achieve key milestones which adhere to their heuristics and market benchmarks. Of course, you are building a business to make customers happy but you’re also building a business which is attractive to investors. The danger is you act like Beepi and focus too much on investors.
The earlier the stage of your startup the more your focus on milestones will be thesis based, essentially in/validating something. This may be illustrating that you can ship your MVP, basic product market fit, come up with basic metrics such as your acquisition costs through certain channels etc.
Later stages such as series A and series B are much more about the numbers. Your milestones, therefore, become much more financial, such as the growth rate your revenue, the number of customers, demonstrating cohort based retention etc.
The milestones, therefore, are a function of both qualitative and quantitative integers rather than strings (story telling) the larger you are. Do not have too many, you need to be focused. Being unfocused is never a good thing unless you are a competitor.
What you need to say
“Our milestones are a combination of qualitative and quantitative figures. Let me first start with the qualitative ones. Internally our KPIs are the following: ACSOI (cough, Groupon), MRR, MRR Churn and MRR growth.
These are the things that we track daily, weekly, monthly, as well as through cohorts.
Through discussions with investors, we understand for series B they want to see us with a MRR of $1 million and a growth rate of approximately 40% month-on-month.
Naturally, it’s easier to get the MRR numbers if we have a low churn; we target under 2% monthly. Our qualitative milestones in 12 months time following the closing of the round are therefore $1.2 million MRR and an average three-month training growth rate of 30% month on month.
Qualitatively, it’s critical for us to be competitive that we are able to close deals with Yahoo, Microsoft, and Facebook.
For us to be a compelling investment proposition at series B we need these deals done. Part of our funding is to hire three people in our business development team who we already have lined up, waiting to join to get us there. Do you agree that these make sense?”
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