Posts Tagged ‘Business’

What Investors Expect in Milestones

By Eleanor Haas

A company’s milestones are turning points in a company’s development that mark stages of growth and wash out a measure of the risk of failure.  Investor criteria for these are excellent metrics for shareholder value.  Investors think about six major milestones for an emerging  B-to-B technology company –  they look for this road map:

  1. Product Market Fit

You know it’s happening when your non- or little-paying beta customers stay with you and tell their colleagues about you. Retention above 90 percent.  High word-of-mouth growth.  It’s proof you’ve met a need – at least for the moment – but you’re far from home free.  You can lose product market fit at any time.  Customers discover alternatives you had overlooked, your performance slips or something new and better pops up – and you’re back to Square 1.

  1. Paying Customers

Once you get, say, five customers to make the leap from free or token payment to paid, you know you’ve started creating value for your business as well as your customers.  You won’t have much market penetration, and that’s your next goal.  If you could get five, you can get 50!  Sell-sell-sell!

  1. Statistical Viability

The next bottom-up goal is sufficient recurring revenue to achieve something like an annual run rate of $1 million – i.e., $83,000 per month.  For this, you’ll need solid pricing and market segment data to achieve a reasonably accurate estimate of market size – plus the marketing, sales, customer support and technology to make it happen.

What’s the return per customer?  How many customers do you need per month?  Per day?  Are there enough customers in your segment for you to land that many?  Do you have a market segment than can support your pricing?  No?  Then, what segment should you target?  What would it take to hit the run rate in a year?

  1. Cash Flow Positive

When:  12-18 months from startup for a technology business

Net income is still negative but your cash balance seems to keep pace with expenses.  This is a major coup – proof of economic viability and an investor requirement for further investment.  It’s a precarious time because the balance shifts dynamically.  You have to keep selling, closing deals making deposits, with just enough of a cash cushion for protection when the balance shifts downward.  Profitability still lies in the future

  1. Capital-Efficient Growth

Once you’re generating $3 million to $6 million in revenue and see that you can sustain positive cash flow, you know you’ve reached capital efficiency.  Investors like this a lot because they can expect you to generate $1 million in recurring revenue for every $1 million they invest.  Of course, your growth still depends on outside capital.

You may well  choose to stay at this stage for a long time – selling equity for cash in order to grow aggressively In a competitive market, you could do this through $100 million in revenue or even more.

  1. Profitable

When: typically, 3-5 years from startup for a growth business

Nirvana!  Net income at long last is positive.  Cash balance keeps growing.  Revenue from existing clients is sufficient to maintain it.  The net income is from new business, and it frees you from needing either investment or loans.  Right on!

 

Shifting Realms for King Content: Three Views

By Eleanor
Haas

Is
content still king?  Yes and no.  Depends who’s talking and how they’re
defining content.  Michael Wolff, magazine
columnist and best-selling-author, stated unequivocally at the recent SIIA
Summit that traditional news organizations – newspapers and broadcast news
alike – are finished.  He gave them 18
months at the outside.  His solution was
to abandon print and to found Newser, an online news destination.  At Newser, machines aggregate news, humans edit
it down to what’s important and then they present it in lively online formats
with links to original sources.

Not
so, countered Vivek Shah, head of the News Business Unit at Time, Inc. Print
journalism lives.  Newsgathering as a way
of creating value is disappearing, he said, but voice and personality
matter.  It’s all about points of view.

Content
lives and so do newspapers, said Arturo Duran, CEO, Impremedia Digital, a
portfolio of Hispanic periodicals, at an SIIA Summit preview session on digital
publishing. Newspapers have an important role to play.  But they need to redefine themselves as
local; they have to own their cities’ local listings and news.  Readers trust the name. Newspapers also need
to reinvent their antiquated infrastructure in terms of cost and processes and
be ready to deliver content to any platform.