Written by: Dan Dragicevich
“Is my company fundable?” I just passed the one-year mark with Kerosene and I can tell you that out of all the questions I have received over the last 365 days, this has been the single most asked question. Luckily, we’re big on data here at Kerosene and have spoken with hundreds of investors. Through many conversations and a lot of data analysis, we’ve identified 4 key factors that make a company “fundable.”
Traction: If you’ve been in this game, there’s no surprise here! For a company to ‘de-risk’ itself in the eyes of an investor it needs to prove that someone wants this product. Traction also demonstrates to an investor that you’ve put the work in and the product has gone beyond the idea stage. Typically (and preferably) this is generally in the form of revenue. Investors want to see that there is substantial, increasing traction that can help catapult you to the next stage of your startup.
Momentum: Coinciding with traction, it’s also crucial to showcase consistent growth. Momentum can be what we call a ‘death blow’ for a founder. If you aren’t growing the number of users, transactions, and activity we would highly suggest focusing on that ahead of fundraising. Investors need to see that you’re growing at a significant pace. One of the most difficult things for founders to realize is that VCs expect them to grow during their raise which means sales is priority number 1 during this time. If your business has seasonality to it, I suggest raising during your peak months!
Age: Investors consider the age of a company when investing. What they’re contemplating is how long has it taken you to get to this point of inflection. Going back to points 1 and 2, investors tend to prefer younger companies that have seen early indications of product market fit. In other words, if a company has been around for a while but hasn’t shown much growth, it’s likely to raise concerns for investors.
Capital Efficiency: I could go on and on for days about this one, but the headline here is how efficient has your business been with the amount of capital injected? This comes down to looking at your business’ unit economics. Investors are contemplating how you’ve made that capital stretch. It’s crucial for VCs to see if the capital injection had a positive impact on the company’s growth and overall performance.
So, what do you think? Is your company “fundable?” Is it ready to enter the VC dating pool or does it need a little more TLC? If you need more clarity, feel free to complete the Kerosene Evaluation and I will get back to you!
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