October 21st, 2019 | By: Wil Schroter | Tags: Funding
More often than not, what we avoid saying to investors is as valuable as what we do say.
With our best intentions, we often shoot ourselves in the foot making lofty assumptions or declarations that investors hear all the time and just start shaking their heads.
Let's avoid that.
The moment we open ourselves up to saying our estimates are "conservative" we risk the conversation pointing to whether our assumptions are actually "conservative", "aggressive" or just "wild-ass guesses."
All estimates are guesses.
Let's avoid giving them a label at all, and instead say "These estimates are based on our best assumptions across our entire business." Investors would rather know the assumptions are based on what we are most confident in.
Also, whenever discussing forecasts, always focus on individual assumptions, not total forecasts — they are more defensible.
"Just" capturing 1% of any market that's big enough for 1% to be meaningful isn't easy, so let's not make that sound like a layup.
It also often suggests we're targeting the wrong initial market.
We'd rather explain how we're going to capture a large percentage of a smaller market and work our way up to a larger market in time. It's more conceivable to say "We're going to capture 20% of the all-vegan noncarbonated energy drink market" than "1% of the beverage market".
We may be deferring revenue generation a bit, but let's not say we're not thinking about it.
A better response would be "Revenue is incredibly important to us, but right now we're going to exploit some opportunities to drive market share before cranking up revenue."
Investors don't want to think we are blind to revenue, which is ultimately how they will earn a great return on their investment.
Too often "Not thinking about revenue right now" is interchangeable with "We have no idea how this makes money."
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Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.