Raising Capital? Financial Performance Is Not Enough...

published on 01 July 2021

Many of our clients come to us shortly after they start trying to raise capital.  The stories are very similar.  Their businesses have been performing well enough to attract the attention of some interested investors, but those investors are starting to ask harder questions.  What is your customer acquisition cost by platform?  What percent of your new customers are organic vs. paid?  How well is your site converting?  Let me see your customer cohort performance?  You get the picture.

As a founder spending 80-90 hours a week just trying to get the business off the ground, there wasn’t time to set up the data measurement and reporting capability to answer those questions.  However, from an investor perspective these are critical questions that need to be answered before handing out any money.  Let’s take a quick look at why this data is so important and then we’ll talk about how to close the gap: 

1. Inventors need to know how you built the business

Demonstrating top and bottom line performance on the P&L will get most investors through the door, but to get the check you are going to have to show them more.  They will be interested in many subjective things like product-market fit and differentiation, but diligence often is focused on customer acquisition.  Investors want to know how you made customers aware of your product or service, how you got them to buy it, and most importantly how much it cost.  They will want to understand how that differs by platform (facebook, google, etc.) and how it has trended over time.  They will also be interested in how effective you have been converting customers once they visit your website.  These “funnel metrics” give investors the visibility they need to truly understand how a business like your works. 

2. Investors want to know that you will be responsible with their money

The ability to confidently, accurately and simply articulate funnel metrics to potential investors demonstrates that you understand the financial aspects of customer acquisition.  It shows them that you have the tools and analytics to intelligently put their capital to work.  From their perspective, how you present your business is how you run your business.   If information is presented in a disorganized and haphazard way it suggests that you don’t have the knowledge, tools and data to invest their money properly.  This increases risk and decreases their expected ROI...not the situation you want to be in when you are asking for money.

3. Investors have to believe there is opportunity for future growth. 

This aspect of the founder-investor dynamic is often overlooked.  Many founders and business owners feel the need to present their business as perfect.  Not only is that unrealistic and unbelievable, but inventors actually don’t want a perfectly run business.  They want opportunities for improvement.  This is called “value creation” and it is at the heart of all investment decisions.  Being able to show, with data, that there are opportunities for growth AND that you understand them might be the most important aspect of a pitch.

At this point, you’re probably saying, “that’s all great and interesting, but it doesn’t solve my problem.”  That’s where Rubx comes in.  Rubx is a no-code data and analytics platform ideally built for early stage business owners.  It quickly and seamlessly aggregates data from common ecommerce platforms into easy-to-read and actionable reports.  Rubx has a suite of visualizations that give you the tools you need to improve business performance, and present your business to potential investors.  It’s the perfect solution for founders who don’t have the time but as discussed above, definitely have the need.  You can get started today with a 30-day free trial: https://www.rubix3.app/sign-up-premium

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