Startup Funding Espresso -- Rating Your Deal Flow

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Deal flow is the lifeblood of the startup investor.

It’s important to assess the deals in short order to prioritize follow-up.

One way to help this process is to apply a rating to each deal.

Here are some key factors and how to calculate them to use in your rating:

Revenue run rate - take your current monthly revenue and multiply by 12 to annualize it.

Gross Margin - take your Cost of Goods Sold, divide by the revenue, and subtract 1. 

Burn Rate - monthly cash expenses minus monthly revenue.

Cohort Analysis - take the number of users who join the program and track the outcome of each. 

Cost of customer acquisition - monthly sales and marketing expenses divided by revenue from the customers signing up that month.

Payback - number of months of recurring revenue to cover the cost of customer acquisition.

Magic Number - revenue over two months multiplied by four and divided by sales and marketing costs over the same timeframe.

Sales Cycle - average number of days from first contact to customer signing up.

Lifetime Value - the total amount of revenue generated from a customer.

Total Available Market - the total amount of money spent in a target market.

Give each factor a score, say 1 to 10 with 10 being the best.  

Add up the factors to give the deal a score on a scale of 1 to 100.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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