When considering a Series A investment, investors prefer businesses with value and lots of growth. A quick-growing enterprise expanding at 20-30% or more a month, a scalable economic system, and strong engagement are crucial. A general guideline for a Series A is a rate of £5m in annual revenue.
In the grand scheme of investment, having a minimum scale is the most important component to consider. "Working" businesses have a minimum scale that shows enough sales generated to create a repeatable pattern. One-time wonders will not turn the eye of a potential investor. Gaining the interest of a £5m Series A investor will require 40% or more in gross margins or 10% or more in market commission. Scaling a company varies from business to business and determines the size of the Series A.
In the list of components necessary to gain the interest of a Series A investor, growth is the second most important piece of the puzzle. Investors want to see swift growth in the years following the company's startup; this rapid growth allows them to predict whether the business will continue to grow or has reached its peak. Convincing a potential investor that a slow-growing company is going to morph into a fast paced enterprise is not easy. Startups need to scale quickly over a short time to succeed, which is why investors are looking for an optimal growth rate of 20-30% a month.
The last imperative component is a scalable economy. The economics of a company includes how customers interact with websites, how they become sales, and how much customers spend. It's important for startups to have a complex model showing each step of the customer lifetime value. Investors are looking at how their investment will spur more growth. A business' social media following, word of mouth reputation, and repeat customers are also taken into account; having a large following and good reputation are good indicators of a strong customer base.
Revenue is an important piece of the puzzle, but investors also look at the completed masterpiece. Companies are often granted leniency in the revenue area when they have strong teams and large markets, and the opposite is also true. Companies with solid revenue benchmarks are often given a break in the marketing components. Contact us to learn more about impressing Series A investors.