Hack B2B SaaS Fundraising

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Presentation from "Hacking B2B SaaS Fundraising" event to share my experience fundraising at Simply Measured. Vijay Nagappan from MHS Capital hosted the event at WeWork Labs in San Francisco with SVB …

Presentation from "Hacking B2B SaaS Fundraising" event to share my experience fundraising at Simply Measured. Vijay Nagappan from MHS Capital hosted the event at WeWork Labs in San Francisco with SVB sponsoring. We specifically talked about my experience fundraising and some of the specific best practice for B2B SaaS companies raising venture capital.

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  • K.I.S.S = Keep it simpleFocus on what makes your company special and why it should stand out in their eyesRemember the goal here is to whet their appetite, become top of mind for them, and convince them they should continue the discussionKeep track of major questions as they are likely to come up and you will come off more prepared if you have answers for them
  • Unlike first meetings, these meetings can take various directions based on the areas each firm wants to explore more deeply. Be preparedHave data/some preliminary diligence items that are safe to share ready to dig into if the meeting goes that directionPrior to these meetings, have Q&A ready based on what you think hot button items will be going forward

Transcript

  • 1. Hacking B2BSaaS Fundraising
  • 2. Who We Are Vijay Nagappan @vijaynagappanB2B Investments: 2
  • 3. Who We Are Adam Schoenfeld CEO & co-founder @schoeny @simplymeasured 3
  • 4. DISCLAIMER• This discussion is based on the experience of one company - there are tons of different paths to success in fundraising and plenty has been written about general best practices.• The specifics of our story are most relevant to B2B SaaS companies.• I’m not a professional, but did play one on TV this one time. 4
  • 5. Agenda I. BEFORE YOU COMMIT II. PREPARING TO PITCH III. PLANNING/STAGING THE PROCESS IV. MANAGING THE PROCESS V. PICKING THE RIGHT PARTNER VI. LESSONS/HACKS/THINGS TO AVOID 5
  • 6. Before YouCommit: InternalQuestions toAnswer 6
  • 7. Options and Trade-offs? Small VC - $1-4M Bootstrap Larger VC - $5-10M Alternate Financing 7
  • 8. How We Made Our Decision • Believed* The Business Could Be “Big.” • Believed* The Market Was There. • Founders Willing to Commit. Gas in The Tank and Having Fun • Small Raise Would Not Allow Enough Behavior Change vs. Bootstrapping. * = had data + validation + conviction 8
  • 9. What Are You Optimizing? • Price and Terms • Partner/Team • Firm(s) • Time/Business Distraction • EVERYTHING 9
  • 10. Preparing to Pitch:Take Care of theDetails 10
  • 11. First, Build a Business 11
  • 12. Pick Your “Team” For The Process Who is going to help through the process? What role will they play? • Co-founders? • Seed investors? • Advisors? • Other? 12
  • 13. Create Your Pitch Materials • 1 Paragraph Summary for Intros • Pitch Deck • Diligence Materials 13
  • 14. How We Got There 1. Spun our wheels making a deck and thinking we were ready to pitch -- RESET -- 1. Started with a short, tight narrative. 2. Nailed the narrative before building our deck. 3. Boiled down the narrative to an intro email. 4. Created our pitch deck – same story, but add pretty pictures and steep graphs. 14
  • 15. Our Narrative Simply Measured is Reporting as a Service. Headline/ Background/Highlights: $NNNK in Monthly Recurring Revenue. NNNN Wow Metric Customers. Cash flow break-even. All inbound – never made a cold call. Done it with just $900K in total funding Business users increasingly need data, but have a fundamentally Problem/ different need. Solution Nobody has re-engineered the reporting business process around these needs. Simply Measured solves this problem with “reporting as a service” Turns data to deliverables - your own analyst with a click Traction We started with social media analytics. Validated that this approach works. Leads, Customers, Revenue, and now customers are pulling us into additional marketing use cases. What’s Unique light-weight customer acquisition, unit economics that are ripe to scale. Special? Our plan is to expand our reporting as a service model deeper into marketing and beyond. We’re defining a new category in a $34B market. Vision Raising 8M to grow sales, spend on marketing, build out expand platform and use cases served. 15
  • 16. Our Email Intro Simply Measured is a SaaS company that provides simple, beautiful reporting for business users. Their "reporting as a service" approach makes data analytics accessible for business users - no data science degree or IT involvement required. Since MHS Capital invested 1 year ago, the company has grown MRR by 6x, is now at a $___mm run rate, is break-even/profitable, has ___customers and ________users, all acquired through an inbound marketing model. Simply Measured plans to leverage its growing foothold with companies like Amex, Microsoft, AOL, and Playboy to define a new category around reporting in the $34B Analytics & BI market. Adam is just starting to speak to investors about their next round and wanted to make sure you meet them early in the process. Adam is scheduling a trip to the bay area in the next week or two. Hopefully you will get a chance to meet. 16
