Key Metrics Investors Look For In Fundraising

Jockeys, Dogs and Unicorns - What matters when raising capital. Over the next 12 months at Kerosene, we will introduce over 350 startups to approximately 400 North American VCs. With such a substantial number of introductions, it becomes relatively straightforward to see patterns developing, in fact they jump out at you! With a singular focus on "connecting great founders with great investors" we get a lot of feedback around startup fundability. So, let's consider the key factors that emerge when VCs evaluate startups raising in the $1 million to $10 million range. Based on feedback, 90% of the capital-raising process boils down to just three elements. Despite the myriad of activities involved in pitching a startup, the preparation, analysis, and excitement, most of the time these 3 points are the make or break of a fundraise. Ready? Here we go!   Jockeys: You may have heard the notion that jockeys (founders) are more important than horses (startups), but probably not as feedback from VCs on why they passed (it’s a little sensitive!). The foremost focus for VCs is the team running the startup. Are you and your team the best 'jockeys' to execute your business idea in your space? While you may argue that the business idea itself is crucial, consider this: would Elon Musk face challenges raising money to compete with Starbucks selling coffee or Sony selling TVs? I think we’d agree he’d be just fine raising!  VCs need to believe that you and your team are exceptional and present a formidable force in your industry. Convey your team's greatness convincingly, and you'll likely secure your funding.  TEAM IS CRITICAL   Dogs: Over a decade ago during my first venture capital pitch in the U.S., the leader of the angel group made a memorable statement: "Let's go for it, the dogs are eating the dog food." The second element VCs love is a growing customer base or, in other words, "dogs eating the dog food." Demonstrating that customers are increasingly buying your product is a critical aspect that ranks among the top three investment criteria.  TRACTION IS CRITICAL Unicorns: At Kerosene, we scout for two types of VCs: those with a conservative approach seeking higher success rates and lower returns per deal, and the majority who are on the lookout for "knock it out of the park – Bases loaded – Grand Slam – Billion Dollar Unicorns!"  To be able to be a unicorn you could argue that you have to generate $100M in revenue based on a 10x valuation multiple. And let's say you command 10% of a given market. You must have a market of $1B as a minimum. A big market is the third and most discussed issue around startup fundability. This one is worth doing a lot of evidencing in your data room!  TAM IS CRITICAL In conclusion, 90% of your success or failure in raising venture capital hinges on the 3 T’s.  TEAM TRACTION TAM Now you know this, you know where to direct your focus! Kerosene Ventures: Connecting Great Founders with Great Investors

I’ve raised 3 rounds. Here’s what you actually need to prove before each round. Founders obsess over the wrong traction metrics. $10K MRR. 100 customers. An MVP. These aren’t the point. They’re proxies. The real question is: What’s the strongest proof you’ll succeed? That’s what investors are pattern matching for. ----- At pre-seed, the risk is you. - Can you build? - Can you sell? - Will you quit? Show it with: - A scrappy MVP built in a weekend - 3 early design partners who don’t know you - A track record of doing hard things ------ At seed, the risk is nobody really wants your product. - Are users actually using it? - Are they coming back? Show it with: - High activation or retention from early users - Feedback loops that feel urgent (”I need this to do my job”) ------ At Series A, the risk is you can’t scale it. - Are you still the engine? - Can the team execute without you? Address this with: - Early hires closing deals - Usage growth without your daily involvement ------ Fundraising isn’t about hitting a number. It’s about running a good business.

When raising capital and speaking to investors, there are several key pieces of information you should have prepared to present yourself as credible, organized, and investment-ready: 1. Financials ▪︎Revenue, Profit Margins, and Cash Flow: Investors need a detailed understanding of your financial health. ▪︎Projections: Show financial forecasts for the next 3-5 years. Be ready to explain how you will meet your targets. ▪︎Burn Rate: If your business isn’t yet profitable, clearly explain how much money you are spending monthly and when you expect to break even. ▪︎Valuation: Be prepared to explain how you arrived at your current valuation. 2. Clear Use of Funds ▪︎Capital Allocation: Investors want to know exactly how their money will be used. Will it go toward hiring, marketing, product development, or scaling operations? ▪︎Milestones: Outline specific milestones the funding will help you achieve, such as launching a new product or entering a new market. 3. Business Model and Market Opportunity ▪︎Business Model: Clearly explain how your company makes money and how scalable the model is. ▪︎Total Addressable Market (TAM): Investors want to understand the size of the opportunity. How big is the market, and what share can you realistically capture? ▪︎Competitive Landscape: Be able to discuss your competitors and explain how you are differentiated. 4. Traction ▪︎Key Metrics: Have data to show growth (e.g., user acquisition, customer retention, sales, or partnerships). ▪︎Proof of Concept: Demonstrate product-market fit through customer feedback, pilot programs, or revenue generated. ▪︎Case Studies: Provide examples of how your product or service has performed successfully with real customers. 5. Team ▪︎Founders’ Experience: Investors often invest as much in the team as they do in the business idea. Highlight your team’s qualifications, relevant industry experience, and ability to execute the business plan. ▪︎Advisors: If applicable, mention any industry experts or reputable advisors involved with your company. 6. Exit Strategy ▪︎Investor Return: Explain how investors will make a return on their investment. This could be through an IPO, acquisition, or other liquidity event. ▪︎Timeline: Provide a realistic timeframe for achieving these exits. 7. Risk Factors ▪︎Challenges: Be honest about the risks your business faces (e.g., market competition, regulatory challenges, or technological development). ▪︎Mitigation Plans: Show that you have a clear strategy to manage these risks. 8. Legal and Compliance Information ▪︎Intellectual Property: If applicable, ensure that you have documentation related to patents or trademarks. ▪︎Regulatory Compliance: If your business operates in a regulated industry, be ready to discuss your compliance with relevant laws and regulations. 9. Pitch Deck Prepare a concise and visually appealing pitch deck summarizing all the above points. It should tell your business story while keeping investors engaged.

🚀 5 KPIs Every Startup Must Nail Before Your Next Fundraise 🚀 In the last 18 months, I’ve reviewed 120+ pitch decks and 87% stumble on the same metrics. Nail these five numbers, and you’ll instantly stand out to angels: 1️⃣ Monthly Active Users (MAU) Growth ≥20% MoM – Benchmarks: Top‑quartile fintech and SaaS startups see 25–30% ⬆️ month‑over‑month. – Why it matters: Sustained MAU growth proves product–market fit and virality loops. 2️⃣ Customer Acquisition Cost (CAC) ≤ $20 – Data point: Direct‑response ad campaigns in your category average $18–24 per new user. – Aim for CAC payback in under 6 months to keep CAC: LTV < 0.6. 3️⃣ Net Revenue Retention (NRR) ≥ 110% – If you’re in B2B SaaS, the top performers actually see an NRR of 120–130%. – A high NRR shows upsell, cross‑sell, and “stickiness” that de‑risks your revenue stream. 4️⃣ Burn Multiple ≤ 1.5 – Burn Multiple = Net Burn ÷ Net New ARR. – Best‑in‑class startups spend $0.8–$1.2 to generate each $1 of ARR growth. 5️⃣ 50% of Users on Tier‑2 or Higher Plan – Tier definitions: • Tier 1 = Free or $0–$10/mo • Tier 2 = $11–$50/mo • Tier 3 = $51+mo – If under 40% upgrade past Tier 1, you’re leaving >60% of revenue on the table. 🔑 Key Takeaway: Data isn’t just nice to have; it’s your strongest argument at the term‑sheet table. Before your next investor call, run these five numbers, benchmark them against peers, and be ready with the story behind any outliers.