Venture Capital is broken right now.
AVL Growth Partners released a new guide that highlights the key three financial drivers of a startup, along with recommendations to help founders avoid common financial modeling pitfalls and the best way to project business growth. A few of the common mistakes AVL Growth discusses in this guide include:
- Overestimating attainable revenue
- Misunderstanding how quickly revenue can grow related to COGs
- Underestimating customer acquisition cost
We, as startups, are often given mixed advice from the venture world.
- If your intent is to raise VC funding you must have a pro forma that shows you going to $50M in revenue in 5 years
- Your pro forma is not realistic
This can be confusing as hell because not many businesses go from very little revenue to $50M in 5 years. My advice is to create a real pro forma and build your business off of that. There is a shift in the VC world towards higher progress hurdles for funding. It's both a buyer's market right now and VCs are having their own troubles with their business model, resulting in a double whammy on investment activity. The VC market will come back around when liquidity starts to happen. Short of that, I urge you to examine how to build your business without the venture capital world. This means:
- finding earlier paths to revenue
- doing consulting in your space to find other sources of early revenue
- finding grants (especially in the climate tech space)
- getting creative with a combination of crowd funding and angel networks and the vehicles you use to raise
