The startup and capital raising game
Question for entrepreneurs before they make a pitch for capital
Can this be your pitch?
We started 15 years ago. Our revenue is $ 100m and a loss of $ 70m and is raising capital of $600m.
We have a history of net losses, and we anticipate increased expenses in the future.
…. We expect our costs to increase over time and our losses will continue given significant investments expected towards growing our business. We have expended and expect to continue to expend substantial financial and other resources on, among others, advertising and sales promotion costs to attract customers and partners to our platform, developing our platform, including expanding our platform’s offerings, developing, or acquiring new platform features and services, expanding into new markets…. These efforts may be more costly than expected and may not increase revenue or growth in our business. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from maintaining or increasing profitability or positive cash flow consistently. If we cannot successfully address these risks and challenges as we encounter them, our business, cash flows, financial condition, and results of operations could be adversely affected. If we cannot generate adequate revenue growth and manage our expenses and cash flows, we may continue to incur significant losses in the future…..
If you say no, you need to understand the mindset of early-stage investors before pitching.
If you say yes, you need to balance the role/importance of growth, cash, and valuation over profit (a balancing accounting entry).