Investors Write Checks for Outcomes, Not Activities

In a previous article, I described various ways to determine how much money to raise (you can read it here).  If you’ve decided and communicated how much you are raising, you might be getting the obvious follow-up question: “Why is that the right amount?”  It’s a very simple and justifiable question for the investor to ask but it is commonly met with a host of unacceptable responses, such as these:

  • It lets us continue to operate for 9 months
  • It allows us to hire a lead architect and two sales reps
  • It lets us start doing some marketing
  • It lets us move into a larger office to support our expected employee growth
  • That amount will only cause us to give up 25% equity in the company, which feels right for this early phase
  • It’s the most we think we’ll be able to raise given our current traction
  • We’ve seen a lot of other startups in a similar stage raise that amount of money successfully
  • We have an advisor that told us that was the right amount for now

This article explores just one of the topics covered in Chapter 2 of my bestselling book “Startup Success – Funding the Early Stages”.
You can listen to this chapter now and if you’re interested in the book, you can
find it on Amazon here.

So What, Why Do I Care?

I could add several more but you get the idea.  To every one of these answers, my response is “So what, why do I care?”  (see related article titled The “So What” Rule)  What investors want to know is the resulting strategic milestones and outcomes the funding allows you to reach that help secure viability (elimination of risks, increased traction, important validated learning, etc), keep you on your path to achieving the stated vision and eventually reaching an exit event that will give the investor a significant return on their investment.  If staying on that path over the next 9 months requires a lead architect, an inside sales rep and some marketing activities, that’s great.  But don’t put the cart before the horse.  Your answers to “so what, why do I care” should become your explanations for why a specific amount of money is the right amount to raise.

By the way, you might have to ask yourself the “so what” question multiple times in succession to get to the real answer.  Here’s an example:

  • “It allows us to hire both a dedicated sales rep and market development rep”
    • answered by “so what, why do I care?”
  • “Because the founders used to do all of the sales and we haven’t even been able to think about launching our next geographic markets for our online marketplace.
    • answered by “so what, why do I care?”
  • “Because during the next 12 months we can land our next 60 paying customers, reach $35K in MRR and activate our next three geographic markets.
    • BINGO! Investors write checks for outcomes, not activities and these are great examples of outcomes that can be achieved with the desired funding.

This is just an example but you’ll rarely get scrutinized if your newly-raised funds will be used to acquire a bunch of customers, open new markets, launch new sources of revenue, secure strategic partnerships, dramatically improve KPIs, and the like. So rather than tell the investor how you are going to spend their money, instead tell them what you’re going to accomplish with it.

This doesn’t mean your planned new headcount and activities aren’t important. We call them the use of proceeds. The investor might ask how it is that you plan to acquire those next 60 paying customers and what your market activation playbook looks like. That’s your chance, and obligation, to dive into the new resources and key activities that will enable you to accomplish the expected outcomes.

The concept is simple. Investors don’t care as much about how you plan to use their money versus what you expect to accomplish with their money in your pursuit of an eventual great exit.  So crack open your business plan to figure out what investors are really going to get for their money and communicate with them in those terms.

Time to Use Your Crystal Ball

Sometimes it’s hard to identify the best way to word the expected accomplishments mentioned before.  If so, it’s time to look into your crystal ball.  Take yourself into the future, at a time when the runway gained from the current round of funding is coming to an end.  At that future time, you’ll possibly be deep into the next round of funding (assuming you’ll either need or want more funding at that time).  Imagine yourself pitching that next round of investors.  How do you see yourself describing the accomplishments of the company?  What do you brag about as justification for why they should invest?  Those are the outcomes I’m referring to in this article.

Cheat Sheet

If you’re struggling to think of some appropriate expected outcomes to include in your plan and message to investors, here are some ideas:

  • Acquiring a meaningful number of new customers (potentially also expressed in terms of gained market share, if it’s an impressive figure)
  • Opening a new market (see related article titled “Expanding Beyond Your Home Market“)
  • Landing a strategic partner that will make a difference (see related article titled “A Secret to Securing a Strategic Partnership“)
  • Anything that offers revenue enhancement (new pricing model, new offering, enhanced offering)
  • Significantly improving key metric (for example, for a SaaS company it might be CAC, CAC payback or churn.  For a consumer mobile app it might be free-to-paid conversion rates.)


The concept is simple.  Investors don’t care as much about how you plan to use their money versus what you expect to accomplish with their money in your pursuit of a profitable exit.  So crack open your business plan (see related article titled “Don’t Waste Time on a Business Plan” Doesn’t Mean Don’t Plan) and figure out what investors are really going to get for their money.

Related Reading:

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