Early stage investors make a risky bet: 1 or 0, either the company will work, or it doesn't. Later stage investors don't take that make or break risk, they invest in companies that have gotten some traction but need capital to finance growth and expansion. Which markets are you going after, how are you going to sell to them, what new products can you launch. 

Valuation of early-stage startup is usually a mysterious process in the absence of sales and profits. For growth-stage companies it usually boils down to some sort of discounted cash flow analysis.

This is important to remember when presenting to these type of investors. In the end, a junior analyst will sit down, take your presentation and try to come up with some sort of financial business forecast for your company.

One way to deal with this is to email your own business forecast ready in Excel. But by definition, the buy side will never believe the assumptions of the sell side in a transaction, and worse, the potential buyer might just use your own spreadsheet to salami slice every single assumption down in order to end up with a value of $5.

The best approach is to feed the buyer the assumptions (market growth, market share growth, pricing, number of sales people you need) without doing the adding up of all the numbers. And feed those assumptions in the form of stories about your business plan, rather than a dry set of numbers.

Prioritise your sources of growth according to likelihood of success, first existing customers, existing products, then maybe new geographies, new verticals, and finally completely new products.


Art: Paul Cezanne, The Card Players, 1890