What Do Investors Want? Just One Thing | Mark MacLeod

November 2, 2023 - Mark MacLeod

What Do Investors Want? Just One Thing

What do investors want? One thing: Growth.

That’s what you sign up for when you raise venture capital.

We have all read the stories of the big outliers. The Shopifys, Facebooks, Airbnbs, etc. That’s what investors are looking for. The next one of these.

How to attract investors

The reality of VC

They know most of their investments won’t come close to that. In fact, most will outright fail. But when they invest, they believe there is potential for your company to return the entire fund. They believe you can be an outlier. And they want you to try for that.

Hopefully, the individual investor you deal with is an awesome human. But venture capital as a thing is dispassionate.

It doesn’t care that you are trying hard – unless that effort is driving serious growth.

You won’t get attaboys for effort. Only results matter.

During COVID, some of my companies had their revenues go to literally $0.

The investors expected them to pivot and find a way to keep growing. They still expected growth.

The VC relationship

If you are unhappy with the relationship you have with your investors, ask yourself this:

“Is my company growing as fast as my investors want?”

If the answer is no, then don’t be surprised if the relationship isn’t great.

It’s not personal. They just need to focus on their winners.

Learn from SaaS growth benchmarks

What does great growth look like?

In SaaS anyway, the benchmark comes from SaaStr’s Jason lemkin: 3, 3, 2, 2.

You triple, triple again, then double, then double again.

Year 1: $1M

Year 2: $3M

Year 3: $9M

Year 4: $18M

Year 5: $36M

This is best-in-class growth. It’s the only thing your investors are looking for.

This kind of growth is what drives valuations. It’s what attracts ambitious talent. It attracts strategic buyers.

So, what do investors look for in a startup?

Growth.

Your #1 job as a VC-funded CEO is to unlock and deliver this revenue growth.

Photo by Bill Jelen on Unsplash

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