Part 2: The Team. We’ve already broken down VC expectations for founders and CEOs in our article ‘Forget the business plan – how VCs really pick teams to invest in. Part 1: the founder’. So in this article we are tackling the rest! If you plan on achieving scale (and you are on the wrong website if you don’t) you’ll need a kick-ass team to help you build, execute and lead. And the VCs definitely know this. So what are they looking for?
Part 1: The Founder and CEO. When it comes to investing their money, VCs have to weigh up a huge number of competing and sometimes contradictory factors. But as Marc Andreessen, cofounder of Andreessen Horowitz, once said during an interview – ‘the decision ultimately is and should be around people.’
Nine out of ten startups fail, and every start-up that survives will go through its own tricky periods. What separates the failures from the successes is how the founders and their exec team choose to deal with these problem periods.
Applying for venture capital is an exhausting and time-consuming process on which a huge amount of literature has been written. We have a big database of articles breaking down the fundraising process ourselves. But what is it like on the other side of the table, and how do VCs deal with these applications?
Congratulations on finishing your funding round! Raising capital is a huge achievement and can be a mammoth undertaking so it’s worth taking a moment to celebrate. Unfortunately, that was only the beginning. Of businesses that raise a series A, only about half will survive to their series B, and that figure continues to decline throughout each round of funding. So if you plan on being one of those businesses that survives, thrives and continues to scale, now is the time that will really determine your business’s success going forward.
The most important thing for a business approaching series B is steady revenue growth over the last few quarters. The specific growth rate will vary somewhat by industry. For example, Neeraj Agrawal, general partner at Battery Ventures, summarised the ideal YoY growth path for a SaaS scaleup as triple, triple, double, double, double.
The jump to Series A funding from seed funding can be one of the trickiest, catching out many unwary businesses ignorant of the different requirements and interests of the potential investors. You will likely only get one chance to pitch to each investor, so don’t fumble your opportunity by pitching the wrong things. As investor circles are quite small, prospective investors will talk to one another about your business. In this environment, a good or bad pitch can colour future talks with other investors.
Raising capital is a complicated process which can often be quite opaque, so it’s not surprising businesses can face confusion.
We’ve made a handy breakdown of the 5 most frequent misconceptions we’ve discovered while talking to businesses and investors to help you avoid making these mistakes.
As you start to think about raising funding, it can be difficult to know where to start and tempting to fall back on old strategies and pitches. But as your business scales, your approach to funding will have to evolve as well. Each round of funding will come with its own unique challenges, but there are some steps you can take now to ensure that you are ready to meet these head on.
Looking for the latest data on scaleup financing? Check out this rundown of trends, stats, and outlooks to help close your next round.