Scalability: how to sell your startup with data

In today’s competitive startup landscape, demonstrating scalability is crucial to securing investment. To help early-stage founders better understand how to use data to highlight growth potential, Tenity recently hosted a webinar with Iryna Krepchuk, an Investment Associate at one of Estonia’s top VC firms.

This session brought together valuable insights on how data-driven strategies can boost your startup’s appeal to investors. Iryna shared practical guidance on the key metrics investors look for, the importance of product-market fit, and how a well-crafted, data-backed story can build credibility with VCs. By understanding and presenting the right metrics, founders can craft a growth narrative that showcases scalability and instills confidence in potential investors.

Understanding How VCs Assess Risk and Scalability

For venture capitalists (VCs), investing in startups is a high risk and reward. Iryna emphasized that while VCs expect only a tiny fraction of their investments to yield significant returns, they still look for companies with exponential growth potential. This growth potential, or scalability, justifies the risks they take.

When evaluating startups, VCs need to see data that signals a clear path to large-scale success. It’s not just about current performance; it’s about assessing whether your startup can multiply its impact over time. VCs understand that not every startup will succeed, but they’re betting on a few with robust and scalable growth indicators.

Core Takeaway:

To capture VC interest, startups must present data demonstrating a sizeable addressable market and its capability to increase. Investors need to see that your startup has the potential to scale significantly, turning early traction into a long-term success story.

The Power of a Strong, Data-Backed Story

Ina crowded market, capturing an investor’s attention quickly is essential, andthat’s where storytelling comes in. According to Iryna, a compelling story isn’t just about showcasing your vision; it’s about presenting a clear, credible path to growth that resonates with VCs. However, storytelling alone isn’t enough—backing your story with the correct data is what truly makes an impact.

Data gives credibility to your vision, allowing investors to see how your startup can grow and scale. By presenting specific metrics that reflect market demand and your startup’s value, founders can make their stories more persuasive and relatable for investors. Iryna emphasized that a story supported by data shows investors that your projections are rooted in reality, making it easier for them to imagine the growth potential.

Practical Tip:

When crafting your story, integrate data points highlighting the market opportunity and your unique approach. This helps investors quickly understand the value you bring to the market and the scalability of your solution.

Critical Metrics That Showcase Scalability

A robust and data-backed story is only as good as the metrics that support it. Iryna highlighted a few key metrics investors consider when assessing a startup’s scalability. By focusing on these metrics, founders can demonstrate their growth potential and scalability:

• Customer  Acquisition Cost (CAC):CAC reflects how efficiently your startup can acquire new customers. A lower CAC shows that your marketing and sales efforts are practical, helping investors gauge the scalability of your customer acquisition strategy.
• Lifetime Value (LTV) to CAC Ratio: This ratio compares the revenue generated by a customer over their lifetime to the cost of acquiring that customer. A higher LTV-to-CAC ratio signals that customers are loyal and that your business model supports sustainable growth. Investors typically look for a ratio of 3:1 or higher.
• Churn and Retention Rates: Retention rates indicate how well your product satisfies customer needs. Low churn and high retention rates are positive indicators of product-market fit, suggesting that customers find lasting value in your solution. High retention is a strong signal of scalability, indicating a stable, satisfied customer base.
• Engagement Metrics: Metrics like Daily Active Users (DAU) or Net Promoter Score (NPS) reflect how frequently and enthusiastically customers use your product. These engagement metrics offer insights into product stickiness, helping investors understand whether customers are engaged and likely to stay.

By focusing on these critical metrics, founders can make a compelling case for their startup’s scalability and demonstrate that the business is ready for growth.

Achieving and Demonstrating Product-Market Fit

Product-market fit is one of the most vital indicators of a startup’s scalability. For investors, it shows that there’s a proven demand for your solution and that your product effectively meets that demand. Iryna described a two-part approach to evaluating product-market fit, which helps founders assess whether their startup is on the right path for growth.

1. Market Demand: The first component is understanding whether your product has a natural, pressing need. Investors want to see that your target market is actively seeking a solution to a problem—and that your product addresses this demand directly.
2. Product Quality: The second component is evaluating whether your product effectively solves the problem. This includes the core functionality of your solution and the overall user experience, reliability, and efficiency in meeting customer needs.

Early Signs of Product-Market Fit

Iryna pointed out a few early indicators that signal product-market fit:

• Strong Customer Engagement: High engagement metrics suggest users actively find value in your product.
• Short Sales Cycles: A shorter sales cycle shows that customers quickly recognize your product’s value, often a sign of strong demand and clear messaging.
• Low  Churn Rates: Low churn indicates that customers are satisfied and likely to continue using your product, reinforcing the product-market fit.

For startups, achieving and demonstrating product-market fit is a powerful way to validate scalability. These signals reassure investors that your startup has the potential to grow within a receptive market.

Preparing Your Data for Investor Meetings

Preparation is key in any investor meeting. Iryna emphasized that investors expect organized and readily accessible data, which reflects professionalism and a clear understanding of your business. When founders come prepared with relevant metrics, decks, and growth projections, they demonstrate their commitment to transparency and build credibility with potential investors.

To make the most of investor meetings, founders should have core data points at their fingertips. This includes the critical metrics discussed—such as CustomerAcquisition Cost (CAC), Lifetime Value (LTV), and engagement metrics—and any growth projections or supporting charts. Having these materials on hand makes it easier for investors to understand your business and build confidence in your growth potential.

Realistic and Accurate Data Over Perfection

Iryna noted that investors prefer realistic, accurate data over polished but exaggerated projections. Transparency about your current metrics, even if they’re not perfect, establishes trust and shows that you’re committed to data-driven decision-making. Investors recognize that early-stage startups may have areas for improvement, but they value founders who are upfront and transparent about their current performance.

Being prepared with well-organized, truthful data allows investors to see the whole picture, making it easier for them to envision your startup’s potential and scalability.

About Tenity’s Support for Early-Stage Startups

At Tenity, we are committed to accelerating the growth of early-stage startups by providing access to valuable mentorship, industry-leading tools, and a global network of corporate partners and investors. Our programs are designed to equip founders with the skills, insights, and connections needed to scale their businesses and showcase their value to investors.

If you’re ready to elevate your startup’s growth journey, we invite you to explore Tenity’s programs. To dive deeper into the insights from this session, watch the entire webinar, where you’ll find valuable guidance straight from Iryna and our team.