Are you selling your product to another business? Whether your customer segment is an SMB or an enterprise, you need to get a handle on your key B2B metrics before you talk to an investor!
No matter how novel an idea you have, investors hear many pitches and are grading you on a curve to other founders and startups. They want to know how you are sourcing, closing, and scaling your customer base.
Regardless of what stage you are at, you need to be able to share your approach, and back it up with data and B2B metrics!
The Baseline B2B Metrics You Need To Know About Your Business
During the course of an initial conversation, expect investors to ask questions that will suss out the following:
The market size of your opportunity: how many customers are there and, more specifically, how many customers have the problem your product is trying to solve and are actively looking for a solution?
Investors want to know that your customer base is aware of the problem and is looking for a solution.
Uneducated customers are the ones that aren’t aware or actively searching for a solution. This means it will take time to educate and then convert them. How long? That’s another piece you need to find out and be able to convey.
Market Metrics
Is your market growing and if so, how quickly? A market that isn’t growing rapidly isn’t attractive to investors. Each investor may have a different appetite for how fast. Some might want to know what may cause it to plateau, i.e. barriers like government regulation, high costs, or a declining customer segment.
How are customers currently solving the problem your product solves, and how much are they paying for solutions? Investors what to know how price sensitive your customers are. Customers who are too price or budget-sensitive will be a challenge to acquire. Investors know they will make it hard for you to scale your revenue.
The competitive landscape: call out your competition. It’s better to be in a growing market with competitors than to claim you have no competition. No competition signals that either you are too early in a market. Or there isn’t enough demand. Or there are no potential acquirers.
Investors interpret each of these signals as a high-risk venture.
How do customers perceive your competition? Is it one that has a lot of brand loyalty? Or is it one that they are using because there aren’t a lot of alternatives out there?
What is your product’s benchmark relative to competitors or the industry standard? e.g., Does it take seven months to do an integration that your product does it in 7 days? Do people currently spend $5 million and your product helps them save $5 million? Alternatively, does it help them generate $10 million?
If you don’t have clear and concise answers to these questions with B2B metrics and data to back them up, you need to do some research to get them!
Once you’ve covered the basics, you need to demonstrate how customers are moving through your sales pipeline.
The Health of Your Sales Pipeline
If you’ve started selling your product, investors are going to want to gauge the health of your sales pipeline. Know that they will dig into every stage of that pipeline.
So let’s start with the first stage: prospecting.
What channels are you pursuing? How do those breakdown in terms of inbound (warm leads) versus outbound (cold calling, outreach, and demand generation)?
Given those channels, what are the breakdown in terms of impressions, cost, and lead time?
Explain Your Experiments
If you have run some experiments on those marketing channels, do you know what the ROI is in terms of CAC or cost-per-lead and LTV?
Be able to speak about the experiments that have both succeeded and failed. Having failed experiments is OK. It means you aren’t afraid to try something. However, it would be best if you were clear about what caused the failures. You can let investors know if the experiment you ran indicated that a channel was expensive, noisy, competitive, or just produced low quality leads. Then you can talk about the experiments that succeeded and why.
How scalable are your sales channels? While it’s great that you have run a successful experiment and found a channel that helps you grow your customer base, investors will want to gauge how the channel will scale. If you are successful in that particular channel, competitors will either find out about the channel or customers will become desensitized to it. Hence you want to show how much time it will take for competition to catch up. Or for how much longer you can capture customers, in that channel. And what your plans are to expand beyond it.
As you are getting people into your pipeline, investors want to know what is the pipeline velocity: how quickly are prospective customers moving through the stages? Most investors will want to see the ratio of buy-time the time you spend educating a prospect versus time-to-close: the time it takes from when they became a lead to paying you.
The Velocity of Your Sales Pipeline
It’s OK to admit to your pipeline velocity being low as long as you can point to the causes, e.g. needing more salespeople to help close, adding more features to meet customer needs, or requiring a budget to run more sales and marketing campaigns.
Most B2B products operate under a contract or monthly subscription model. If that’s your model and you have closed customers, the next couple of B2B metrics that investors are going to want to know is the rate of renewals and your average contract size.
These indicate how you are thinking about pricing, and how many customers it’s going to take to ramp up your revenue.
Business Model Metrics
If you had customers who have issued an LOI (letter of intent), are on a pilot, or are in a POC (proof-of-concept) stage, investors may hang back until they see metrics around renewals and average contract size. Their concern is how scalable and repeatable your sales pipeline is. If you don’t have those metrics, then some investors might feel like your ventures is a higher risk.
If you are targeting a specific vertical that an investor is familiar with, e.g. Healthcare, be prepared to answer questions specific to that vertical, e.g. How long would it take for hospitals to adopt this technology? Does the product increase the efficacy of clinical trials? How likely are doctors to recommend this product to their patient?
Make Your B2B Metrics Memorable !
You need to know these B2B metrics like the back of your hand and be able to do a deep dive during a conversation.
As you are walking through these B2B metrics, don’t just spew them out. Remember investors are meeting with founders daily. They aren’t going to remember your 3-5 metrics off the top of their head. To make your B2B metrics memorable, you need to wrap them in a short story that captures why the B2B metrics are what they are, and indicate how you expect them to change over time.
Craft a short story (30-60 seconds). Have it highlight the most impactful metric and teases the investor to learn more about your business. Be prepared to follow it up and dig into the story deeper.
Example of Teasers
“Over the past six months, we have built a marketplace that connects commercial real estate agents to business owners who are looking for office space. Usually, it would take them months or years to source and close a contract. Using our marketplace, they can source, vet and close contracts in less than a week.”
“Since January 2018, we have been servicing Fortune 100 companies. We have grown our customer base by 30% month-over-month resulting in $2.5M ARR. They use our product to improve employee engagement and improve retention.”
Want help getting a handle on your B2B metrics and pitching investors? Apply to the upcoming accelerator batch!
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