They were raising $2 million at a $9 million post-money SAFE. This startup had some awesome growth, but I passed. Here’s why…
“CEOCoach” is a service that provides a coach for top executives. ”CEOCoach” is a composite, not a real startup, and the name is made up. But it shows why even some companies with great growth have a hard time raising money.
The Good
“CEOCoach” is a pretty cool service! They match top executives with their own personal coach, who helps them improve their leadership and decision making.
When I met with the founder, “Mike,” I could tell how deeply he cared about this problem. Mike’s eyes lit up when he talked about how “CEOCoach” was helping execs get more out of their teams and grow their businesses.
“CEOCoach” itself was growing really fast too! Over the last year, they had grown 19% month over month, an incredible record.
The Bad
Not many companies grow as fast as “CEOCoach.” But I questioned whether they could maintain that growth.
Churn was high at 5% of revenue a month. That means after a year, you lose 46% of your revenue.
You’re basically rebuilding the company from scratch every 2 years. It’s hard to grow to $100M ARR when you can’t hold on to customers.
“CEOCoach’s” retention sat at 54%. I’d like to see a minimum of 60% yearly for a company like this, and I’d prefer 80%.
“CEOCoach” had what we call “the leaky bucket problem.” It could get customers to sign up, but it couldn’t keep them.
This tells me the customers aren’t getting enough value from the service. And that’s a problem.
Decision Time
“CEOCoach” had some incredible growth. I really liked the founder, Mike, and wanted to support him.
But I couldn’t get past the high churn. I had serious doubts that this business could keep growing given their difficulty holding on to customers.
I passed.
Wrap-Up
I actually really like “CEOCoach,” and I might be very interested in investing in it in the future. If they can get that churn down, it could be a fantastic business.
Like every startup I meet with, I saw “CEOCoach” at a moment in time. Today their churn is high, but that could be totally different tomorrow.
Startups are always raising money. The odds are good I’ll have another shot at this one, and if I do, I just might take it!
Would you have invested in “CEOCoach”?
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More on tech:
My Ten Year Angel Investing Plan
Why I Passed: “ProductPreview”
Why Angels Struggle to Keep Their Checks Small
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