Happy Fourth of July from the Thunder Team!
Hopefully, you're not working today and instead taking some time off, but if you're grinding away on your startup, you got to do what you got to do. #thehustleisreal
Fundraising Demystified Episode #5 is Live!
Today we have Martins Lasmanis with us, Martins is a co-founder at Supliful, a platform for brands and influencers to launch their white-label products and they've recently raised a $2MM Seed round.
Here's what we discussed in this episode:
- The Importance of Personal Connection: Martins shares an anecdote about how he used his daughter's drawing of a unicorn to spark conversations with venture capitalists. By showcasing a personal and unique aspect of his life, he was able to stand out and generate interest in his pitch.
- Building a Consumer Packaged Goods Brand: Martins shared his journey from being an electrical engineer to starting his venture. Martins and his team identified the challenges in the consumer packaged goods market and created an innovative solution called 'consumer packaged goods on demand'. With Supliful, brands, and influencers can launch their white-label products with ease, eliminating the need for upfront investment, inventory management, and complicated supply chain logistics.
- Overcoming Challenges as an Immigrant Founder: We also touch upon the challenges faced by immigrant founders in the US while launching a product and working with investors and partners. Our guest shares their experiences and reflects on the importance of building trust and proving themselves in a new market.
- Fundraising Journey and Metrics: We discuss the fundraising journey of Supliful, including the decision to go down the venture funding route and the challenges faced along the way. We also delve into the metrics and milestones that founders should focus on to project future cash flows and determine sustainability. Listen Here
How to communicate difficult metrics to VCs
One major topic Martins Lasmanis, co-founder of Supliful and most recent guest on our podcast is presenting KPIs to VCs. As a founder, you know that raising money from venture capitalists (VCs) is not easy. You have to pitch your vision, your product, your team, and your traction. But how do you communicate your metrics, especially when they are not stellar or straightforward?
VCs are looking for evidence that your startup is on the right track to achieve product-market fit, growth, and profitability. They want to see that you have a clear understanding of your key performance indicators (KPIs), and that you can use them to make data-driven decisions.
However, not all metrics are created equal. Some are more relevant and meaningful than others, depending on the stage of your startup and the nature of your business. Some are also more difficult to measure and explain than others, such as retention, engagement, unit economics, and churn.
Here are some tips on how to communicate difficult metrics to VCs in a way that showcases your strengths and addresses their concerns:
- Target the next step in the “Ladder of Proof”. The KPIs you have should always aim to move you up the next rung in the Ladder of Proof, a framework for whether your startup is venture-fundable as James Currier from NFX recently shared. The top priority of a startup changes at different points in its lifecycle, and so should its KPIs. It doesn’t make sense to be tracking, for example, far-away proof points like indicators of revenues or gross margin when you’re still trying to figure out early retention. Focus on what’s in front of you and choose KPIs that serve your next step in the Ladder of Proof. Once you climb to the next step, you can always switch your focus to the next important KPI.
- Few is better than many. Sometimes when founders are asked for KPIs, they’ll have a long list of 20 metrics. This can be overwhelming and confusing for both the founder and the VC. Instead of trying to impress with quantity, focus on quality. Identify those 1-3 key metrics that indicate adoption and value derived from usage of your product/service. These are often called the North Star Metric or the One Metric That Matters. They should be specific, measurable, actionable, and relevant to your business model and customer segment. For example, for Airbnb it’s nights booked; for Facebook, it’s daily active users; for Slack, it’s weekly active users sending messages.
- Show trends and cohorts. VCs are not interested in absolute numbers or snapshots. They want to see how your metrics are changing over time and across different groups of users. This can help them understand your growth rate, your retention curve, your customer acquisition cost (CAC), your lifetime value (LTV), and your payback period. For example, instead of just showing how many users you have in total, show how many new users you acquire each month, how many of them come back after one week, one month, three months, etc., how much revenue they generate over time, and how much it costs you to acquire them. Use charts and graphs to visualize these trends and cohorts clearly and compellingly.
- Explain the drivers and levers. VCs are not only looking for numbers; they are looking for insights. They want to know what factors influence your metrics, both positively and negatively, and what actions you are taking or planning to take to improve them. For example, if your retention rate is low, explain why that is (e.g., seasonality, product issues, competition) and what you are doing to address it (e.g., launching new features, improving user experience, increasing customer support). If your CAC is high, explain how you are optimizing your marketing channels, testing different strategies, or leveraging referrals and word-of-mouth.
- Benchmark against peers. VCs are not evaluating your metrics in isolation; they are comparing them with other startups in your space or stage. They want to know how you stack up against the best practices and the industry standards. For example, if you are a SaaS company, they might expect you to have a monthly churn rate below 5%, an LTV/CAC ratio above 3x, and a net promoter score above 40. If you are below or above these benchmarks, explain why that is (e.g., different market segments, pricing strategies, customer behavior) and how you plan to reach or exceed them.
- Be honest and transparent. VCs are not looking for perfection; they are looking for potential. They know that every startup has its challenges and weaknesses, and they appreciate founders who are candid and humble about them. Don't try to hide or manipulate your metrics, or make unrealistic projections or assumptions. VCs can see through that and will lose trust in you. Instead, be upfront and clear about your metrics, both good and bad, and show that you have a learning mindset and a problem-solving attitude.
Communicating difficult metrics to VCs is not easy, but it is essential. By following these tips, you can increase your chances of impressing VCs with your data-driven approach and your growth potential.
What the Experts Have to Say
How VCs See Your KPIs
One of the most important reads when thinking about presenting your KPIs to VCs. VCs know it is tough to start a company, all they want to see is potential. Read More
101 Metrics by Stage
A guide by Morph Ventures on what is important to focus on based on the stage of the startup. Read More
How Venture Capitalists Make Decisions
Another important read for startups who are about to pitch VCs. Knowing how VCs make decisions will help you reverse engineer your pitch. Read More
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Written by Jason Kirby - https://www.linkedin.com/in/jasonrkirby
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