How One Company Opened Their Books As A Way To Court Venture Capitalists
By sharing its business intelligence dashboard with select VC partners upfront, Fab.com selected the best partners possible and ultimately raised $40MM over the holidays.
As our “one thing” at Fab.com is design, I put a lot of thought and consideration into how we might design our fundraising process differently from the norm, so as to optimize around time spent fundraising vs. running the business, and to quickly hone in on who we wanted to marry.
In short, rather than go through the time-consuming process of ‘dating’ VCs — demonstrating the company’s vision and leadership at first, the numbers only at the end — Goldberg and his team decided to accelerate the process by first focusing on the right ‘marriage’ partner, and not on the quantity of dates. In order to allow his team to focus on the business during a demanding, critical time for revenue generation (holiday sales), Goldberg and his team first identified the three key criteria that would qualify the right firms to partner with. This criteria included venture growth capital, a recent track record of picking winners, and scalability.
Once they’d narrowed the list of potential partners down to about 7 firms, Goldberg introduced a layer of transparency that gave these partners visibility into the same business data that Fab’s leadership tracked on a daily basis — by providing those 7 VC firms with a login to Fab’s RJ Metrics business intelligence dashboard for analysis prior to meeting. The value of RJ Metrics, according to Goldberg;
RJ Metrics works as follows. You spend a couple of hours connecting your production database to RJ Metrics and then it spits out the most amazing graphs and charts on all facets of your business. It updates every couple of hours based on your actual production data. As a dashboard it’s fantastic, but the real power of RJ is in its cohort analysis — RJ enables you to effectively monitor each cohort of users by join date and then then evaluate their revenue contribution, payback periods, engagement levels, and lifetime value.
The lesson to be learned from Fab.com and Goldberg’s experience is applicable primarily to startups, but actionable by longer-established businesses.
- Get a firm grasp on your business and customer data.
- Understand your customers (co-horts), time to first purchase and repeat purchase rates.
- Share that data with the partners that can help you identify the investment needed to achieve the growth you desire
As Goldberg states: “if you can’t measure it, it didn’t happen.”
And lastly, don’t be afraid to have a plan for determining your business growth strategy. By redesigning the VC process with just a few time-saving tweaks, Fab.com’s $40MM investment didn’t come at the expense of their holiday revenue.