I was listening to a VC talk the other day about what he looks for in a pitch.
I like this "Less Passion, More Math" idea.
Entrepreneurs often bring loads of passion no doubt, but we often end up short on the math.
And he's right -- rather than "estimating" things like market size, growth, and share, we need more due diligence ourselves by building bottom up models with more data points. Even if the data doesn't exist, there's enough related variables in the marketplace to draw from -- afterall, what's important to investors are the assumptions and the metrics.
How much math are you doing on:
- the market - total available, and annual growth - build this up based upon some key market data points vs. an industry report/study.
- your segment - size, revenue potential, revenue by product and customer, adjacent segments and size.
- your customer - the number of customers you'll win, revenue per customer each year, # of installs, and # of locations,
- channels - how many sales reps will you have?, how many channel partners at what comp plan?, how many calls will they make? % of success? etc. Build up your year by year forecast from this.
- competition - growth against the market, analyze their business using the points above.
Math like this puts meat on the strawman - now we are able to see the size of the beast, and what it will take to service this opportunity - size of company, functional areas, # of products, etc.
Take a hard look at your own passion to math equation. It's not only for investor meetings - it's a sobering way to assess your business.
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