The Simple Funding Formula

One thing you always get asked when talking to founders is what is most important: team, market, traction or business model. You always answer that it is not that simple but it actually is VERY simple. And it is that simple in B2C and B2B.

It’s is always communicating pipes, it is always a sum of all of those parts. Let’s presume that the average is 0 of the stuff that is being pitched, then you just need to look around you and wonder how you are doing.

If you have a great team, you can give yourself a +1, with previous experience, possibly even +2. Then the question becomes the market. If the market is fully unknown, there is great risk, so let’s put a -2. Then you suddenly have wild traction like Fab.com and you put yourself a +4. Then having no business model for a -2 still leads to a total of +2… welcome to getting funding. The higher the number, the higher the competition.

If you are pre launch, you talk to angels and they will judge your team, see if they at least give you a 0 on the business model and feel if the market is there to a certain degree. It’s more of a belief system at that point. But let’s take the Fab.com example again, great team (+2), unclear real market size for design items (0), clear business model (+2) and sick traction (+4) going for a total of +8. Of course they get big money at sick valuations.

Simple as that. Good start of a day :) Now go back to work.

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