The one winning founder mindset, every successful founder I have interviewed or worked with had, was the ability to figure out where their first dollar of revenue would come from. And how they would get it done.
That’s it.
You never have to read any more of this blog. You’re done. Figure out where your first dollar of revenue will come from and you will be well on your way to success. “It’s not that easy,” you say. Well you’re right, it’s not. However, if you can get your first dollar, or have a plan to get your first dollar, you will also be well on your way to being invested in by people who want a return on their money through your great idea being executed competently by your team.
I worked with a wise VC who invested money for his family for a couple of decades. He was negatively impacted by the dot-com bubble and struggled for 7 years recovering his families wealth. He started with a strategy of hope. He hoped for good outcomes by investing in good ideas, or ideas he wished would work, or science-fair experiments, or disruptive technology. He kept a book of his investment picks from 1992 to 2009, with notes about why he liked a deal, why he picked it to be a winner, why he felt it would not work, etc. (An excellent habit to take up in my opinion.) The one conclusion he came out with was that the few deals that did do really well had a strong (and fast) route to revenue.
We had discussed this at length in the past. And he was not a typical bean-counter investor. He invested in a couple of my startups when I was younger, and all but one turned out to be real stinkers. At the time I was a patent-writer. I focused on the big idea and getting it right, rather than asking the customer what they needed first and what they would pay for it. He backed me on a lot of “arrogant” ideas untouched by the realities of the customer. He said he looked back and remembered that the companies that wanted to serve their customers and had a plan to economically design their activities to make monetary sense, were the ones that succeeded. Not the cool ones that nobody understood. Not the ones that should have been successful. Not the ones he really really wanted to be successful.
He often mentioned one way he selected companies in the dot-com bubble was searching for the ones grabbing lots of users for free and then figuring out how to monetize them later. He flipped this on its head when he was working to recover his lost funds and he was very often put down by other investors for not “getting it” later on for not investing in the things everyone else was rolling into. I never had a chance to ask him about Crypto currency, which is a shame. I would have enjoyed his self-review and looking at similar investments he made in the past.
This brings me back to Preference Capital.
One of the things in my investment opinion (which each GP delivers individually in the Investment Review Committee) is my understanding of:
- is getting to your first revenue important for you (or are you concentrating on the science experiment)
- do you have a good plan to get and grow revenue, and
- do you have the ability to get to the milestones of your revenue before you run out of money.
A good opinion looks something like this:
- they have reviewed and tested the idea with their target customer-base and it fits the need demonstrated in the market place
- the market size is growing and the penetration rate increases based on a plausible thought-out plan – a plan we have seen work in the past – and
- they have the foundation of the team, and our money will get them the needed employees to get them delivering through to the next 2 milestones
Focus on generating revenue and I look forward to writing a favourable opinion of investment in your company.
