Phase 3
Use of proceeds: Triple your valuation over two years
Fundraising Masterclass
In this chapter we will develop a plan how to create most value with the funds that you are about to raise. Investors will ask you what you want to do with the money they are giving you (the “use of proceeds”). In this phase we will work out the answer. The objective is to increase the valuation of your startup by 3x over the coming 24 months.

The big picture: How will your industry look like in 10 years?

Before going into shorter-term planning It is crucial to make a step back: How will your industry look like in a decade? Some investors call this the “end game” – understanding where your industry is gravitating towards.

Here are the questions you want to answer:
  • How are new technologies going to impact the industry?
  • What do you think will a typical customer in your industry expect in 10 years?
  • Who will be the dominant companies in 10 years? Is it existing market players? New entrants?
  • What competencies will be most relevant in 10 years? What is going to be commoditized and can be bought from third parties or accessed via APIs?
  • What role do you want your startup to play in 10 years? Do you want to be one of the key players, or be part of another company?
It is obviously difficult to predict what happens over the coming decade. But still – you should have a view how your industry is developing, and what role you want your company to play in it. A clear vision not only helps you attract the right team members, but also the right investors.


  • Prepare one slide with your vision of the “end game”: This can be an illustration, or a few hypotheses written as bullet points (note: this slide will be part of the long deck)
  • Review your mission/vision slide: Is it relevant to create the company you want to be in 10 years? Should you do any changes or can you leave it as is? (note: this slide will be part of your short deck)
  • Prepare a quick and dirty slide with the exit considerations of your company (note: this is for internal use only)
    Optional: Write a first (provocative) article about how you think your industry will evolve over the next 10 years, and publish it on LinkedIn. You obviously don’t want to be arrogant – nobody really knows how the world will look like in a decade. But it is great if you have a clear vision how it could be.
  • Describe the impact of technology, what customers will expect in the future, etc. You can write follow-up articles about this over the quarters and years to come, putting financing rounds, M&A activities and so on into perspective. Doing this will make you a sought-after speaker at conferences and an interesting discussion partner for investors and potential trade sale partners.

Why triple the valuation, and what does it mean?

The 3x valuation increase that we propose to aspire for over the coming 24 months is not a magic number: There are startups who have reached a higher increase – and most investor will not shout at you if your valuation is “only” 30% higher in two years.

But you need to be ambitious to build a unicorn, and 3x over 24 months is a reachable goal for early stage tech companies.

Let’s assume that you are planning to do a USD 2m seed round at a pre-money valuation of 8m, resulting in a post-money valuation of 10m. The 3x valuation increase means that you want to reach a pre-money valuation of USD 30m over the coming 24 months, which would then enable a USD 10m Series A Round.


  • Write down the valuation your company should reach in 24 months

Analyze potential value inflection points

A “value inflection point” is a milestone that substantially increases the valuation of your company once you have reached it. Depending on the stage of your company it could be things as follows:
  • Product: First working prototype, certification received, first sellable product, product/market fit, NPS of 30+, …
  • Customers: X app/product users, LOI / contract with B2B partner, …
  • Revenue: Presales of XY reached, 6-digit revenue, 7-digit revenue, recurring revenue of XYZ, …
  • Development: Key feature launched, new product launched, patent granted, crucial milestone reached, …
  • Geographic expansion: Product launched in a new country, …
  • Profitability: Unit economics of XY reached, CAC/LTV of XY, core business break-even, EBITDA-break even, …
  • Team: Key person XY hired, world class data science team built up, …
Value inflection points tend to be digital in the early stage (e.g., launching a first product or an FDA approval can triple the valuation of a startup). Over time, revenue becomes the central driver of startup valuation. Read more about this here. And make sure that you understand typical revenue multiples in your industry.


