Most investors have a mental framework that lets them judge a startup based on a core group of predictors for risk and success that is called the “Ladder of Proof.” Your job as a founder is to know where you are on the Ladder of Proof, where you need to get next, and how to clearly communicate that.
Here’s how a Ladder of Proof works:
- Each rung represents a predictor of risk or success.
- The further up the ladder a startup climbs, the more signals it’s sending to investors that it’s a sizable opportunity and a worthwhile investment.
- Some rungs — like rapid growth, a great team, or paying customers — are more powerful than others. And hitting on those rungs (marked in red) can level a startup up to a place where a VC is willing to overlook some of the lower rungs (for now).
- Different VC’s will emphasize different rungs. The key is to understand your audience — which VC you’re talking to — in order to determine whether you fit their preferences.
- The rungs listed below are representative, not exhaustive. This is an ever-evolving list