Michael Ho - who focusses on preparing seed stage founders for series A - has an amazing insight!!!
❌raising money isn’t about revenue ❌
In fact it was 3+ years before Figma had any of the common traction metrics (users, revenue, growth)
Sandvine, the first startup Michael worked for raised a $19.5M seed round pre-traction / pre-product right after the dot-com crash…
And Kinde raised $11.5m a few years back on a piece of paper !!!
So clearly it’s not always about traction either
Okay then… So what is it about?
🤩 Raising money is about investors believing in your (future) ability to hit Venture Scale
Does (historical) traction help?
Sure - but not always!!!
The key is to clearly articulate the 10X factor
There’s only a very few that’ll be able to raise with zero traction which is usually about
→ the team or
→ some crazy breakthrough
Traction doesn’t always equal funding 🤯
Many Starrups were sold a story
→ if you get to X traction = you’ll be able to raise
→ Growing 2-3x yoy = successful raise
→ $3M ARR = Series A
And so they put their heads down, burn through their runway, hit those metrics to eventually pop their heads back up and realize only then that it’s not enough
But now they’re almost out of runway 😞
Michael’s company , Sandvine doubled revenue, had big customers with thousands of users and finally crossed $5M 🙌 -
But then struggled to raise their next round
→ they had traction??
VCs look for leading indicators vs lagging indicators
To have belief that they will get the $1M to $100M in 7 to 10 years venture scale curve
What are some of the leading indicators
It’s not always about month on month growth
→ grow at 10% mom for 24 months straight
→ and 6% mom for the next 3 years 🚀
It could be
ICP,
growth tactics,
stage ,
opportunity and industry ,
belief in the team ,
gut & intuition on the investors side ,
belief by those who have influence !
The golden nugget
Find out what those leading indicators are and use that as your roadmap 💪
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