Series B investors want to see a management team that is successfully navigating their way through the chaos of a company experiencing fast growth. A simple plan with company-wide buy-in will help you demonstrate this.
Wrestling the complexities of a scaling business can be challenging due to a lack of focus - too many initiatives, too wide a market, too expansive an offering - which can lead to a lack of cohesion and togetherness in your management team. That’s why you should draw up a simple plan with key objectives that all departments in your organisation can buy into.
When everyone in the company knows precisely what they’re aiming at – and whether their activities are helping you get there – it’s easier to achieve the scale you need. Boiling down your plan to something simple can be difficult, but it’s worth it. There are many approaches, but the One Page Strategic Plan from Verne Harnish’s "Scaling Up is a good start.
At Series A, it’s far too easy to find metrics that paint a rosy picture due to the lack of firm data to lean on, but when you’re aiming for Series B, consistent reporting of results is vital for building trust. Series B investors want to see that you have identified the right metrics and can measure, report and act on them relentlessly. You need to be able to back up future growth assumptions with evidence of past results or early indicators of success rather than founder optimism.
This is where revenue operations (RevOps or BizOps) come in. RevOps is the part of your business responsible for the sales and marketing stack, reporting, analytics and attribution. Critically, RevOps should span both marketing and sales, so it can then be the source of truth that ends the arguments over ‘who has the more accurate number’ when conducting funnel analysis. RevOps should also track results against your plan, while your Sales and Marketing leaders provide context, diagnosis and plans to improve. That separation of duties keeps everyone honest and delivers what the business needs: data on what is happening and a plan for improvement.
Ensure you and your team know what is normal for an organisation at your stage of the cycle, including benchmark metrics, the full range of funding options and common struggles. Although every company is different, there are commonalities between all businesses scaling from Series A to B and reassuring your team that others have faced similar challenges and made it through can be like gold dust.
For example, at Idio.ai we had enough good signals – huge clients, large expansion, a well-differentiated product – for our existing backers to keep funding us, but not enough repeatability and robustness to entice the type of Series B term-sheet we felt our business deserved. Fortunately, we had an experienced chairman and board who knew the variety of approaches to funding the business – including venture debt, convertible notes, bridge rounds and good old-fashioned 3-year client contracts paid upfront - to help us prior to our acquisition.
Many founders believe that every successful company follows 2T3D and that they should too. If you don’t know what I’m talking about, it’s the view that you should aim to triple two years in a row, then double three years in a row.
It’s a great aim, but not every company can follow the 2T3D curve. Unless you are incredibly well-capitalised and have a pretty bullet-proof belief in your product-market fit, you shouldn’t try to force it at all costs. Too many companies force 2T3D expectations into a context that cannot support it due to product, team or market immaturity. It might take you longer and , you might need to learn lessons along the way, but remember that capital conservation whilst you are learning and experimenting is rarely a bad strategy.
Another mistake I often see from companies approaching Series B is that their company is ‘different’, so the standard rules don’t apply to them. Don’t get me wrong: every company is different. However, it’s unlikely your company is different enough to avoid the benchmarks your investors will use as they assess you.
At Series A, investors place more of a focus on the founders and early market proof of a product that people want. But for Series B, it is much more about a scalable model with consistent reporting of results. If you have fundamental assumptions in your model on staff retention, quota attainment, cost per lead, client churn or another metric that are way beyond industry benchmarks, you better have a good, data-backed reason for that belief. If you don’t, then what you have is a model that is (soon to be) broken.
There is no universal journey from Series A to B, but as mentioned in Mistake 1, I often see companies expecting to move faster than their current trajectory. At Series A, I believe the job is mostly ‘survive long enough to succeed’. You have raised some decent capital, but probably still have a bunch of assumptions that are very wrong. Your mission is to survive long enough to work out which assumptions are right so you can build your company on those fundamentals. It’s not sexy and it might not be the route to the archetype of a unicorn, but it works.
For example, think about the recent headline-grabbing growth story from UIPath. Sure, while they grew from 50 staff in 2015 to 3000 last year, they were actually founded back in 2005! Or, as Jason Lemkin put it: ‘while $0-1m ARR is Impossible, and getting from $1m to $10m ARR is Unlikely… getting from $10m to $100m ARR is Inevitable.’ Series A is the phase of moving from Impossible to Unlikely. Series B is the phase of shifting gears from Unlikely to Inevitable.
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