How Media Startups Can Get Investors on Board Our expert Jon Elvekrog provides insight on how media startups should discuss milestones and scalability to investors.
By Jon Elvekrog
Opinions expressed by Entrepreneur contributors are their own.
Q: I am looking to create a content startup and many investors ask how I am going to achieve milestones, like getting the 100th customer, 1,000 customer and 10,000th customer. How do you suggest doing this?
A: The first step is in understanding the needs of customers in the content business is to realize you have two completely different sets that you must appease. Your readers are there to consume the content, so you build that audience with great content and great marketing. Your advertisers (assuming that's your monetization strategy) are there to buy your readers' attention, so you have to find innovative ways to deliver that. You need milestones for both. Investors have historically been willing to tolerate losses when they see audience growth on fire. But let's deal with the trickier and, ultimately, more important business metrics.
The thing with investors is that, because you are the subject expert, they often let you define your own metrics of success. But keep in mind that because you set the goals, you had better exceed them or the investors will get in your grill on a very regular basis.
Related: 5 Ways to Minimize Risk for Investors
From an investor perspective, the ultimate metric of financial success is profit growth -- that is the one that will move the needle at the end of the day. Fortunately many early stage and growth-focused investors understand that real financial success requires them to invest in the growth machine and even then may require greater scale to actually get to profitability. This is a good thing if you are Twitter or Uber and can raise significant money from investors or the public market while hemorrhaging dollars. It's a bit harder of a balancing act if you live in the "not-so-rocketship world" of many startups where the rules of fundraising gravity still apply. That's why you must define meaningful metrics that indicate the presence of future dollars. For example, you can show that to have enough scale to attract advertisers, you need a million unique visitors monthly, which was proven by content company X, so by the end of year Y, I need to have that million. Now you have a metric that can be plotted on a simple chart.
In addition to growth and profitability, investors need to see scale. If your business -- financially or from a metrics perspective -- looks like your corner dry cleaner in terms of scale, you are going to be in a difficult spot. Media and technology investors invest with the hopes of funding the next Facebook, not small businesses with a steady stream of cash flow (banks are the traditional funders of businesses like this). So you might be making money and clearing a profit with a million visitors, which is a great accomplishment but now you have to say, "Great, we showed this business can be profitable, now here are the metrics that will show it can scale."
Related: 3 Reasons Entrepreneurs Fail to Secure Funding
As food for thought, think about tracking multiple different target metrics for your business such as: unique visitors, revenue growth, engineering processing capability, employee growth, numbers of customers, and other metrics relevant to a content business, like page views and engagement time. But at the end of the day, a single metric that can guide your business is easier for your investors to understand and more importantly, easier for your team to rally around. Simplicity and focus is key, so if you can boil things down to single metric that encompasses the most important parts of your business, then that is a big win.
Related: The Basics of Pitching Investors
