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Getting to Series B

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by Jeb Katz, Javelin Venture Partners. Provides tips for A-Round funded startups to prepare for and successfully achieve Series B funding.

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Getting to Series B

  1. 1. Getting to Series B A Framework To Help Set Your Company Up For Success Jed Katz
  2. 2. Premise • You’ve just raised Series A – Congrats! • You have 18-24 months of cash • You have major holes in your team and you haven’t really established a culture yet • You have barely started to show product/market fit, much less prepare to scale • A board has been set up, but hasn’t met yet • There is a loud ticking sound • You may not know it, but your Series B fundraising effort has just begun
  3. 3. First and Foremost ENJOY THE MOMENT!!! OK, moment’s over. Time to think about the Series B.
  4. 4. The Odds Are Against You • Far more companies raise Series A than are able to raise Series B • The “Crunch” used to be Series A – now Series B • Investors want removal of risk and proof of scalability • They want to see you can recruit well, build well, and sell well • Your job is to make the decision easy for them before you run out of cash
  5. 5. Start With 12 Month Goals • How long can you make your cash last? • What is your brand, your “True North”? • How do you want your board to operate? • Who do you need to recruit, what’s the culture you want to promote? • Create an initial roadmap for both product development and revenue creation • What metrics will be most important? • How can you show the likelihood of explosive growth? • What additional strategic value can you demonstrate? • How can you diminish key risk concerns?
  6. 6. Making Cash Last • Find ways to save money – Offer employees extra equity for less cash – Use equity to pay for things like rent if possible – Be frugal! • Find ways to bring in cash faster – Can some customers pay up front for a discount? • Consider Venture Debt, but don’t plan on taking it! – Try to get 12-18 month window to draw down debt – Only take if you can service it and the extra runway is essential
  7. 7. A Few Best Board Practices • How do you want your board to operate? – Create a collaborative board culture – Figure out the value each member can deliver • Antagonize them until they deliver it! – Help everyone bond with each other – Always talk about Series B • How to get there, which funds they think should be following the company, important metrics, etc • What metrics are you NOT tracking well on? – Discover how to access their big brains – Avoid drama!
  8. 8. Recruiting and Culture • Recruiting – Hiring well early is absolutely crucial – Don’t settle! – Create a presentation for new recruits – Have them interview you too – Imagine each exec pitching to Series B investors • Culture – Create a culture of speed, results, winning • “Speed of Learning” is essential – Be totally transparent with your team – Demand feedback, listen carefully
  9. 9. Engineering & Sales Roadmaps • Engineering AND Sales – You need roadmaps for both • A very common error is only doing one – Iterate quickly and often – Remove friction – Create a realistic timeline and hiring plan • Being over optimistic hurts a lot • Assume it will take 6-12 months to find your top execs – Did I mention the importance of scalability?
  10. 10. Metrics Are Important • Metrics – What are the KPIs to attract the next investor? • CAC to LTV? Length of sales cycle? Churn? • Land & expand? Downloads? Virality? – How do you compare to the competition? • Get to know them - study where you excel and fall short • Never assume they’re dumb or slow – Can you prove the size of the opportunity? – Have you figured out “The Machine”?
  11. 11. Lowering Risk • Ways to avoid investors getting scared off – Have you shown you can recruit well and has your team stuck together? – Do you have referenceablecustomers? – Is your churn low? – Is your growth rate increasing or decreasing? – Any glaring red flags (law suits, loss of key people, falling behind development schedule, etc)? – Are your current investors ready to invest more?
  12. 12. Other Key Things To Avoid • Believing your own hype – Echo Chambers – Too much optimism or pessimism – be realistic • Wasting money • Bad hires • Lack of focus • Spending time with investors who will never get to yes!!!
  13. 13. Choosing Which Funds To Engage • Fund Size And Investment Amount Must Match • Review their portfolio for relevancy and competitors • You Can Identify Your Champion • The Board Member Would Actually Be Helpful! – Relevant Expertise in your space – Not just as an advisor, but more as a constant brainstorm partner – A cultural fit • They Will Truly Support You • You’ll Be Meaningful To Their Fund
  14. 14. There are active investors who help a ton, passive investors who never show up, and distracting investors who waste your time. Choose wisely.
  15. 15. Some Final Words Of Wisdom Get in – and stay in - the Series B mindset
  16. 16. Some Final Words Of Wisdom • Don’t wait until you have 3 months of cash left to focus on Series B. Do it from the start, from the employees to the board. Not running out of money should be your new religion. • Create a brand investors can believe in and a culture they want to join • Prove potential for explosive growth, creation of strategic value • Lower or eliminate risks where you can • Form relationships early and keep them updated with your progress – The best companies raise their Series B relatively quickly after than Series A
  17. 17. Questions? Jed Katz jed@javelinvp.com @jedkatz

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