Take out your liquidity planning sheet
and get ready to have some fun with it (here is our view on how liquidity planning should be done, incl. a template). Start with the value inflection point from the bucket list above that is most highly ranked: how much will it cost you 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 in-house 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:
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 likely go for another financing round to further accelerate growth in case you reach a substantial valuation increase.