The Paradox of Consulting Revenue

Predicting Future Business

The problem with consulting revenue, from a potential investor’s standpoint, is that it doesn’t necessarily tell us much about the business that the founder is trying to create, even if the consulting work is in the same space. Consider the following example:

  • The founder is knowledgeable about the space
  • The founder is able to sell (very important for potential investors!)
  • There is a market for content marketing consulting
  • Is she spending enough time on the core business?
  • Is she going to get “addicted” to the consulting revenue?

How to Frame Consulting Revenue

This is not to say that our founder should hide her consulting revenue (or not pursue it in the first place), but within the context of a fundraising pitch it’s essential that the revenue be framed correctly. Specifically, consulting revenue should be presented as a means to an end and it should never be misrepresented as product revenue.

Be Proud But Honest

All other things equal, a startup that has any revenue (even consulting revenue) is in a stronger position to fundraise than one that does not, if only for the insights it provides about the founder’s knowledge of the space and their ability to sell. However, it’s essential that non-product revenue be presented to potential investors for what it is and you must be prepared to answer questions about how/when/if you will transition away from consulting revenue, when you expect to begin making product revenue, etc.

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Chris Neumann

Chris Neumann

35 Followers

Helping founders around the world @ Commonwealth Ventures. Former Venture Partner @ 500 Startups, CEO and Founder @ DataHero, and Employee #1 @ Aster Data. 🇨🇦