David K Smith
David Smith is VP of data and analytics at TheVentureCity, a global early-stage venture fund investing in product-centric startups across the U.S., Europe, and Latin America.
Of every 100 deals a VC firm considers, about a quarter get a meeting, and only one ends up securing investment. Given the downturn in the markets leading to a startup funding squeeze, getting through the door is a critical first step.
But then what? How do you prove you’re that one in 100? Well, you have one drastically overlooked superpower: your data.
Many early stage startups don’t have a data team or even a data expert. They’ve been told that it looks good to have cash flowing in and user numbers ticking up. But investors are looking past superficial metrics for indicators that your product is poised to grow years into the future. There’s no one metric for that, which is why you need to know exactly which ones to focus on, and what they tell others about your product’s growth prospects.
If possible, collect the most granular, user-level data you can: events and transactions. Having this data allows you to X-Ray how people are interacting with your product.
Visualizing and communicating this data can definitively power up a pitch deck. If you’re a founder of a new SaaS, fintech, marketplace, or consumer subscription product, here’s what you should be showing investors at the early stages of your journey.
Investors need to see that you’re not being blindsided by easy wins that can go up in smoke within weeks, but are using hard data to build a sustainable company.
At all stages: Focus on active usage, not vanity metrics
If you haven’t been thinking about product-market fit, you don’t have a pitch.
Now, that doesn’t mean you have to prove you have product-market fit, but you absolutely need to show investors that you’ve been working towards it. If investors can’t tell where you are in your lifecycle, they have no way of telling how close you are to getting real traction — and getting them their returns.
Product-market fit isn’t a defined point. It’s more about reading the right signals: You have to know which metrics to look at and how to measure their strength. The stronger the signals related to user engagement and retention — all measured in different ways and all trending positively — the more evidence you have that you’ve reached, or are reaching, product-market fit. Building up all that evidence through data helps bolster a pitch and increases your odds of landing an investment.