The Series A is the first round of startup funding from institutional investors, such as venture capitalists. This is certainly a huge milestone. But getting this funding is not easy. “Series A investors will be looking at your prototype, traction, and management team,” said Sid Sijbrandij, who is the CEO of GitLab.
And even if you get funding, there are lots of risks. “When negotiating, remember that you’re not just setting terms for the Series A but you’re signaling what is acceptable for all future rounds,” said Adam Wilson, who is the CEO of Trifacta.
So then, what are some strategies and approaches to consider? Well, I reached out to entrepreneurs who have been through the process. Here’s what they had to say:
Kraig Swensrud, who is the CEO and Founder of Qualified.com:
You need to check off the Three T’s. (1) Team – We had built the core team, the first 10 employees, that could lead and grow the business to $10M in revenue. (2) Timing – We had built a product, and our first 50 customers tell us that our product presents a real and meaningful opportunity for change in their business right NOW. Therefore, we can see a path to product-market fit within months. (3) TAM – If our grand vision is more or less accurate, and our product delivers on that vision, the Total Addressable Market is huge.
Tim Eades, who is the CEO of vArmour:
I have led three companies through fundraising rounds and the most important lesson I have learned, as basic as it sounds, is to create a fully fleshed out fundraising strategy. You would think that is easy to do, but you’d be surprised how many people don’t have a well-thought-out plan. Start with building out a timeline of around five to six months and identify the key metrics you want to achieve each month. Then you need to identify your top targets. I usually go with around five VCs, but make sure you do your homework! It’s not enough for a VC to have a big name—they need to understand your market, aren’t currently investing in a competitor of yours, and have a proven track record of helping companies grow and scale to market. Finally, don’t be afraid to own the process. VCs want to see you take initiative, so be proactive and meet with them every six weeks to show your progress as well as talk through what your next steps are.
Chris Nicholson, who is the founder and CEO of Skymind:
VCs are looking for traction in the form of users or revenue, and the best way to help them understand all that—the problem, the product, the team—is in the form of a story, which you tell in a slide deck. The best slide deck I saw was from Front founder Mathilde Collin. I structured ours like hers.
Tomer Tagrin, who is the CEO and Cofounder of Yotpo:
Tactically, it’s good practice to bring someone with you to meetings to take notes. Then do a debrief on what worked and what didn’t to improve for the next meeting. You might also discover something new to incorporate into your pitch.
Jake Stein, who is the SVP of Stitch, Talend:
For Series A, for example, you’re partially selling investors on the dream of what could come in the future and partially providing evidence that you’ve made tangible progress with your product, service, and users to back you up. For any company, it’s useful to be rigorous about where you are now, where you need to go, and when you will switch phases.
Martin Hitch, who is the Chief Business Officer and co-founder at Bossa Nova:
The most important advice for raising a Series A is to make sure it’s the number one project for the funding lead (usually the CEO). While CEOs often juggle a number of responsibilities, they need to carve out dedicated time to prioritize fundraising.
Ross Schibler, who is the CEO and co-founder of Opsani:
I have founded three companies over the past 25 years in Silicon Valley—two with successful exits, and my current company, Opsani has just closed a $10M round from Redpoint, Zetta, and Bain. One piece of advice I would pass on to fellow entrepreneurs is to consider the quality of the partner making the investment because that will greatly affect the quality of the outcome. I would go so far as to say that a dollar from one investor might be worth 2x the same dollar from a higher quality investor. Folks tend to get hung up on valuations and percentages when what they should be focused on is the question: “Do I want to work with this partner and will they help me build a great company?”
Bipul Sinha, who is the Co-Founder & CEO at Rubrik and a Venture Partner at Lightspeed Venture Partners:
When I was in VC, I had a strong thesis about risk capital that when someone gives you VC funding, the purpose is for you to take risks and create high growth, especially in the early days of a company. Entrepreneurs often get bad advice around risk and become more conservative than what the situation demands—a startup taking capital should by nature be taking risks, so if the idea works, you can create a massive company.
Adam Karp, who is the CEO of Livley:
When pitching an investor, the most important thing is to know what impact your business is going to make in the lives of your customers. Yes, the fundamentals of your business must be solid. Your product needs to work. But until you can truly put yourself in the shoes of your customer, and understand what they lose by not having your solution, you’re not finished. For Lively, we share stories of our earliest customers. A man who, after he became a customer, sat on his porch and heard the birds sing for the first time in years. A mom who had given up on phone calls, and was finally able to hear her kids again once she tried our bluetooth-enabled device. These stories help explain why Lively’s hearing aids are more than just another gadget, and they help investors see why our customers are so wildly passionate about the service that they get from us. Don’t enter a pitch without knowing why exactly your customers love you.