The Revenue Strategy and Goals: Understanding What Growth Investors Look For and How to Start Building a Strong Investment Case From Day 1

In every funding round, one goal takes the forefront: convincing investors that your concept is developing a long-term profitable business model worth investing in. However, the growth phase of a startup doesn't just matter to potential investors; it also significantly influences your company's internal structure and strategy.

In this blog article, we take a closer look at the various factors that matter in the growth stages of a startup and how they impact the roles of investors and Chief Revenue Officers (CROs).

Specialization of Investors

Competent investors can identify a good company at any stage of the business lifecycle. Nevertheless, the different phases have such distinct success criteria that investors rarely excel in all areas. The reality is that investors often specialize in phases that align with their expertise and individual experiences.

For you, as an entrepreneur, it's crucial not only to understand the individual specializations of investors to convince them but also to maximize the value you receive. Early stages often require investors who can recognize the potential of a team and its ideas. Later, when it comes to scaling and increasing revenue, you need investors with experience in expanding businesses.

The Role of the CRO in the Growth Phases

A highly competent Chief Revenue Officer (CRO) plays a pivotal role in your company's success. However, the requirements for a suitable CRO vary depending on the growth phase, so you should consider different CRO profiles.

If your company is in its early stages, customer acquisition, network expansion, and strategic partnerships should be the focus for your CRO. In a later phase, sustainable growth and the scaling and automation of sales processes become critical. Therefore, adapting the CRO profile to the respective phase is of paramount importance; a "one-size-fits-all" approach won't work here.

Two Common Startup Mistakes

Although it's extremely important to adapt to different priorities and focuses in various growth phases, many startups fail to recognize this importance. Instead, they concentrate on aspects that are of minor relevance to their success in the early growth stages, squandering valuable resources.

You need to separate the wheat from the chaff and concentrate on the things that genuinely drive your growth. Another phenomenon that afflicts many startups is the tendency to jump from one issue to the next as challenges grow faster than solutions. A clear strategy and consistent execution are essential to staying on course.

What Investors Really Want to See in the Early Phase (up to 10 million EUR ARR)

Founder Team: Investors seek smart founders who believe in their vision against all odds and have the ability to execute it. A strong founder team that actively tackles challenges and finds creative solutions is invaluable and often more attractive to investors than relying on individuals.

PMfit (Product-Market-Fit): It's crucial to demonstrate that the overall market potential is significant, and there's a target audience willing to pay for the offered solution. Information about Ideal Customer Profiles (ICPs), their willingness to pay for specific solutions, and hints about unit economics, payback periods, and the defensibility of competitive advantages excite investors and provide them with a better understanding of market potential and future forecasting.

What's Important in the Late Phase after Product and Market Validation (>10 million EUR ARR)

Proof of Marketability: Investors want to see that you and your team can successfully bring the product to market and sell it competitively.

Revenue Architecture: The efficiency of converting capital into revenue becomes a crucial factor. Investors view your company as a revenue machine and want to know how much they need to invest to achieve specific revenue targets. This requires clear data and forecasts.

Systematic Improvements: Investors want to see that you've made consistent and systematic improvements in your marketing, sales, and customer success processes, positively impacting key metrics. How have messaging, channels, and ICPs improved, and what effects have these initiatives had on marketing metrics like Customer Acquisition Cost (CAC), Lifetime Value (LTV), Marketing Contribution, MQLs, etc.?

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You probably already sense it, but the most crucial message of this article is that your success criteria and priorities constantly change, and you should always adapt your strategies accordingly. Depending on the growth phase, you should modify your CRO's profile to maximize their success and make the most of this vital position.

To convincingly win potential investors, it's crucial to understand the requirements of these investors in different growth phases and address their expectations intentionally. So, focus on the right aspects and continuously improve your business processes to create a solid investment foundation that no investor can say "no" to.

It might sound simple at first, but we know, of course, the devil is in the details. If you want to delve deeper into this topic and seek tips for your individual situation, feel free to reach out to us for a free consultation, and together, we'll uncover your untapped potentials.

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