  • 17. Nail The Delivery 17
  • 18. Diligence Materials We Prepped • Operating Dashboard with Key SaaS Metrics • Financial Model/Projections • Unit Economics: LTV & CAC Model • Diligence Q&A (Living Document) • Product Roadmap • Customer List • Historical Financial Statements • Customer & Personal References • Past Transaction Documents 18
  • 19. Things We Were Asked for That WeDidn’t Prepare • Segmentation of Churn by Reason & Type • List of Churned Accounts by Price • Cohort Analysis • Customer Job Title Distribution • Usage Data By Product Module/Feature/Report 19
  • 20. Delivering Diligence MaterialsDoesn’t Have to Suck 20
  • 21. Planning/StagingThe Process:Preparation Matters 21
  • 22. Who to Pitch? Funded Similar Cos .Fund Size & Won withCheck Size. . Similar Cos . Stage Focus 22
  • 23. Deals We Looked At • Marketo, Eloqua, Box – SaaS winners with similar business models • Hubspot, Marin Software – similar pricing and go-to- market model • Buddy Media, Hootsuite, Sprinklr – adjacent business, same market • Chartbeat, Flurry, Tableau – similar offering/problem space • Competitors – Exclude Their Investors 23
  • 24. How We Phased Intros & Meetings • Create Theoretical Firm Ratings* • Phase Intros/First Meetings into Groups: • First Group – 30% of total • Second Group – 60% of total • Third Group – 10% of total. Save for later. *Theoretical, because there is a lot you don’t know until you talk to people. Someone you think loves your space may hate it, someone you think is too large may be looking for smaller deals, etc. 24
  • 25. How Many Firms? Our Top of TheFunnel Initial List of ~30 Narrowed to ~20 First Meetings with ~15 25
  • 26. Managing TheProcess: UnderstandGoals at Each Stage 26
  • 27. Timeline First Follow-up Partnership Final Meetings Meetings Meetings Meetings 27
  • 28. First Meetings Goal: Get Them to Want a 2nd Date 28
  • 29. Follow-up Meetings Goal: Get Them To Fall in Love 29
  • 30. Partnership Meetings Goal: Handle Objections, Sell Yourself 30
  • 31. EVEN MOAR MEETINGS?? Goal: Get a Term Sheet or Move On 31
  • 32. Gauging Interest…. • I love it! I’ve been searching for a company like this. • What is your schedule like the rest of the day? • Can I get you scheduled to meet with _____? • What is your timeline for closing a round? • Thank you for coming by, I’d like to talk again. • Good luck. • Is this competitive with [portfolio company]? • Sorry, can you repeat that? I was checking email. 32
  • 33. Timing the Conclusion 33
  • 34. • Use existing investors & advisors to give guidance about timing/demand• Be honest and direct if a firm is falling behind• Give a specific timeline• Lean on your travel/business schedule• Be honest and direct that you are running a full process• Send diligence items in stages• Hold off customer references until there’s a strong signal of commitment 34
  • 35. Picking The RightPartner: RememberWhat’s Important toYou 35
  • 36. Come Back to These Things • Price and Terms • Partner/Team • Firm(s) • Time/Business Distraction • EVERYTHING 36
  • 37. How We Decided 1. Alignment with company & founder personal values, goals, and style 2. Size and relevance of network 3. Specific SaaS Expertise 4. Terms 37
  • 38. Misc Hacks & Lessons:Tips, Reminders andResources 38
  • 39. • Do Screencasts of the pitch to share for feedback.• Hire an Admin. Scheduling is brutal.• Monitor your energy during the process.• When something feels wrong, take a step back.• Use the opportunity to learn + get feedback.• Don’t forgot to negotiate.• Don’t forgot to ask questions of VCs (incl. qualifying)• You always have options.• Have fun with it 39
  • 40. “Crafting the Pitch” • Venture Hacks: http://venturehacks.com/pitching • Bessemer 10 Laws of Cloud / SaaS: http://www.bvp.com/cloud • Sequoia Capital: http://www.sequoiacap.com/us/ideas • Canaan Partners: http://www.slideshare.net/canaanpartners/canaan- entrepreneur-pitchbook-presentation • Tim Young: http://techcrunch.com/2010/11/02/365-days-10-million-3- rounds-2-companies-all-with-5-magic-slides/ • Jon Bischke: http://jonbischke.com/2009/11/13/a-dozen-of-the-best- start-up-pitches-on-the-web/ • SEO Moz: http://www.slideshare.net/randfish/seomoz-pitch-deck-july- 2011 • Business Insider: http://www.businessinsider.com/the-best-startup- pitches-of-all-time-2012-11?op=1 40
  • 41. Understanding the SaaS Business • David Skok: http://www.forentrepreneurs.com/ • Bessemer 10 Laws of Cloud / SaaS: http://www.bvp.com/cloud • Chaotic Flow: http://chaotic-flow.com/ • Jason Lemkin: http://www.saastr.com/ • David Cummings: http://davidcummings.org/ • Bob Warfield: http://smoothspan.wordpress.com/ 41