Actors talk about putting on a face, but a scaling founder needs two: the internal face, which focuses on getting the basics of people, process and product done well, and the external face, which pulls all those results together and sells a convincing story.
“The way I see our role is helping to make sure our companies run a super tight fundraising process and making sure that they raise the next round. Because ultimately that’s the market we are in day in day out: not their business but fundraising, what excites investors, how to tell the right story, what to show, and how to explain the shortcomings because there will always be a few! With such a focus at Series B on the model and the numbers, it’s crucial to build the right narrative around all of that.” – Notion Capital (VC)
A good actor can’t nail a scene if they focus solely on themselves; they need to be aware of the other main characters’ roles. In the Series B showcase, that means founders must not only understand each key players’ parts, but proactively adapt to them.
Think of it like selling a film. The Series A investment is like a start-up loan, which enables the founder to develop the initial film idea and attract the producers (the VCs). The VCs come on board and finance the film with additional capital – allowing you to hire your dream cast and expand to incredible set locations etc – with the hope of selling the film to studios/distributors (Series B investors) for a profit. All the while, the filmmaker/director (the founder) must wisely use the budget and information on what specific studios want in order to create a compelling film.
The better prepared the director, the better they understand everyone’s role, the greater the chance they’ll sell the film at a good price and generate widespread interest.
“As soon as you raise Series A, have a proper sit down with the VC and align yourselves around what the company should look like specifically in order to successfully raise Series B, as the VC will most likely be pivotal in that next round. That is not just about metrics but about the entire profile of the company and what may be most attractive to the type of Series B investors that you are likely to approach.” – Octopus Ventures (VC)
A repeatable sales process? Consistent revenue growth? A well-aligned GTM strategy and geographical expansion? Just as no company is the same, no Series B investor is looking for the same thing. From achieving £10m ARR to showing a 5:1 LTV:CAC ratio, there are a myriad of different metrics that Series B investors might prioritise depending on the structure and market of your business or even the personal experience and preferences of the investors. And therein lies the problem for the CEO founder: how do you know what they want?
Besides googling ‘Series B investors’, the chances are you won’t even know who you are trying to sell to, let alone what they’re looking for. This is where VCs earn their crust. A good VC knows who invests in your type of product and company – like knowing which studios specialise in indie-horrors or dystopian Westerns – and what they want to see in order to invest. It’s a fundamental part of their job and a crucial tool for a founder as what’s the point in focusing your narrative around your huge international reach and 50+ country customer base if the buyer only cares about unit economics and growth rate?
“Between Series A and B, there is a huge leap required in the level of numerical sophistication, thinking about data and process. Series A investors can be very flexible, but Series B investors look at the model and the numbers much more than the team – there’s a big difference. So if your numbers don’t tell the right story, it gets tricky.” – Notion Capital (VC)
Let’s say, the investor is interested in your SaaS company’s long-term performance and wants to see how many customers sign-up and stay / grow with you. Armed with this knowledge, it’s time to work backwards.
First, work out what metrics are needed to show this and what great looks like in the investors’ eyes – e.g. Net Revenue Retention (NRR) of 120%+. Next, identify the levers you can press to alter these metrics and who internally is needed to adjust them – i.e. which teams are responsible for which cogs. Then work out what your expected trajectory should look like, including what systems and structures are needed to show quarterly increases to your NRR. If you can show that you implemented a scalable cross-selling approach that saw NRR rocket upwards, that’s the kind of story that wins Oscars in the minds of Series B investors.
But remember: while you should focus on your future (Series B) investors’ desires, it’s also important to align with your current (VC) investors’ expectations too. That’s because during the research for our report, VCs said they naturally divert their resources to their portfolio companies with the highest likelihood of success. As such, founders with the most convincing strategy early on will be given the best chance to realise that vision.
Of course, a scaling company is not a movie script, but channeling the narrative from an early stage acts as a blueprint that can guide you in the good times and help you get back on track when things go awry (which they will at some point, but it’s about how you respond).