There have been times where we were part of pitch events where not everyone was paying a whole lot of attention. As you might understand, many pitches are a carbon copy of others, with deck designs, revolutionary technology promising the moon, an ivy league team, a large market, and so on. However, I've seen investors perking up, having a twinkle in their eyes the moment the founder says "We did 10 lacs in MRR last month and are growing 40% WoW"
A lot of founders we've interacted with believed that angels will happily sign a cheque at the end of the first meeting in a coffee shop after you've explained your 'idea' to them. No. Most angels will not invest in just ideas. Angels have limited capital, and do a handful of deals a year. Angels will go through the idea, team, market, technology, and opportunity. However, the most successful pitches would be the ones that can demonstrate the ability and willingness of customers to pay money to get your product! It is no secret that Malpani Ventures participates in opportunities that are revenue-generating. The likelihood of a pitch succeeding and the time we spend on diligence will be proportional to the amount of revenue being generated.
If your startup has significant revenue coming in for the stage you are operating in, you may have one foot in the door. You should most likely make your revenue numbers the highlight of your pitch deck! We highly encourage founders to figure out their revenue generation before they think about raising funds.
However, we understand that not every company will be able to generate revenues before raising. And that's okay. There are other ways of showing traction than just revenue. Yes! Revenue is the best indicator, but others also work. There are other indicators that provide validation about the value, usage, and success of your product.
Recurring revenue: Yes, this comes first. Even if you have a handful of loyal customers, we want to see that loyalty. We want to see if customers purchase your products once or multiple times. We want to see if customers liked a product during the trial and fell in love with it to continue using, and purchasing!
Purchase orders: Large purchase orders demonstrates firm commitment of the customer to buy large volume of your product. This can be almost as good as revenue.
LOIs: Letters of Intent are a way of showing the excitement of customers to use your product. LOIs enable the customer to deeply engage in evaluation and diligence in order to ensure your product can be used seamlessly by them. LOIs from end-users matter the most, followed by distributors and manufacturers. Because the more layers between you and the customer, the lower the impact.
Grants: Grants form a significant portion of expense funders when making a highly technical product. Investors love the nondilutive aspect of a grant, and the credibility of getting funded by a large organization that typically signs cheques for these grants is akin to due diligence.
There are also other modes like Awards, participation in Accelerators & Incubators that also add immense credibility. However, nothing really tops good old revenue!