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How Investors Think

Posted on Wednesday, Jun 16th 2021

If you’ve been bootstrapping your company for a bit, and are wondering whether or not to raise money, remember, Investors are looking to multiply the money that they put into startups.

Multiply by how much? 2X? 3X? 5X? 10X? 20X?

This question determines the strategies of what they’re looking to do:

  • Look for Unicorns (build companies with billion-dollar market caps): Go from 0 to $100M in revenue in 5–7 years.
  • Look for early exits (sell capital-efficient startups and make a lower multiple, but nonetheless, have a successful outcome).

And then, different investors have different investment theses.

Just like you look for product-market fit, you also need to look for investor-entrepreneur fit.

A seed investor looking for a Unicorn won’t invest in a capital-efficient startup that is better suited to a $30M strategic exit. And vice versa.

If you haven’t raised money before, understanding the fundamentals would be critical for you.

You can develop understanding of the fundraising process through some of these courses:

How Pre-Seed Investors Think About Startups with Sramana Mitra

How Seed Investors Think About Startups with Sramana Mitra

Post-Seed and Pre-Series A Investors on Startups with Sramana Mitra

How To Build Unicorn Tech Startups with Sramana Mitra

Alternatives to Unicorn Chasing Investors with Sramana Mitra

Learn what to expect from 1Mby1M.

Photo credit: Manoj Vasanth/Flickr.com

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