The Truth About Fundraising In The Summer (Plus 5 Strategies!)
It’s common lore in the venture world that summertime is slow and quiet. Here's the truth...
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It’s common lore in the venture world that summertime is slow and quiet. Here's the truth...
Read MoreIt’s common lore in the venture world that summertime is slow and quiet.
Founders are told:
Don’t raise in the summer. And definitely don’t raise during the last 2 weeks of December.
In fact, I say that almost verbatim right here.
Whaaaaa?
But, Kathryn, what about our dangerously low runway and the hires I need to make for growth?? WTF?????
Are you screwed or is the summer lull an exaggeration? What’s the truth about fundraising during the summer? What can you do to raise faster regardless of the calendar?
Let’s dive in! (…to the pool on a hot’s summer day? No way! Back to work!)
Deals are always getting done. Year-round.
Salesloft closed their transaction with Vista Equity on Dec 23.
At Atlanta Ventures, we have deployed millions of dollars over summer months and talk to startups all summer long.
We have portfolio companies fundraising now and are in discussion with startups raising money.
Investors are hustlers and high achievers, many coming from startup backgrounds themselves. They don’t want to take breaks or miss an opportunity.
Contrary to the jokes, the investors I know are hard working and care deeply about helping founders.
Brace yourself. Surprise coming.
Investors are human!
With families even.
We’re not artificially cloned from a spreadsheet and a Patagonia Vest (…YET. Let’s see what AI can do!)
Our families may include school-aged children, aging parents, or even a (very patient and heroic) spouse.
The combination of official holidays, educational institution breaks, and the snowball of if-other-people-are-out-it’s-a-good-time-for-me-to-be-out-too make summer and late December prime time to spend with loved ones.
A truth known across the business world — which is why the biggest conferences are usually in the spring or fall (e.g. Venture Atlanta, SXSW, Dreamforce).
It’s also why Q3 is typically a slower sales quarter.
So while it’s not the European style of 6 weeks vacation (#jeally), if one partner is out for a week, then another key player is out the next week, then you have a holiday weekend, and there’s fewer events to meet at…small things add up.
It can be hard to get momentum going and feel like things are dragging.
So what the heck is a founder to do????
A “quick” raise often takes 100 meetings and 6-9 months. Make sure you have time and cash runway. It’s better to plan for summer to be slower and things move unexpectedly fast than the opposite.
Connect with investors before you need to raise. Send regular updates so they get to know your business and see progress. The better they know you, the quicker they can move and the more they will prioritize you. Be a line not a dot.
Summer is a great time to develop relationships if you haven’t already.
Bonus: study up on investors — what they look for, insider tips, and fave blogs and podcasts.
You know what makes a fundraise go faster? Having amazing customer traction and growth. Yes, customers take summer vacations, but someone is always in office and ready to learn, optimize, share feedback, or get more value (and upgrade???? 🤞🤞🤞). Help them do this!
Here’s 5 tips on how to have a great customer call.
Figure out who your ideal investors are. Refine your elevator pitch and pitch deck. Understand what investors care about and how to grab their attention. Learn how to talk about revenue (regardless of how much you have) and make a realistic TAM slide. Prep and do meetings with friendlies so you’re ready to roll once September hits!
Last but definitely not least…there’s no “short cut” better than an awesome business. Be great and light a (summer bon)fire under every investor you meet. Make it easy to say yes. This is definitely the HARDEST thing to do but results in the quickest raise.
I will tell you all the insider tips but at the end of day, nothing beats an awesome business. Annoying, I know!
What other tips do you have for fundraising during slower times of year? Have you successfully raised during the summer? What worked for you?
Continuous learning is key for startup success. As Kyle Porter, CEO and founder of unicorn startup Salesloft says, you have to learn faster than your startup is growing. Learning can take many forms: coaching, peer groups, podcasts, books, school, YouTube, and…one of my personal favorites for obvious reasons…BLOGS!
Read MoreContinuous learning is key for startup success.
As Kyle Porter, CEO and founder of unicorn startup Salesloft says, you have to learn faster than your startup is growing.
Learning can take many forms: coaching, peer groups, podcasts, books, school, YouTube, and…one of my personal favorites for obvious reasons…BLOGS!
I already shared 3 incredible SaaS blogs.
But what about the millions of non-SaaS startups?
