In this unit we will cover the various types of entrepreneurial capital, and how they differ. We will define "institutional" venture capital, and learn how to position our startup in the proper stage, sector, and thesis to navigate the capital pipeline. We will discuss "cost of capital." We will learn why investors stage investment. We will learn how to frame a hypothesis, raise our valuation by de-risking aspects of our business, and lower the cost of future capital. We will learn how to calculate our burn rate and define our runway, and learn how this implies the amount of money we should raise. We will also learn about nine criteria that investors use to evaluate companies and deals. This is not an exhaustive list, but this is an illustrative example of how investors are thinking about your business. They are looking at things like team, market, technology, problem, and solution.
In this unit we will focus on building the investor pitch deck. We will focus on framing the market size. We will learn how to calculate the total addressable market (TAM) and the serviceable addressable market (SAM). We will learn how to think about the inputs to lifetime value (LTV) and what drives a successful business. We will discuss customer acquisition costs (CAC), and the inputs to LTV such as number of users, retention, and average revenue per user (ARPU). Together this will help us successfully articulate the size of the opportunity. We will also frame market size and opportunity within the context of what "moves the needle" for a specific size venture capital fund. This will inform where in the capital pipeline we should focus, based on the potential pathways to market size. This helps us get to "Yes."
In this unit we will discuss how venture capitalists define your company's value, by looking at proxies of value like user adoption, engagement, and revenue. We will also learn that valuation at the early stage is a function of the amount a startup is raising, and the ownership target of the VC. The amount the startup is raising is a function of the hypothesis, burn rate, and runway needed to achieve this next step, and de-risk the business. Finally, we will learn how to put all of these pieces together to communicate and calculate our pre-money and post-money valuation. It will be a function of our hypothesis, burn rate, runway, amount we're targeting, the size of the market and our opportunity and who we're pitching to, how we're thinking about CAC, about LTV, about ARPU and inputs to LTV, and how we believe there is a path to growth to "move the needle" on the fund we're talking to given their likely 20% ownership target.