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Should I seek funding with these metrics?

I am a solo founder of a 9 month old SaaS startup. So far, revenue has been around 35k, 17% monthly growth rate, 35% are recurring customers and I have about 60 so far.

Is this time to seek a seed round? Will investors be impressed with these metrics?

  • I think it depends on the service part versus the software part in your offer. If each customer needs lot of work, your impressive growth means a huge hiring rate and low profits. But if you rent pure software and customers acquisition cost is low, you have built a cash machine.

    In short, to make a decision, I suppose a VC will ask you margin and cost per customer, and estimate your hiring needs. And of course take a harsh look at your growth curve to see if it looks like a strait line or a hockey stick :o)

    Reply

    • Thank you for your reply. The business is low cost to operate with a net profit margin of about 60%. I haven’t spent any money on marketing so cac is low.

      Right now growth chart looks linear but that is because I don’t have time to keep a sales cycle going full time.

      Reply

      • That’s a good beginning ! I’m not a specialist in fundraising, but I think you may be in good position for seed funding… if I understand correctly where you are. From what you said, I assume you have a product. More than a simple MVP, probably you are near the MMP. With your metrics, you need this (the MMP) to get funding. If you are at this stage, it is mainly storytelling. And here is the story:

        You have a product, not a prototype. It is not perfect, but good enough to sell by itself with no marketing budget. And it produces its own slow growth without any help, and with high profit margin. Now you need VC money to market it and begin fast growth. But you can do it without them if they are too greedy, because your business already produces profit and can continue its slow growth without external capital.

        If you feel your product is already good and you feel secure about your capability to bootstrap, it’s a good time to search seed funding.If you need a few more weeks or months to feel more secure, take them, but don’t wait too much if you have competitors running fast. Good luck !

        Reply

        • I love the way you tell the story. You are absolutely right. Going alone is a possibility, but too risky due to slow growth and competition. Since I owe 100% of the company, I can afford to bring some investors to minimize risk and grow faster.

          Thank you.

          Reply

      • Everyone’s market size is less than 5 billion. You’re no where close to being ready to quit your job. Grow your company to the point you’re seeing repeat business and experiencing enough revenue to fund an office and team for a year. If your current job is a pipeline for leads, you’re unethical and that’s none of my business, but you shouldn’t ever leave because your leads will dry up pretty quickly and you’ll find yourself in unemployment fast. So, I’m sure your next question is, will you ever be able to leave? Only if you have a solid plan to generate leads and a 6-9 month sales pipeline.

        Reply

    • I am a bottleneck tied up with marketing, ops, sales, support, engineering issues. With capital, I can hire people to run these areas, creating a better experience for my customers while growing faster.

      Reply

      • That’s a lot of people and not a lot of details. You should be able to answer which people you will hire, in which order, what specific things they will do, and what the impact of that is on your business.

        It’s pretty common for technical founders to say something like: hire marketing person … (magic happens here) … get more revenue.

        For example, hiring a marketing person without knowing if they are going to be doing social media, tradeshows, email marketing, print, PR….

        Reply

  • Run it on revenues. Hire the next person when you can afford to pay their monthly salary out of revenues. Make sure that that person will help increase your revenues some more. Give that person significant equity so they, not just you, will get rich if they help make the business take off. Grow organically. Your customers will teach you where your markets are. Seeking outside money is a big rathole you can pour months of your attention into. Spend that time selling to your customers and prospects. If you get outside money you will stop listening to your customers. When it’s time to make payroll, you will be listening hard and adapting your product to close the next deal.

    Reply

  • The question you need to answer is: do you have a formula where X money spent = Y results?

    If you haven’t spent any money on marketing – it doesn’t sound like you have such a formula yet.

    Also, as noted above, the market opportunity doesn’t seem very well articulated. Any competent investor is going to dig deep into what niche you actually serve, what competition you have, and just how big the potential opportunity really is. I’ve seen a lot of pitches were the product is some niche database feature but the market opportunity is defined by Oracle’s sales. Not.

    Reply
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