Yes, there’s great resources for marketplaces, consumer apps, web3, general scaling, product building, and everything in between.
Here are 6 of the best startup-focused blogs guaranteed to provide takeaways that you can use at your company today!
📖: Lenny’s Newsletter (Substack)
Product leader at Airbnb with “deeply researched growth, product, career advice”
Real data and how-tos from “the early days” of successful companies — one of the most helpful resources for marketplaces especially!
How to kickstart and scale a marketplace business (17 real stories)
📖: AVC.com (classics), AVC.xyz (current)
Partner at Union Square Ventures “investing at the edge”
Thoughtful, concise writings on web3, climate, NYC, and other tech trends
📖: Lessons (Substack)
COO/Head of Ops at high profile startups like Quip, Lambda School, Chan Zuckerberg Initiative, and Facebook
Practical, strategic guidance on how to scale especially people and ops
‘Give Away Your Legos’ and Other Commandments for Scaling Startups (published by First Round Capital 👇👇)
First Round is a VC firm known for their helpful content!
Comprehensive, actionable content across every topic for early stage founders
Finding Language/Market Fit: How to Make Customers Feel Like You’ve Read Their Minds
Step-by-Step Fundraising Tactics from the NYC Legend Who Raised $750M
📖: The Generalist (Substack)
Best “deep dives” on founders and well-known startups
Get a thoughtful entrepreneur biography in 15 minutes instead of 15 hours!
Union Square Ventures: The Thinkers (learn more about Fred Wilson 👆👆)
📖: andrewchen.com (classics), Substack (current)
Partner at a16z “at the intersection of games + tech”
Great insights and specifics on consumer products and apps
Other favorite blogs? What resources have been most helpful to you? What’s a newsletter that you read every time it hits your inbox??
It’s acquisition season here on The O’Daily! I’ll start the bidding at $1B for 100+ blog posts and a great logo. And that’s how you negotiate an LOI, folks! Or is it? Today, we’re continuing to share insider advice for acquisition-curious founders. Specifically — how to get the best price for your company!
Read MoreIt’s acquisition season here on The O’Daily!
I’ll start the bidding at $1B for 100+ blog posts and a great logo.
And that’s how you negotiate an LOI, folks!
Or is it?
Today, we’re continuing to share insider advice for acquisition-curious founders.
Specifically — how to get the best price for your company!
Here are 5 strategies (plus 2 bonus tips) for negotiating a fantastic Letter of Intent (LOI) aka price for your company’s acquisition — including insights from folks on the “buy” side of the deal!
Before even getting to the price negotiation stage, you have to know a thing or two about the acquisition world.
First of all, not every acquisition conversation is a good one. There can be significant downsides and challenges as A.T. Gimbel (an acquisition “buyer” himself back in the day) outlines.
A few other insider tips that we talked about last week but are worth mentioning again:
And for goodness sake, if you remember nothing else:
Negotiate hard as heck at the LOI stage!!!!!!!!
It’s only going down from there! 🥴😳🙃
Once you have a sense of the playing field, it’s time to ask the big question:
Q: How do I get a great price?
A: Have a great company.
Apologies for being Captain Obvious here, but I think it’s important to clarify that while there are strategies for optimizing price, there are no short cuts.
You MUST have a good business! It doesn’t have to be perfect. But even the most talented, sales-oriented founder can’t make it through due diligence on dreams alone.
How do you run a fast marathon?
You train your face off.
Yes, there are tweaks and nuances and every once in a while someone is such a good athlete they can run 3 times, drink 12 beers the night before, and run a sub-3 hour marathon.
But that’s like 4 people on the planet so odds are it’s not you. (Definitely not me either!!!)
Same with business.
The best way to get a great price is to focus on building a meaningful, resilient business.
Good things happen when you have revenue, happy customers, and a strong team.
Along with strong fundamentals, have options.
Not stock options. Future-of-your-business options!
If a company has several paths — acquisition, profitability, IPO, raise & keep growing — it has the freedom to say no.
And nothing attracts PE firms, M&A teams, or investors like a company with the confidence to say no. Dealmakers can sense this.
I’m not saying it’s right, I’m just explaining the reality.
When you don’t need to be acquired is when you’re most likely to get the best offer.
Another way I’ve heard this explained is “willingness to walk away.”
