The little company had added two new products. One was profitable and selling well, the other died. Old product sales have scaled up but so have costs.
One day, Mike J., the angel investor, called. “How are things? We hadn’t talked for a while. How’s progress? We can get into a deeper discussion if there’s progress.”
Mike J hoped that Jim had the numbers in his head that would make investing attractive.
Jim reacts excitedly. He tells Mike J. about the new products, the sales spike, and new promotional campaigns. Existing dollar volumes for the older product were also climbing.
Mike J. asks “Sounds like you’ve made some great strides. What about the path to profit?”
Jim said, “We’re going to have a much bigger business in 6 months!” Mike J. thought “And bigger losses too.”
He said, “I’ve heard your story, but you haven’t touched on how you’re going to become profitable. Consider tracking customer acquisition costs. I believe that it will drive your path to profit. Call me when think you’ve got a handle on it.
Mike J. thought “What does he want the money for? To keep burning cash?”
Mike J.’s Decision — Don’t Invest (Mike still has a number in his head – and Jim doesn’t have it.)
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