Securing Series A funding is one of the key stages in the capital-raising process by a start-up. It’s the first stage of venture capital financing on a start-up’s journey, with the aim often being to raise more money for product development, team growth, and to attract more investors to future rounds of financing.
It’s also an incredible, yet daunting, experience. When Series A funding is achieved you throw rocket fuel on the growth of the company, and things can change and expand very quickly.
One year on from my first experience of securing Series A funding, I’ve had the chance to reflect on the process: from challenges, learnings, to what I wish I knew before I started.
Here are the six things I believe every start-up should know before embarking on this Series A journey:
#1 – Ensure you can withstand scrutiny
Your product vision will be challenged, and your strategy will be carefully investigated by some very smart people who have done their research. You therefore need to make sure you are pitching your product goals in a way that your potential investors can understand. For a technical founder like me, communicating complicated B2B technology means focusing on the outcomes, not the tech.
However, you should never underestimate the depth that an investor can go into when quizzing you about your approach. It’s likely you will undergo a full technical due diligence. In our case, we had an outside consultant come in and speak to our main technical stakeholders.
It’s therefore key that, when hiring your first team members, you feel confident that they will be able to withstand that kind of scrutiny and deep dive. Ultimately an investor is investing in your people, perhaps even more so than your product, meaning recruitment quality is one of the most important factors in building your early company.
#2 – Get your financial ducks in a row
Investors will not only challenge your product strategy but your budget as well. It’s relatively easy to pitch a vision, or a product, but it’s much harder to generate a financial model for it that can withstand scrutiny.
Many early stage start-ups will also be modelling pre-revenue which is difficult to substantiate. For us, we were already making revenue, which gave us a bit more confidence in our projections. I recommend having someone on your founding team that has the chops to own this and getting professional advice on it early in the process.
#3 – Learn what you want from your investors
Investors all have different preferred outcomes. Some want a successful business that turns a profit within 5-10 years with a medium exit, while others are looking to get into the billion-dollar-club with a unicorn and want you to show them how you’re going to achieve that.
Early in the process, it’s important to create a shortlist of investors that you have some affinity and fit well with. Having a clear view on your requirements and red lines will help to make the process of identifying investors who share your vision and approach more straightforward.
#4 – Be prepared to repeat yourself, a lot
When pitching, you will give the same deck repeatedly, and the message can get less passionate the tenth time you do it. It’s important to keep the fire alive in your presentations, even if it’s repetitive.
Just as if you are pitching to a client, you need that same energy. It’s very easy to learn it by rote and just spout the words. You need to mean it, and you need to convince with your passion as much as your vision.
You will also learn to tweak your Series A pitch slightly depending on the investor audience. We learnt that investors in the UK and EU are, on average, a little more conservative and risk averse than their US counterparts – so we tailored our pitches accordingly.
#5 – Take control of the timelines
If possible, try and set your own timelines and ensure you’re in control of the dates. It’s easy for the process to extend and bloat outwards, and setting definite deadlines is useful for motivating and prioritising your own team, and your investors.
Taking control of this also helps to illuminate to your potential investor how you handle getting things done at speed, and vice versa. This is something you want to learn before you sign a term sheet, not after! Creating urgency can help to speed up the process.
#6 – Learn to let go and trust
One of the biggest challenges when you secure your funding is to let go of control and trust your team. If you’re used to doing everything, being everywhere and knowing everything that’s going on in the company, suddenly having independent teams, new ways of working, new processes and closed-loop communications which you aren’t privy to can be stressful.
If you don’t learn to let go, delegate and encourage ownership in the team, then you risk burning out and, even worse, micro-managing. That in turn can risk churning your new team and undermining your growth effort.
From my personal experience, operating our business as “remote first” forced us to take on this view of “radical responsibility” within the team – we were forced to let go and trust very early on.
However, it’s completely worth it. After securing your investors, you’ll likely be surrounded by plenty of senior, experienced and passionate new voices giving advice and guidance.
Those voices change the whole company and help you grow up. As a founder you learn so much from them, however you need to put yourself into a learning mindset. We can’t be experts at everything, so we need to understand, learn and evaluate the decisions and opinions of others in order to properly manage and grow our companies.
Martin Buhr is CEO and Co-Founder of Tyk