(And if you’re not feeling confident, that’s totally normal and here’s tips on how to fake it ‘til you make it!)
Investors who will support you on multiple paths
Reasonable cap table (don’t raise too much or on bad terms)
Hiring and revenue alignment (don’t overhire, use revenue milestones to unlock new hires)
Flexibility to pivot if needed (at Pardot, we had integrations with 4 CRMs; Salesforce was the bulk of our customers but if they had acquired someone else, we could have doubled down on a different tech ecosystem)
Behind every great M&A strategy and team is…humans.
Yes, they are experienced negotiators who know how to analyze the data and wield a spreadsheet like a knife.
But they are also susceptible to irrational human nature as the rest of us mortals.
Namely, they love to win.
Competition drives up prices because humans want things more when other people have them.
Especially ambitious, corporate M&A humans.
So — make sure you have other buyers at the table if at all possible!
The seriousness of other buyers doesn’t need to be revealed but it will drive the price up AND give you confidence.
If one company is interested, it’s likely that others are too.
It’s not uncommon to engage a “broker” to put out feelers and bring interested parties to the table. You can also do this outreach yourself or get investors and advisors to help.
Real life example: Why did the NBA drive a better media rights deal (as a multiple of revenue) than the NFL? More buyers competing over fewer products.
Listen. I know you’re busy trying to sell your company and that’s a full time job.
But it’s really, really worth it to stay focused and drive a great sales quarter.
Don’t believe me? Denis Cranstoun, M&A specialist in NYC, commented here that sales numbers dropping is one of the biggest reasons deals fall apart. A.T. also talks about the risk of distraction on a business.
The other reason a great sales quarter can impact price is…
Recency bias, baby!!!
Had a bad sales quarter last year? No one cares!
Your most recent quarter will have the most weight. Use it like crazy in negotiations.
There’s a reason why companies double down on sales (e.g. hire outsourced resources) before an IPO.
Two final thoughts:
Talk to other founders or investors who’ve been at the negotiating table. It’s likely they have stories or insights that can’t be shared publicly but may be pivotal for you. It’s an incredibly stressful time and talking to others who have been through it (even if you can’t reveal what’s going on) can also be tremendously supportive.
Do yourself a favor and read this awesome book on negotiation: Never Split The Difference. It will take a few hours and could make you an extra few million dollars. Pretty good ROI. 😉
And should things work out like you hope, be ready to leverage these 6 strategies to make the most of the opportunity post-acquisition!
What advice do you have for founders who want to drive the highest price possible for their startup? Any other stories or resources about acquisitions to share?
I’ve been lucky enough to have a front row seat for 3 startup acquisitions to publicly traded companies (Pardot to Exact Target, Exact Target to Salesforce, Rigor to Splunk). It’s a wild ride and I hope everyone gets a chance to experience it. I also worked closely with the corporate merger and acquisition (M&A) teams at Exact Target and Salesforce — especially on the
Read MoreI’ve been lucky to have a front row seat for 3 startup acquisitions to publicly traded companies (Pardot to ExactTarget, ExactTarget to Salesforce, Rigor to Splunk).
It’s a wild ride and I hope everyone gets a chance to experience it.
I also worked closely with the corporate merger and acquisition (M&A) teams at ExactTarget and Salesforce — especially on the post-acquisition integration process — and have also heard many behind-the-scenes stories from founders about their experiences.
So, what’s helpful to know about acquisitions and getting acquired?
It’s probably not what you think!
Here’s the top 4 unexpected insights about getting acquired that every founder should know!
Before I knew the wild world of M&A transactions, I thought decisions were made with spreadsheets and slide decks based on facts, strategy, and metrics.
Silly, foolish Kathryn!
What I didn’t understand is — you have to work with the company you acquire. Definitely short term and usually (hopefully?) long term.
For the purchasing company, an acquisition is an expensive bet with no winnings until the new product is integrated into your business (and making money for you)!
To do that, you need collaboration, communication, humility, and teamwork.
In other words, you want to work with people that are reasonable and well-intentioned humans.
Now, not every company cares. But more care than you think.
And yes, you still have to negotiate, be confident, and advocate for yourself and your people. But just know that culture fit and personality DO matter.
It may be the winning factor in the deal (“I’d rather work with the team from StartupA”) or the losing one (“We looked at this space but passed because all the CEOs seemed like jerks.”)