  • Brainstorm and create a long list of value inflection points your company could potentially reach over the coming 24 months
  • Rank the long list of potential value inflection points based on the expected impact on valuation (low, medium, high), how expensive it is to get there (low cost, medium, high cost), and how much it is in line with your vision/mission (not so much, medium, very much). You will use this prioritized list in the next step
  • Research: What is the typical revenue multiple in your industry?
  • What is the revenue you want to reach 24 months from now?

Work out a plan incl. financials

Take out your liquidity planning sheet and get ready to play with it (here is our view how liquidity planning should be done, incl. template). Start with the value inflection point from the bucket list above that is most highly ranked: How much will it cost to reach it? What personnel is needed, and what is the external cost for doing it? What is the revenue impact? Does the annualized monthly revenue in 24 months lead to a company valuation that is in line with your expectation?

Play around with different value inflection points that you could potentially reach over the coming 24 months. Developing a new product feature? Launching the product in another country? Opening a new sales channel? Building an inhouse digital marketing team to push sales?

Now comes the crucial part: Focus! Most startups are trying to do way too much. While it may have been crucial to test many different hypotheses in the very early phase of your startup, you need to slow down and start focusing on doing things right. While launching a new product feature in your core market, entering a new sales channel and bringing the product to a new country may sound like a good idea (after all, you are super agile and fast) – it usually makes a lot more sense to come up with a much more boring plan.

So focus on one or two things that will be the true drivers of your valuation increase. Factor in that things take longer and cost more than expected. And double down on the key value drivers: If your value inflection point is getting a first paying B2B customer, you may want to have 2-3 sales reps who work on the sales funnel independently. If you do this the chances are good that you will make it a success. If you don’t you run a high risk of failure.

Make sure that the big picture of your financial planning sheet looks right. Experienced investors have a good feeling of what is realistic – and getting this wrong will cost you credibility. Here are some practical recommendations:
  • Revenue growth: This is a critical one. Getting it too low will tell investors that you are not ambitious enough. Getting it too high can sound ridiculous. You will probably want to reach something like USD 50-100m revenues 5 years after launch. Annual revenue can grow up to 10x in the initial phase (e.g., from USD 300k in year 1 to USD 3m in year 2), but will obviously go down over time.
  • Percentage of key cost blocks: Make sure that the relationship of cost blocks to revenues make sense. While they can obviously be much higher than revenue in the initial phase, you want them to trend down to industry norms over time. Marketing may trend to something like 20-50%, R&D 10-20%, general and administrative cost (office rent etc) to 10%. While established companies typically include personnel cost in these groups in their P&L statements, we like to keep salaries separate in early stage liquidity planning as they are relatively easy to estimate.
  • Conversion rates: If you assume that 10% of your unique visitors convert to paying customers you will be challenged (in most businesses 1% or so is more typical). If you include such figures in your revenue estimate (which we feel can be very useful), make sure that your assumptions are in line with industry norms.
Make sure that you will have liquidity for at least 30 months with the “external financing target” of 15% dilution (see previous phase). This gives you leeway to raise another round once you are getting there. The best case is if you can build a liquidity plan that brings you to break-even with any further financing – knowing that you would most probably go for another financing round to further accelerate growth in case you reach a substantial valuation increase.


  • Make one slide showing where your company will be in 24 months, and why it will be 3x as valuable then compared to the post-money valuation of your upcoming financing round (note: you will present this slide to “friendly” investors in Phase 4, and see whether they buy into it).
  • Have an updated Cash Flow Statement that shows that the plan can be reached with the funding which you are about to raise. Show that the money lasts for 30 months.

Are you sure that you will reach this plan? Really?

You are happy with the plan you have worked out in the last step: A massive increase of valuation can be increased within 24 months, and the money lasts for 36 months.

The next step is to get buy-in from your team. Once you start talking to them you find out that things are not as simple as planned: SW engineers tell you that rolling out the new product feature takes more time. Hiring all the planned new employees will require more time and resources, and potentially a new office. Entering a new country requires a certification which you don’t have yet. Etc.

