Most investors want “Growth stage” companies NOT startups or “early stage.” There are probably 10 growth stage investors for every 1 early stage. This is why raising from yourself, then FFF and then Angel investors to go from idea to growth stage is important.
Growth stage is when you
1. Have a product
2. Have a team
3. Have someone using, subscribing or paying for the product and you are trying to GROW that business and not get it off the ground.
Think of this stage as “theory stage” vs early stage being “hypothesis stage.”
In the early stage you:
1. Make an observation (the market)
2. Form a question (the problem)
3. Form a hypothesis (the solution)
4. Conduct an experiment (your business)
5. Analyze the data and draw a conclusion (traction, product market fit)
Then you become GROWTH STAGE when you want to scale that theory and apply it more broadly. You are not experimenting totally with peoples money (although some tweaks are bound) you are moreso scaling a business that was proven to work in the early/seed stage. This is why you see $500k seed rounds but $20million Series A’s! Test with 500k. Scale with Series A. Grab more market share before others catch up.
The focus is not on profit but scale, customer acquisition, market share. Investors typically like to make 4-6x their money in 3-5 years in growth stage companies. We underwrite to accomplish those goals (what value can I invest today so that if they meet their growth targets I can cash out at 4-6x in 3-5 years). So your projections are important and your financial model. Hurry and your business out of hypothesis and into theory and get all the money out there waiting for you! How do you ask? Well…that’s why you make the big bucks at the exit if you can figure that out! 🤷🏾♂️💰🙏🏾✊🏾👨🏾💻