And yes, that’s a real reason I’ve heard from a F500 leader for passing on an excellent strategic M&A opportunity.
Successful companies move too fast to spend time on assholes. Never underestimate the business value of being nice.
Price matters to companies who want to buy you.
If two companies are pretty close in their offering but one has raised a lot less money, the acquiring company can get a much better “deal” — same tech for way less.
If a company raises a lot of money, its price goes up. They have to pay back the capital, give investors their share, and make sure there’s enough left for employees. A lower offer won’t be approved by the board.
Post-acquisition, the integration process between a corporation and larger startup is more complex and expensive.
Yes, some companies raise a lot and sell for a lot. Sometimes corporations are looking to acquire customers or revenue so the more the better.
But don’t assume that raising money to get bigger is always the best strategy for a future exit. I know many stories of smaller companies who “won” because of their size, scrappiness, and lighter cap table.
One of my favorite M&A stories is about a tech startup who was acquired by a large public company…who had built the same product in-house.
Large Company built a competing product in-house. Startup Company thinks it’s done for. But the Large Company product isn’t great and Large Company reps don’t want to sell it. Startup Company builds an incredible partnership program driven by the sales reps wanting to sell their product. Large Company acquires Startup Company because they “have to” as driven by the sales org.
How amazing is that???
Venture M&A teams are often talking to company employees to find out what tools they’re seeing, what customers are asking for, and especially what sales reps are recommending or cross-selling.
A cross-selling partnership can be an M&A “try before you buy” testing ground. (Ditto for strategic investment!)
Will customers buy your product? Do sales reps want to sell it? How easy is it to sell?
If you’re hoping a partnership turns into something more, invest heavily in making the big company’s reps wildly successful.
Face time (road shows), working 1:1 with reps or pairing up your reps/their reps, a Slack channel, great technical support, executive sponsorship on both sides, and helping get deals over the finish line are all strategies I’ve seen work well.
But make sure you’re big enough and your product is mature enough for a partnership to be successful! You, not the large company, will have to do the heavy lifting to stay top of mind and help reps sell.
If you don’t get traction, it could backfire and hurt your M&A chances.
The main negotiation happens at the Letter of Intent (LOI) stage.
Yes, it seems early in the process and the instinct is “get ‘er done” asap and worry about the final price later.
BUT…
Once you sign it, it’s unlikely to go up and very likely to go down.🥴
Here’s why:
You now face a team of experienced M&A lawyers and finance folks whose job it is to uncover every possible risk, liability, or inconsistency and factor that into the deal.
Have a line of credit? That gets taken off the sale price.
Customer contract missing an auto-renew clause? Minus $2M.
No double trigger in your employee stock agreements? Less another $5M.
Like when you send an enterprise deal through procurement, expect a significant haircut.
Nothing nefarious or ill-intentioned about it. Just people doing their job.
What’s in your control is understanding how it all works!
Negotiate the crap out of the LOI and prepare for adjustments in due diligence.
What advice or unexpected stories do you have about M&A learnings?
How do you negotiate a great LOI? Tune in next week when we dive in to the best strategies for leverage in an M&A negotiation.
Top recommendations for women founders who are getting started, looking for community, raising money, or scaling to the next stage!
Read MoreI love sharing resources for founders!
A few examples:
(You can blame “Input” — one of my Gallup Strengths. #sorrynotsorry)
And you know what else I love?
Supporting women!
I am passionate about all women leading fulfilling lives — whatever that is for them!
On this blog, I’ve spent time encouraging women to think big, encouraging men to support them, and sharing the insider info on how the biggest companies start and scale. (It is a startup blog after all. 😉)
A few examples:
Today, we combine the two!
Here are 10 resources for women founders who are getting started, looking for community, raising money, or scaling to the next stage!
The Southeast's leading community for female founders
A 501c3 “helping women build big-a$$ companies” with events, Slack channel, community, newsletter
HQ: Charlotte
In-person, monthly gathering for women in tech at Atlanta Tech Village
A great place to network, get actionable tips and inspiration, and find a co-founder or your next hire.
Led by Melissa Heffner, head of VentureLab at Georgia Tech
Open to all women founders, no GaTech affiliation needed, fully virtual
2 cohorts per year with weekly programming, community, mentorship
More STEM founders than other programs (great option if you’re STEM) but it’s not required
Great online resources, data, masterclasses, content plus an annual conference
Largest global organization supporting women founders, investors, board members in tech
No ATL chapter that I know of (lmk if you start one!)
