Received some tough but good questions from investors and wanted to see if the group has come across questions like this before... perhaps others who are either raising funds now or in the future may benefit from them. Please offer any insight you can into these few questions (in no particular order):
Quick qualifier - we have full 5 year financial projection and the investor deck drafts in place already
1. Sales, Sales, Sales
- we are a sales-driven B2B product, we will have a large sales force by year 5 end.
- investor wants to know how we will hit our numbers (new clients per sales person per month)
- how else can I indicate / sketch out that we will hit these numbers? Should I map out the regions where we operate, list how many customer, list how many calls and meetings should be achieved per month to close deals etc etc.
- show how we could partner with other players who have large target clients on the roster for other services?
2. What is the seed investment worth in value two-to-three rounds later?
- one investor is interested in hearing about dilution. How do I factor that in?
- our goal its to have the initial seed be a convertible note into the Series A six months later.
- we have the financial projections, but how do I calculate dilution amount?
3. What is the discount of the convertible note into round 2 ( series A)?
- how do I position this?
- if the seed investor doesn't invest further cash then what should we negotiate the discount to be on the convertible note? Standard metric?
4. How do we calculate our pre and post-money valuation?
- we're currently in private beta, we're trying to build value so instead of giving up X% equity, we want to offer a convertible note.
- how do we determine a current value: (tally our hours spent + personal cash injected) X some multiple to determine current value?
5. Sensitivity Analysis (failure to meet projections)
- investor wants to know what happens if our costs double and our sales half
- is this common question? Is there a good way to show this?
- so far I have a table that shows what happens if our sales are half and our product is sold for half.
6. Your before & after industry data
- investor wants to know what impact the product has had on clients
- after X beta / pilots we've had X transactions which have had X% lift of revenue etc etc
- we're so early with so little data how do we say we're preparing for this. Was thinking outlining our process for collection and analysis at least.