Last month, I was part of a great session at the Atlanta Tech Village. We discussed what metrics investors care about or are looking at every stage.

It’s a fun format (one of the few “Villager-Only” events - most are open to the public) called “Capital Conversations” with a handful of founders and several investors or industry experts.

I learned a bunch from fellow panelists Nelson Chu of Kinetic Ventures and Jaisa Gooden of SVB.

What DO investors care about at each stage?

Here’s the annoying answer:

It depends. 🙃

Depends on the firm, company stage, industry, investment thesis, and even where the firm is located.

Nevertheless, the O’Daily persists…in delivering bulleted lists!

Here is an overview of typical investor metrics or evaluation criteria for each stage of early investment!

Idea Stage

Idea Stage usually means pre-revenue and pre-product.

Example Criteria

• Is the founder excellent? (e.g. great at selling, intelligent, resilient, creative, ambitious)

• Is the market big enough to support multiple billion dollar companies?

• Is there authentic demand? How are tests performing?

• Is this a “hair-on-fire problem”? (a great phrase from Nelson Chu!)

Typical Check Size

• $100,000 - $1,000,000

• $100k from an angel or smaller fund

• $1M if you’re an experienced, successful founder with existing investor relationships

Since Idea Stage is pre-revenue and pre-product, investors are primarily assessing the market, the idea, and the founder.

With those 3 factors, does this business have a chance to be big?

And do you think the founder can be smart, brave, and humble enough to pivot the company and grow as an entrepreneur?

It’s likely the current idea is not the final iteration so this is 90% taking a bet on the founder!

Seed Stage

Seed Stage is usually some revenue, some customers, some product but still very early and risky with lots of unknowns.

Example Criteria

• Founder and market size are still #1 most important things! (See Idea Stage ⬆️)

• Do you have paying customers that love you?

• How much time and capital did it take to get here?

Typical Check Size

• $500,000-$3,000,000

• Seed Stage checks can be from firms, angels, or a mix

Every firm is different in what they look for at Seed Stage and how they explain it.

It’s usually too early to have “regular” metrics so investors are looking for indicators of traction and trajectory. It could be customer count, revenue, growth rate, customer love, or a combination of all of those!

This is where Atlanta Ventures spends a lot of time so I can share specifics on our thought process.

Our seed stage investment threshold is 10 passionate, paying, unaffiliated customers.

Paying money is a proxy for value. If they aren’t willing to pay, that is informative.

(I love free samples but rarely buy the product.)

The number “10” is somewhat relative (it could be 9, it could be 12) but it’s more than “a few.” You’re on to something! It’s resonating.

The part that’s hard to quantify is traction and trajectory. If you have 10 customers that love you but it took 5 years to bring them on, that’s very different than 10 customers in 3 months with a pipeline of 20 more.

Also, “10 customers” is assuming they’re paying $500-2000/mo or so, standard B2B monthly subscription fees. If you’re selling really large deals ($100k+), maybe 5 customers who love you is enough. Or if it’s a lower price point ($100/mo), maybe you need closer to 50 customers.

And of course, it’s fine to start with “friendlies” (oh, hi, mom, thanks for signing up!) but you need to be attracting “unaffiliated” customers through the problem you solve.

Series A

You’re a real company! You have a product, a process for getting customers, and so many users you don’t know every email by heart.

Example Criteria

• What is your ARR? (Usually $1-2M ARR is a starting point for Series A)

• How quickly are you growing?

• What is your net retention rate? (how often do customers leave vs buy more)

• What is your burn multiple? (more important now than ever 🥴)

• What is LTV to CAC ratio? (good is >3, excellent is >4)

• Here’s an awesome post with more detail: The SaaS Metrics That Matter

• Plus, founder quality and market size, of course!

Typical Check Size

• $3,000,000 - $10,000,000

• A Series A fund will likely lead the round, sometimes the whole thing, or with room for other investors.

Series A companies have metrics to compare against benchmarks.

Basically, does this business look like something that can scale well? Do the unit economics make sense? If you put $1 in, will you get many more $$ out?

The better the metrics = easier to raise money.

BUT - no startup is perfect and investors know this. You need most of your metrics to be great but a few hiccups are okay.

Proactively address areas of improvement. Explain your plan and showcase your leadership and problem solving chops.

Series B

Scale, scale, scale!

Example Criteria

• Same key metrics as Series A (ARR, growth, capital efficiency through burn multiple and LTV:CAC) but less flexibility in performance

• Founder quality matters less now as an experienced CEO could be brought in

Typical Check Size

• $10,000,000 - $30,000,000

• Some Series A funds also do Series B but you also start to get into “Growth Stage Capital” firms which write the big dog checks (e.g. 10s of millions up to 100s of millions)

You’re definitely talking primarily to the “Coasts” (NYC, SF, Boston) for this stage.

Things are humming and you want to pour gas on the fire.

Companies also start to add new product lines, tackle new markets, or do small acquisitions (“tuck ins”) with this capital.

What About Seed Plus or Seed 2?

Usually a term for “need to raise money but not yet at Series A level traction or metrics.”

Mostly likely this raise is coming from existing investors who believe in the long term vision and know the founder needs more runaway to execute.

“I have $xx ARR buuuut…”?

Have you heard this or thought this before?

On paper, the criteria are met but if you dig deeper, you find out that most of the revenue is:

• for services, not software

• from one client

• from a different product

• in paid trials

There are no loopholes in venture funding.

Every investor wants to see true, valid, authentic traction and trajectory — however they define that for their stage.

But No Startup Is Perfect!

HOWEVER…there’s no perfect company, perfect metrics, or perfect deal.

Every business has stuff they’re working on, risk areas, or aspects that need to be up-leveled.

We’ve invested in successful companies that:

• Delivered “software” through a spreadsheet

• Had 50% of revenue from partner sales

• Didn’t have a paying customer yet

• Expected high churn for a year

These downsides were okay since so many other areas were promising.

So put your best foot forward. It should be a really good looking foot. But not perfect. Every foot is a little gnarly, just like startups!

And on that heel-arious analogy…I’ll see you next week!

What have you seen at each stage? Any key criteria or metrics I’m missing? Any investors with unusual milestones? What’s the most toe-tally outrageous investment analogy you’ve seen???