Tuesdays during the summer at Atlanta Tech Village
*FREE* and open to ALL!
Great intro series for anyone thinking about a startup but not sure where to begin
I’ll be presenting on Tues, June 11, 2024 — Intro To Startups! Registration opening soon. Check here or LinkedIn.
Pre-accelerator for underrepresented founders at Atlanta Tech Village
2 cohorts per year with weekly programming, mentorship, and a graduation demo day with prizes (like non-dilutive funding and free office space)
For underrepresented founders who want to build tech but “don’t know how to code” (or where to start!)
At-your-own-pace curriculum from Kristin Slink, a 4x non-technical software founder, who is brilliant at customer discovery that leads to revenue
Monthly in-person event for women founders
Live pitch experience and on-the-spot feedback from VC investors
Feeder program for Venture Atlanta
Led by Allyson Eman (CEO of Venture Atlanta) and Christy Brown (CEO of Dr Noze Best, founder, angel investor)
A database of women investors in the Southeast
Find someone “like you” at your stage and industry
Connecting women founders and founders of color to their first investors
Includes mentorship and fundraising prep, showcase event, investor intros
33% of presenters go on to raise significant funding
501c3 organization spearheaded by Valor Ventures
25th showcase event is on May 30, 2024!
While not *officially* tech resources…these are wonderful!
The Lola is an amazing co-working and community for women in Atlanta (I’m a member).
Rising Tide prodcast from Margaret Weniger shares inspirational and insightful stories of women in leadership (we chatted in this episode).
What other resources should we add to the list? If you’re a woman founder, what programs, events, communities, or content has been most helpful to you? I’d love to hear in the comments below! 👇👇
Don’t mistake a news story for term sheet reality!
Read MoreLast week, I shared some common criteria, metrics, and check sizes for each stage of fundraising.
As I was typing ballpark numbers per stage, I could hear founders in my head…
But, Kathryn, what about that $10M pre-seed round I heard about???
But the other day, in Techcrunch, I read about someone who raised a $50M Series A??
How did that founder raise $2M with no customers???
As someone who often knows the full story behind a press release…please, for the love of everything — don’t mistake a hyped-up, sunshine-only news story as term sheet reality!
If you hear an incredible story of an incredible raise, there’s usually some extenuating circumstances going on:
More traction than is typical for that stage, e.g. they’re calling it a “Seed Stage” but the company has $2M+ in revenue
A second time founder, raising from previous investors, who are happy to take a big bet on someone who has already been a winner for them
Lots of strings attached or “hair on the deal” — yes, they raised $5M but they’re going to need a $100M exit to make any money, whereas, your $500k raise gives you the same payout at a $10M exit
And of course, Silicon Valley pricing is often different than the rest of the country.
To be clear — this isn’t a knock on tech reporting. I love and subscribe to many tech newsletters and the reporters do an excellent job with coverage. There is simply a natural bias in what, how, and when startups share news about themselves!
You know what doesn’t get reported?
Companies that have bootstrapped to solid cash flow — why would a founder publicly announce they are wealthy now? 😂
A high customer churn rate
Everyone: “Look at these amazing new customers we have!”
No one ever: “Here are the companies we painfully lost last quarter!”
Companies quietly closing their doors or (even worse?) being a zombie
A really crappy work environment (okay, occasionally this makes news but it has to be really, really bad)
Employees getting $0 at an exit because the company raised (too much) money
A competitor of one of our portfolio companies raised a boatload of money. $40M. It was surprising as, to our knowledge, their product was not as good.
At first, the doubts hit:
What do they know that we don’t? What are they doing better? Should we change strategy? Is our product not as good as I think? Do we need tons more money??
But the founder knew what to do:
I’m going to stay focused, talk to customers, execute our plan.
Fast forward 2 years, that competitor shut down and the portfolio company is crushing it.
The other place where misinformation inadvertently spreads…pitch events or demo day!
Now, don’t get me wrong — pitch events and demo days are amazing!
And founders are doing their job to showcase their company to the fullest.
Just know: it’s part of the expectation to explain one’s company in the most positive way possible.
