Wither vanity metrics

Start-up investors are becoming even more demanding for all the right reasons

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Fund managers have been tightening their purse strings over the last couple of years, investing in only those ventures they felt would be able to turn profitable sooner rather than later. But they are becoming even more demanding on targets and timelines, as a report in this newspaper showed on Wednesday.

Investors are not just willing to go by a promoter's estimate of revenue potential; they want to be convinced the brand is a good fit for the market and that customers will be sticky. They are also poring over spreadsheets to make sure the financial forecasts aren't flaky. A consumer tech startup needs to have ₹16-20 crore in annual revenues to be able to raise Series A money; two years ago, it could have done so with half the revenues. Vanity metrics like gross merchandise value are out the window.

So, unless a promoter can prove he has a sound business model and can deliver the numbers, he's unlikely to get a cheque.