Milestones

While building a startup, leaders must make critical strategic decisions about what to focus on to derisk and add value. One manifestation of this planning work is determining the key milestones that must be accomplished and the resources required to take each step. Because this is so important, it is a key focus for investors who are evaluating startup investment opportunities.

For investors, a milestone chart answers myriad questions about a startup’s progress and plans. It showcases how the startup’s founder/CEO (and executive team, if one exists) has thought about building this budding enterprise. It reveals what the startup’s leaders and existing investors think is important, highlights progress, and gives insight into the next steps. And, since milestone charts are often associated with funding asks, they clarify what the use of proceeds for the funding round is intended to accomplish or, in other words, what the investor is “buying” with their investment.

With that in mind, consider the following when developing your milestone chart to share with investors:

• Base the Chart on a Timeline:  What happened/happens when? An effective milestone chart shows milestones over time. By showing both milestones already achieved in the past as well as milestones planned to be achieved in the future, a milestone chart shows both progress to date and future plans along the arc of a startup’s development.
  
  
• Stay High-Level and Results-Oriented:  Building a project task plan to complete a chunk of work focuses on what needs to be done. This is not the goal of an investor milestone chart. A milestone is not a task. It is a measurable inflection point when a bunch of work is completed, and the results can be externally measured. When working on a milestone chart for investors, the key is to not get too granular or task-focused in defining your milestones. No one wants a milestone chart with a hundred milestones on it. Focus on the big ones that the investor community will recognize as putting your startup in a different stage of development. For example, there is a difference between a pre-revenue startup and a startup with accelerating revenue levels. This is why investors will often define some of the milestones that characterize the types of startups they are looking to invest in on their websites – and looking at investor websites in your industry can give you clues for what milestones might be good to highlight on your milestone chart.
  

• Pick Milestones that Highlight Business Derisking and Value-adding:  Remember that you are speaking to investors, not internally focusing on tasks to be accomplished. Therefore, the milestones you choose to highlight should be major milestones that move the startup valuation needle. Often, such valuation movers have to do with completing significant elements of product development (e.g., alpha prototype, beta prototype, filed patents, beta testing/pilot deployments, phase X clinical trials, second product, etc.), major commercial milestones (first customer, first $100K in revenue, first $1M in revenue, etc.), significant partnerships (development partnerships, distribution partnerships, etc.).
  
  
• Keep it Simple:  When defining what milestone(s) you plan to accomplish with a round, keep it clear and simple. One to three future milestones for each funding round are often plenty. While, of course, there will be many interlocking tasks and some good fortune involved in accomplishing significant milestones, you do not want to over-complicate your objective(s). Launch your first product. Achieve $1M in revenue. Get FDA clearance. Secure 1,000 customers. Hit $100M in revenue. Those are major milestones that provide the north star for the next phase of your startup’s development. Focus on your value-adding goal, not the detailed steps to get there.
  
  
• Show Funding Milestones:  In addition to value-adding milestones, show your funding history and plans on your milestone chart as well (perhaps below or to the side of the timeline?) so that investors can relate funds invested to results achieved. While each investor has the right to customize the stages of startup development to fit their investment thesis, these are not hard and fast rules. Generally, there are some common themes and expectations within industries that reflect seed, Series A, Series B, and Series C funding stages. Because this is industry vertical-specific, get some advice from friendly investors in your space to help identify what investors will likely expect at each stage.
  

Fundamentally, milestone charts convey a lot of helpful information about a startup to investors – and are a great tool when you have been accomplishing great things. Congruence between what is generally expected at each stage and your milestone chart is helpful in competing with other fundraising startups for the interest of potential investors. Showing more accomplishment faster with less investment is impressive, as is highlighting what meaningful progress your startup is ready to accomplish next with just the right infusion of capital, creating an attractive package to excite investors.