Word of mouth and other ‘free’ marketing channels often don’t scale well
My heart sinks when I talk to a startup founder who proudly declares having a customer base that’s grown to 1,000 people organically. Being scrappy and frugal are great qualities to have as a startup, but your investors will want to see that you know how to scale rapidly when necessary.
If all of your growth so far has been organic, you might not know how to accelerate the business. After all, you wouldn’t even have a benchmark for what it costs to acquire new customers.
You don’t know how much money you need to raise. At best, that makes you look like an inexperienced founder. At worst, it’ll torpedo the fundraise altogether.
Startups typically raise money for at least one of three reasons: to hire a bigger and better team, to invest in development or to scale growth. Your “ask” slide will outline the milestones you need to hit for the company to reach its next phase, and your operating plan will lay out how much money you need to invest in order to achieve those goals.
Without knowing how much it costs to acquire customers, you can’t know how much money you’ll need to grow the company, which means you don’t know how much money you need to raise. At best, that makes you look like an inexperienced founder. At worst, it’ll torpedo the fundraise altogether.
But it doesn’t have to be this way. By being thoughtful about how you gather this data, you can prove to your investors that you know how to scale when the time comes.