Iterate, do further research and work on your plan until you are convinced that you will reach it. If you don’t fully believe in it your investors will neither.

While there will most probably be a next financing round afterwards to keep growing rapidly, it is great if you can elaborate a CF plan that brings you to break-even with the financing raised. Getting to break-even gives you a lot of power in upcoming financing rounds.


  • Present your plan to key members of your team, and have them challenge it: Are the assumptions realistic? Can you reduce risks? Are further analyses needed in certain areas? Iterate until you have full buy-in and are convinced that you can execute the plan.
  • Have an updated liquidity plan, which shows that the aspired plan can be financed with the money you are about to raise. It should enable a runway of at least 36 months, or even bring you to profitability.

Work out a first pitch deck for the upcoming round

You have advanced big time so far! In Phase 1 you have created a strong basis for the fundraise. In Phase 2 gained a clear understanding how much money you should raise. And now in Phase 3 worked out a solid plan how you will triple your valuation with the money you are going to raise.

It is now time to work out a first draft of your pitch deck (also called teaser). This may be the most crucial document needed for the fundraise. It will be sent out to investors to gauge their interest – and if they are interested serve as a basis for the first call.

So this document has two objectives:
  • Excite potential investors! They spend a few minutes to look at your deck – and should immediately understand why your startup could be a huge future success.
  • Make sure it is in their scope: State explicitly how much you are raising (e.g., Series A Round of USD 8m), and make sure that is clear where your headquarters are, as many investors have a specific geographic scope. We ourselves have setup too many calls (and even meetings!) in our lives where the investor tells you after engaged discussion that it is too early for them to invest, too late, or that they don’t invest in your geographic location. Much better to get a no from the beginning than wasting time.
Start writing a compelling storyline that contains the following information. It is leaning on a template provided by Sequoia.

The following information must be included in your deck:
  • Title slide: Engaging title (aspiring), subtitle which includes the name of your funding round (e.g., “Series A Round of USD 8m”), contact person incl. email and address of HQ
  • Mission/vision: What is your company all about?
  • Problem: What is the pain point of your customers?
  • Solution: How does your product solves this pain point?
  • Market: Show the attractivity of your market
  • Business model: How are you generating revenue? Who buys what from whom for which price?
  • Traction: Describe the awesome traction you already have
  • Funding: Highlight previous financing rounds (if any), and the one you are going to do now
  • Use of proceeds: Show how the money you are raising is going to be used, and how this is going to make a huge difference
  • Financials: Show your cash flow statement (the annualized view only, in table form, 3-5 years forward looking, potentially also historic data if you can show nice revenue growth)
  • Team: Present the (core) team to make it happen.
Depending on your situation you may add/combine the following insights:
  • Competition / USP: Show this if there is a nice and easy way for you to show your USPs (Note: you can potentially include this in the problem slide – how current solutions are falling short of customer needs – or also in the market overview)
  • Why now: Only include this if an event such as Covid, a change in regulation, climate change or anything else has enabled or accelerated your business
  • IP / clinical / regulatory: Add a slide if this is crucial and speaking for your startup (and if it does not fit into the “solution”, “traction” or another slide)
Make sure the deck is simple to understand and short: Max 12 pages, ideally 8-10. An average investor is spending a few minutes flipping through your deck, and may never have heard about your company before: If she does not immediately get it you have lost your chance.

Keep the first version of the deck super simple: A good title, one or max two key messages per slide, and potentially a picture or illustration to strengthen the message. Design is not important at this stage – a very minimal, clean version is all that is needed (design will come into play in Phase 5).

Here are some pitch decks of startups that have successfully closed financing rounds at different stages. Have a look at it if you need inspiration.

Last but not least: We strongly recommend to write the teaser (and all the documents following in the next phase) in English. Even if most of your potential investors may speak Spanish, Swahili or Finnish. If you have global ambitions there is no way around this, and the earlier you start doing it the better.


  • Write your pitch deck
  • Present the deck to key members of your team