Three ways a vCIO can increase startup valuation

Each new company faces specific challenges as it gets off the ground, but almost all of those challenges can be either mitigated or exacerbated by the startup’s use or misuse of its technology portfolio. To implement a plan for innovation, you must pin down your own digital transformation definition that aligns the company’s purpose with your IT goals.

A few of the goals most startups strive for include:

     - Selling the company for as much money as possible, as soon as possible

     - Becoming the dominant player in a given market and maintaining that leadership long-term

     - Solving a social, political, economic, or educational problem

Depending on how fast the given industry is changing, each startup’s goals will develop and occasionally pivot drastically over time, requiring ongoing tweaking and course correction of the company’s technology initiatives. Startups typically come right out of the gate with more openness to new, more technology-based ways of working, which is why 55% of startups have adopted a digital business strategy, compared to 38% of traditional companies.

Improving Startup Valuation

What unites almost all startups is the desire to maximize company valuation - how much investors think the company is worth. As startups don't have the long track record of established companies, their valuation is typically based on potential value more than current value.

Digital transformation and definition of technology roadmaps can help indicate potential and enable scalability in a few key ways. But what exactly is it?

Your Digital Transformation Definition

As with so many buzzwords in the tech field, it’s easy to go on and on about digital transformation as the next big thing without giving more than a vague impression of what it means. Remember when everyone was finding annoying ways to insert the word “synergy” into every webinar? But a digital transformation definition is not really that complicated: In its simplest terms, it just means using technology to advance business goals, whether through optimizing internal operations, aggregating and analyzing data that directly relates to customer engagement, or discovering new growth opportunities.

These benefits can improve the status and perception of your company’s valuation among investors. But whereas larger corporations might have the resources and personnel to retrain their existing IT personnel to adapt to market changes and implement a comprehensive digital transformation initiative, startups often struggle to implement effective IT processes and technologies.

This can be due to either lack of qualified personnel, infrastructure-related budget, or technical expertise, which is where an experienced vCIO can offer a great deal of value. Rather than figuring out as you go along or training yourself and your staff in IT best practices, outsourcing IT to a vCIO can help your startup not only keep the lights on (or servers) but also open up new opportunities for innovation.

Table of Contents

1. Aligning IT With Business Goals

2. Storytelling With Data

3. Hitting Benchmarks

Aligning IT with Business Goals

Aligning IT With Business Goals

Business needs must dictate initiatives for digital transformation

Your IT strategy needs to be aligned with your business strategy, and not the other way around. This is where digital transformation initiatives usually fail, as they become about patching a whole host of problems without looking at the big picture.

So rather than building out processes and a technology portfolio that is designed to move the company forward, often each department is pursuing separate IT initiatives that are siloed off and invisible to the rest of the company.

Build from the ground up

A lot of things are difficult about starting a new company, but one big advantage startups have is that they can build their technology structure from scratch, without the baggage of legacy systems and ways of working.

An effective vCIO doesn’t start the conversation with technology, but rather with business. They will find out what your company is about, where your company is in terms of technology, and where you would like to go in the future. Only then can they get started on a digital transformation strategy that can increase the health of your organization and therefore your market valuation.

Storytelling with Data

Storytelling With Data

Data doesn't tell the story on its own. A vCIO can help tell your story with data.

vCIOs can help provide a digital transformation definition that aligns with the data that matters most to startups seeking a high valuation. With their help in aggregating company data, business leadership can view the company holistically and get a clear picture of the status quo. Financial metrics like revenue, cash flow, burn rate, growth rates, LTV, CAC, etc. are all vital intelligence that can dictate where the company has potential and need for growth or course correction.

But data doesn't speak for itself, and you don’t want to hand it over to potential investors without some context. You have to use the data to support the story you're trying to tell about your startup. This is especially true for startups so early in the process that they don't yet have substantial financial backing or any revenue to speak of.

It’s not just about the financials

Financial data is by no means the only valuable data, especially in an increasingly tech-dominated world. In some industries, increased website traffic may be a better indicator of company viability than the organization’s financial metrics.

Just look at the early days of practically every social media platform. Or any software offering that started with a free version to build a large customer base, then offered additional capabilities and improved scaling for power users in a Business or Enterprise version.

Even if you don't have a huge customer base, if the customers you have tend to stick around, that low churn rate could inspire confidence in potential investors that they can help you expand at a fairly predictable rate.

Sometimes you need a hand

A VCIO or consultant can help you implement a technology structure and IT best practices that not only keep your business afloat but can help you move forward at a faster pace. Then you can craft a story and set up infrastructure to capture the metrics that matter to your specific situation and goals. With the right data in your arsenal, you can show investors what you’re about with hard evidence to back up every point.

Hitting Benchmarks

Hitting milestones matters

While large, established corporations can get by a few months of stagnation, startups have to show aggressive growth. With each round of funding, it's important to get a higher valuation than the last round, and this has to be factored into the strategy for digital transformation. Definition and execution of key milestones is the best way to increase the perceived value of your company, as investors can predict a trajectory for your business that can be translated into dollars and cents.

Again, these milestones don’t necessarily have to have a direct financial impact. They can be upgrades to your existing products, additions to your product or service portfolio, more customers or improvements in customer retention, hiring a new dev or sales team, or even reaching your break-even point between spending and revenue.

Know your ideal investors

Not every firm is the right partner for your business, and trying to make your startup look attractive to everyone will result in losing sight of the reasons you started the company in the first place. So know your ideal investors, then set milestones that matter to them.

A Vision For the Future

While most startups have common concerns around cost, lack of personnel, and expertise limitations, each has a distinct set of business goals that require specific technology initiatives and a digital transformation definition that is different from other companies. When looking for an experienced vCIO to help your company move forward, ensure they’re not simply filling the role of an IT department, but are instead a business partner who can help you strategize your company’s future.

At Vudu, we are technology wizards who want to bring IT magic to your business and achieve supernatural results. Are you considering working with a vCIO? Tell us more about your goals. 

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