Focus on Value Creation, Not Revenue

I regularly have the conversation with founders about what metrics they need to achieve to raise capital. Most commonly, they’re focused on revenue or some derivative of revenue. I remind early-stage founders that revenue isn’t always the best metric to demonstrate the potential of your solution.

Instead of asking about metrics, I like to reframe the question. How can a founder demonstrate the value they’re creating for users or customers? I like this better because revenue is a by-product (or should be) of value creation. If your solution is adding value to others’ lives, they’re likely to pay for that value (now or in the future). Thinking about value creation keeps you aligned with customers and doesn’t force you to turn on monetization prematurely. If value creation can be quantified in other ways (engagement, sign-ups, repeat transactions, etc.), smart investors will give you credit for the absent revenue.

If people have a problem (realized or not) and you solve it, you’re creating value for them. Healthy revenue is the result of value creation. Focus on creating value for people by solving a problem well, and things like fundraising become a lot easier.