How can I convince my Investor that we’ll double up his investment in 2-3 years?

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JASON LEMKIN

It may be an odd & unusual question — but I think it’s a good one.

If you are a VC / private investor, there’s a key meta question: why invest now?  Because, at the same price … later is always better.  Time always decreases risk.  So let’s … wait.

There are really two, related answers to “let’s wait”.  One is because if you don’t invest now, it will be too late.  FOMO (Fear Of Missing Out).  This is really the reason most very early stage investments get done.  Later, it will be too late.

The other reason, even for an early-ish stage VC … is because you could (at least in theory) invest later … but it will be at 2x or more the price.

If as a VC you can invest in a year at the same price … it makes no sense to invest now.

Or put differently, if a VC doesn’t believe the next round will be at least 2x the price in this round … it can be hard to justify the investment.  At least, for now.

So how do you “show” this?

Basically, by showing within 12-18 months you’ll be (x) Hot or at least Warm and (y) hit the ‘next’ investing plateau.  If you are at $10k MRR, prove you can get to $150k MRR by the A round.  If you are in the beta phase, prove you can get to $30k MRR for your Seed round.  Etc. etc.

“Prove” / convince your investor your blow through the milestones for the next round.  Then she’ll know, all things being equal … she’ll get at least a 2x mark-up next time.

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Published on January 27, 2016
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