The investment is the runway for your startup to take-off successfully. The decisive question is: how much do you need before you earn?
The capital requirement for your runway is the financial illustration of your roadmap. If, for example, the first milestone is to acquire the first 1,000 customers, you will already be able to make a well-grounded statement on how expensive that is based on your unit economics. If the minimum viable product (MVP) has yet to be developed, one could name the costs incurred here. Start the process systematically and list your (estimated) deposits and withdrawals each month until a specific milestone is potentially reached.
Inevitably, as soon as you start quantifying investments, you need to talk about the valuation of your company. This is often the biggest blind spot for newcomers.
First off: There is no cure-all solution. Startup ratings are negotiable and investors and founders have fundamentally opposite goals: The founder wants to bargain for a high valuation and few shares to sell. The investor just the opposite, if he wants to get on board. However, when he is serious, he will never push the game too far or put you as the entrepreneurs into a minority stakeholder position. After all, he wants to continue to invest in motivated entrepreneurs and not in employees.
»Business valuation, especially in the startup phase, is an art, say many investors. For me, it’s more like architecture. It is about balance, the static must also hold in later stages of construction (rounds of financing). And if you only have a subjective beauty in mind and forget the objective aspects, you end up quickly with an entrance door two meters above the ground and no staircase. This makes it more difficult for other guests to enter or even makes it impossible. «
Alexander Stoeckel, btov Partners
…is architecture, not art!
There are certain value drivers for a startup valuation. These are reflected in your milestones. If you have a working MVP, it’s a first starting point. If you have first customers and can thus prove that the market responds positively, your bargaining position will improve. If your unit economics are so attractive that you’ve built a solid money printing machine that’s scalable, or you’ve already successfully protected your product with an (international) patent, offers might be flushing in.
Learn more about the nineteenth module „Investment“ of the Startup Navigator in the handbook.