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The days when a startup could sell investors on a dream and no revenue are coming to a close, says angel investor Chris Dixon.
Now, if you’re a consumer startup (ad based/no clear business model) and you don’t have at least 10 million users, you’re going to have trouble raising a Series A, he says.Dixon says there is too much competition in the consumer space. Investors have already funded a lot of startups and there are only so many products people use. In addition, companies like Instagram have shown good startups can scale incredibly fast. They’ve set the bar higher for everyone else.
Transaction-based startups, like e-commerce companies, can afford to have fewer users and still get funded, says Dixon. Revenue becomes the more important figure.
His advice to founders: “If you are thinking of starting a non-transactional consumer startup, be aware that you are entering what is perhaps the most competitive sector in tech in the last decade.” And if a VC does offer you money, take it.