Why good companies struggle to raise even when they have revenue, customers, and a credible story

Hey everyone, this is Ryan Bryden from Breakout Capital Group.

I want to spend some time today running through the dilemma of why “good” companies can still struggle with raising capital.

I had a call this week with a founder who's done just about everything “right” on paper.

• Two years of revenue growth.

• A product customers actually use without hand-holding.

• A team that's stuck around through the hard stretches.

He walked out of three investor meetings in a row hearing some version of "great business, just not for us right now."

We talked after this and he had the same question for me - “what am I missing?”

He's built a good business. Investors keep passing.

But unfortunately both of those can be true at once.

Two Different Tests

Founders walk into a room trying to pass one test: prove the company is real.

The product works. Customers pay. Revenue is growing. The team is credible. That's the legitimacy test, and most founders we work with at Breakout pass it easily.

Investors are running a second test entirely.

How big can this get.

How fast. How much more capital does it need to get there. Who buys it, or funds the next round, when it's time. Can this specific check produce the return their fund requires.

A company can pass the first test and fail the second. That gap is something we see a lot of when our clients speak to investors (mainly in venture).

Revenue Proves Demand. Not Scale.

This is probably where we spend most of our time on deals we're live on right now.

A dollar of revenue isn't a dollar of revenue to an investor. They want to know how it got made.

• Did the founder personally close every account?

• Is each contract custom?

• Does the next customer come easier or harder than the last one?

$1M of founder-led, heavily customized revenue can be a weaker signal than $300K generated through a process someone besides the founder can run.

The engine that produces the revenue and traction matters just as much as the output of it.

For you to become something that is backed by investor capital, they need to see what the future of that machine i capable of producing, and the certainty of it getting there.

For those of you that are struggling with this objection in pitch meetings, there are three honest diagnoses, and each calls for a different fix:

• The story is incomplete - the business is investable, but the scale, the growth engine, and the return path aren't landing in the room.

• The evidence is thin - the opportunity is real, but retention, repeatability, or margin data isn't there yet.

• The capital is mismatched - the company is good and will stay good, it just isn't a venture outcome, and it's talking to venture investors.

Closing

Before the next investor meeting, we tell founders to answer five things:

• What proves your growth is repeatable without you personally in every deal.

• How big this realistically gets, and why.

• What milestone this specific round finances.

• How an investor gets paid back from today's valuation.

• And whether the investors in the room actually have a mandate that fits what you're building.

The evidence you build for your company needs to have information on what THEY are getting by investing in you.

I’ve been hearing a lot on calls about why good, healthy, businesses were struggling with their rounds.

Hope this sheds some light on what we’re seeing.

Thanks for reading.

Ryan Bryden 
Breakout Capital Group

If you're raising $2-100M of debt or equity in the next 6 months and want guaranteed access to investors who can fill your round, check out our Capital Advisory Offer & drop me a reply.

If you have a customer LTV > $50k and want to unlock 6-7 figures of sales pipeline from a new acquisition channel, check out our Revenue Advisory Offer & drop me a reply.