How to scale from Series A to B – and 3 mistakes to avoid

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Scale Expert and experienced CRO, Peter Crosby, shares his insights on the common mistakes made by companies scaling from Series A to B and how to avoid these.

Scalewise aims to give you access to expertise from people who have been through the same scaling challenges you’re facing right now. This is the second article of the series where Scalewise’s Coaches talk about what works and what doesn’t when scaling between Series A and B.

I’m Pete Crosby and I’m a Scalewise coach. I’m a four-times revenue leader – with plenty of experience accelerating SaaS businesses between Series A and  B. In this article, I’m going to talk about three mistakes you need to avoid if you’re at this stage of your cycle. I’ll also give you three actionable pieces of advice to boost your chances for success. 

Mistake 1 – Thinking you have a sales issue when you don’t

You’ve raised Series A and you’ve probably given some quite aggressive growth projections to your investors. Then, inevitably, things slow down a bit and you find it hard to get to the next phase of traction. Most founders I see think they’ve got a problem with sales, so they redo their playbook, or even fire their sales leader.

Now, it may be a sales problem, but much of the time, there is something strategic underlying it – product-market fit, differentiation, or category design for example – that isn’t quite working. 

Sales are an outcome, not an input. Identify the deeper issue behind your problem before you start looking at sales. 

I think this is the most common mistake companies make between Series A and B. Avoid it if you can.

Mistake 2 – Not knowing where you are in the business cycle 

If your post-Series A journey is about proving predictability, after Series B is about taking that predictability and transforming it into scalability. For example, if you add two more people to your sales development team, do your results rise in line? 

Often, I see leaders overestimate where they are on the path to scalability and fail to understand where they are on the cycle. This can lead to many different pitfalls. For example, I talked in the last section about fixing the wrong problems when things go wrong. 

Another common mistake is hiring salespeople before you have sufficient demand, so you have expensive salespeople kicking their heels performing the role of an SDR, before they get annoyed and leave, which brings down morale.

Be realistic about where you are on the cycle. Follow the ‘build, learn, measure’ hypothesis from the Lean Startup and make changes in small increments. 

Mistake 3: Not articulating your value proposition correctly

Selling in most startups is about demonstrating a paradigm shift – either something entirely brand new, a new twist on something that’s been done before, or taking something that’s been done before into a new market. Because in general, people are allergic to change, we have to link our unique idea to a real and visceral pain or problem that our target customer is facing. 

Startups need to present their prospects with a new way of seeing the world, one in which, if they don’t get on board; they’ll be left behind. However, so many startups I see pitch the features and benefits of their product like it’s still the 1970s. 

Startups and scaleups need to show their prospects that they are here to challenge a status quo that is no longer tenable. Identify the pain point (it could be a pain your prospect doesn’t know they have yet), and articulate it properly in order to compel them to take action.

Next, here are my three pieces of tactical advice for companies moving from Series A to Series B.

Tip 1 – Define your ICP with more detailed attributes

We all know about the importance of a detailed ideal customer profile (ICP). But too many businesses create ICPs around only the most basic criteria such as job title or number of employees, when they have to go much further and deeper to identify the customers they need.

For example, Kelly and Rich are both CIOs of similarly sized companies, but while Kelly is always up for new ideas and believes being first to a new product can give you a competitive edge, Rich is more of a laggard and is slower to buy. You want your ICP to be more like Kelly and less like Rich, and it’s important to find indicators that demonstrate this.

For example, when I was CRO at an e-commerce solution, we put in our ICP that we wanted to target people who used the newer Shopify platform, rather than the older, more traditional Magento platform. We figured that if a prospect was using Shopify, they were likely to be more open-minded to new tech giving them a higher propensity to buy our solution.

You can find out pretty quickly whether you are on the right track with these assumptions. Follow ‘build, learn, measure’ and don’t be afraid to change your mind if you need to.

Tip 2 – The five-point value prop matrix

Based on the work of Andy Raskin, I put together a five-point matrix for articulating your value proposition in the context of a paradigm shift. This is about identifying a big change in the world, and helping your prospects to see that change for the earth-moving event that it is. When you’re talking to potential customers, start at the top and work your way through:

  • What is the big change in the world? 
  • Inside the big change, who is going to win and who will lose?
  • What is the common thread that joins the winners? What do the winners understand that the losers do not?
  • What do you need to do to win in this new world?
  • What is the evidence that you can make this new world work for them?

The thing to notice here is that at no point are you pitching your product to your prospect. There are no features and benefits. You’re explaining what the world looks like and setting out a framework.

If you do it well, your customer will agree with your framework, identify the pain and vow that they want to be a winner rather than a loser. That’s when you can move to something more like a pitch.

Tip 3 – Measure on the right metrics

I talked earlier about how moving from Series A to Series B is about adding scalability to predictability. Here are three metrics that Series B investors look for to prove scalability (and you need to know):

  • CAC to LTV ratio – The sweet spot is between 3 and 5. If it’s lower than three, you’re either spending too much or not selling enough. If it’s higher, you’re probably not investing enough.
  • Sales Velocity – This equation lets you see the value you are generating daily, weekly and monthly. It can show you where the problems are, which you can jump in and fix.
  • The Magic Number – This helps to measure your sales efficiency. The Magic Number measures the output of a year’s worth of revenue growth for every dollar spent on sales and marketing. 

There are hundreds of different metrics you could monitor, but you’ll just end up getting lost and no one will pay attention. Focus on the ones that matter most to you.

Find out more from Scalewise

I hope you found value in my three mistakes to avoid and three tips for Series B success. To find out more about Scalewise and read the other articles in this series, visit www.scalewise.com today.

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