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CoverStory

Finovate organizers describe the event, which features fi- Baseline requirements
nalists selected from thousands of hopefuls, as part sales
demo, press conference, analyst briefing and tradeshow in Companies in large markets with high-demand product
one. Tens of thousands of attendees watch more than 2,000 and service offerings are attractive to investors, especial-
demos from hundreds of companies, enabling presenters ly those with great teams, Daily noted. But they must be
to reach the greatest number of people in the least amount ready for long days and nights and ideally meet the fol-
of time, organizers stated. lowing baseline requirements:
• Minimum viable product (MVP): MVP, a concept
Travis Dulaney, PayFi founder and CEO, called Finovate introduced by Eric Reis in the bestselling book Lean
a machine for attracting investors. PayFi and strategic Start-up, is a product that enables companies to learn
partners, Linked2Pay and BuckZ Payments Inc., demoed as much as possible about customer behavior with
at New York's 2019 FinovateFall. The three contestants the least amount of effort.
showed different ways to leverage PayFi's AI-based capa- • Paying customers: Paying customers prove that a
bilities, Dulaney recalled. "Today's nuanced, sophisticated
demos help companies that use APIs tell their stories," company can sell a product or service.
he said. "It's no longer a simple proposition of 'here it is • Key performance indicators (KPI): KPI is a quan-
and here's how it works,' but a layered approach involving tifiable measure for evaluating an organization's or
multiple interfaces." individual's success in meeting objectives.
Go-to-market strategy • Annual recurring revenue (ARR): ARR is a sub-
scription economy metric that shows gross billings
Amid fierce competition, tech startups frequently seek in- generated over one year of a subscription-based ser-
vestors with funds, vision and strategy to help them grow vice offering.
and scale. Convincing financiers to take a chance on un- • Average revenue per user (ARPU): ARPU is a mea-
known startups is far from easy, however. David Daily, an- sure of revenue generated by an individual that
gel investor and founder of Cutter, said, "The bar has been companies use to evaluate per-customer revenue
raised over the last few years to receive funding consider- potential.
ation from professional investors. No longer can a simple
business plan or great idea receive funding; there are just • Gross margin (GM): GM is a percentage that indi-
too many start-ups to choose from with traction, custom- cates a company's net sales revenue minus cost of
ers and revenues to prove their viability." goods sold that shows remaining sales revenues af-
ter production costs.
Greg Cohen, operating partner at Lovell Minnick Partners, • Customer acquisition cost (CAC): CAC measures a
agreed fintech companies must demonstrate more than company's costs related to converting a shopper to
basic proficiencies to attract investors. "Requirements vary a buyer. "Having a good CAC model demonstrates
with different types of investors, such as venture capital, market potential," Daily said. "A CAC that is equal to
growth equity or traditional private equity," Cohen said. 12 months of revenue is not very good; three to four
"But in general, it helps for companies to be in segments months is better. I'm currently working on a deal
with a good size addressable market. Ideally, they are with a CAC of one month."
growing businesses with good margins, low attrition and • Customer lifetime value (CLTV): CLTV measures
a scalable go-to-market plan with some sort of track record the revenue value over the expected duration of the
proving the plan." customer and company relationship.

Lane Gordon, managing director, M&A and payments Daily advised those seeking capitol to have a good idea of
strategy at Preston Todd Advisors, suggested companies where your company fits in the market and why you want
evaluate different partnership models based on their chal- investment capital, and be prepared to demonstrate your
lenges and opportunities. An investor that takes on debt solution's potential to grow and create recurring revenue
will manage debt repayments while the company can con- streams. He also noted that not every company needs to
tinue to call its own shots. A minority partner, by defini- work with professional investors; there are other ways to
tion, takes a backseat in the company, with some represen- grow and scale a business.
tation on its board.
"Make sure that as a founder you have domain expertise
"Minority partners may occasionally be outvoted, but they in your chosen market," Daily added. "Be ready and able to
still have a voice in an organization, and their expert guid- eat, sleep and drink your chosen business for at least the
ance can help startups who have been going it alone," Gor- next 10 years, or choose something else."
don said. "When you've been the sole captain of a ship, it
may make sense to hire a few Navy captains." Partnership dynamics

Cohen likened bringing in capital to getting married, with
accountability and transparency holding the key to suc-

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