Talking Business: How Not To Be A Deer In Headlights

Emmet McGonagle

June 17, 2022

Teruel Carrasco - president of Valhalla Private Capital, co-founder of Radar Endeavour Group Inc and CEO of Lending Assist - has discussed the standard investment journey of a startup, from its inception to achieving product market fit status in the latest installment of Valhalla’s ‘Talking Business’ series.

With expertise in business development and within startups and established companies alike, Teruel claims that some companies “skip through so many steps” on a mission to go public.

While this approach is “aspirational” - “good on you”, Teruel remarked - there is an established development strategy for startups which has been curated to reach product market fit as economically as possible.

Friends & Family

Typically the “first step” of founders, Teruel claims that angel investors look favourably on this round as it shows that “friends and family are willing to bet on you”.

Pre-Seed

Generally carried out via an angel (individual investor), angel group, or a micro fund, Teruel remarked that a pre-seed round’s definition “is embedded in the name”.

“It's seeding the startup,” Teruel said, “it's getting the startup to develop and accelerate their product.”

At this point, a startup usually has a minimum viable product, minimum sales and “in some cases, they're pre revenue”.

As a result of this, these startups tend to be in search of what Teruel refers to as “rocket ships fuel capital” of $250,000-$500,000 (less than $1m) so that they can get their product to market, better known as early stage investing.

Series A

After a startup has created traction in the market and has their first handful of customers, they typically go to a Series A and speak to a venture capitalist.

However, the amount of money startups look for at this stage is defined by industry. For example, an app which provides software as a service would typically start looking at anywhere between $2-5m dollars in ARR (annual revenue) with amazing traction.

On the topic, Teruel comments: “If within the last two years you've gone from zero to $1m, you're at $2m and you're headed to $10m, venture capital companies love to have you at that juncture and have conversations with you.”

Product Market Fit

Product market fit has been discussed at length by Teruel in a previous blog post, with reference to the hockey stick model and the prospect of a liquidity event.

“When I describe this process to a founder I get ‘deer in headlights’ looks.” Teruel explained.

“Nobody's ever laid it out that way to these startups, but they need to look out for these key guideposts of growth as they grow their enterprise,” Teruel concluded.

Do you have a question about angel investing? Get in touch with Valhalla Private Capital via our contact page.

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