No one stands on stage to say:
Eh, I’m really struggling and I’m not sure if we’re going to be around in 6 months but we closed a few good deals last month and got a great angel check so I’m feeling cautiously optimistic even though that could change in 30 seconds.
A founder’s pitch narrative (and with good reason):
We are basically a unicorn already. Look at this hockey stick growth. Here’s 100 more reasons we’re awesome and our world domination is inevitable.
Go into a demo day or pitch event knowing the game being played.
Don’t take it to heart if someone who started at the same time as you has 2x more customers.
They might be burning tons of cash, have high churn, or got those customers through one warm connection that’s not repeatable.
Remember: when you talk about your business, it sounds amazing to everyone else!
Still don’t believe me?
Think about people you know on social media.
How often do social posts tell the full story?
Once a friend posted amazing photos from a family beach camping trip. I texted her to say I loved the photos. She said it was hot, buggy, sandy, and (direct quote) “f-ing miserable.” 😂😂😂
It’s always “best foot forward” on social, in the news, or during demo day. Nothing wrong with that, just know it for what it is!
So, what’s a startup founder to do?
Get to know other founders. When you have founder friends, you see the full picture. Good, bad, ugly. This can be experienced founders as mentors, someone a stage ahead, a direct peer, or a behind-the-scenes look at a real founder journey.
Use the news for information. I think it’s helpful to stay up to date on startup happenings, market trends, and see how founders are positioning their companies and progress. (I love reading Hypepotamus!)
Know if it’s helpful or hurtful to you. If seeing what others are up to lights a fire, great! Use other’s successes to motivate and inspire you. If it’s bumming you out, giving you a distorted reality, or causing you to make hasty, short-term decisions, then minimize your exposure.
Remember — every founder has imposter syndrome and the public story is rarely the full story!
What are your favorite places for startup news? How do you balance staying up-to-date on the outside world vs staying focused on customers?
What DO investors care about at each stage? Here is an overview of typical criteria for each stage of early investment!
Read MoreLast month, I was part of a great session at the Atlanta Tech Village. We discussed what metrics investors care about or are looking at every stage.
It’s a fun format (one of the few “Villager-Only” events - most are open to the public) called “Capital Conversations” with a handful of founders and several investors or industry experts.
I learned a bunch from fellow panelists Nelson Chu of Kinetic Ventures and Jaisa Gooden of SVB.
What DO investors care about at each stage?
Here’s the annoying answer:
It depends. 🙃
Depends on the firm, company stage, industry, investment thesis, and even where the firm is located.
Nevertheless, the O’Daily persists…in delivering bulleted lists!
Here is an overview of typical investor metrics or evaluation criteria for each stage of early investment!
Idea Stage usually means pre-revenue and pre-product.
Is the founder excellent? (e.g. great at selling, intelligent, resilient, creative, ambitious)
Is the market big enough to support multiple billion dollar companies?
Is there authentic demand? How are tests performing?
Is this a “hair-on-fire problem”? (a great phrase from Nelson Chu!)
$100,000 - $1,000,000
$100k from an angel or smaller fund
$1M if you’re an experienced, successful founder with existing investor relationships
Since Idea Stage is pre-revenue and pre-product, investors are primarily assessing the market, the idea, and the founder.
With those 3 factors, does this business have a chance to be big?
And do you think the founder can be smart, brave, and humble enough to pivot the company and grow as an entrepreneur?
It’s likely the current idea is not the final iteration so this is 90% taking a bet on the founder!
Seed Stage is usually some revenue, some customers, some product but still very early and risky with lots of unknowns.
Founder and market size are still #1 most important things! (See Idea Stage ⬆️)
Do you have paying customers that love you?
How much time and capital did it take to get here?
$500,000-$3,000,000
Seed Stage checks can be from firms, angels, or a mix
Every firm is different in what they look for at Seed Stage and how they explain it.
It’s usually too early to have “regular” metrics so investors are looking for indicators of traction and trajectory. It could be customer count, revenue, growth rate, customer love, or a combination of all of those!
This is where Atlanta Ventures spends a lot of time so I can share specifics on our thought process.
Our seed stage investment threshold is 10 passionate, paying, unaffiliated customers.
Paying money is a proxy for value. If they aren’t willing to pay, that is informative.
(I love free samples but rarely buy the product.)
The number “10” is somewhat relative (it could be 9, it could be 12) but it’s more than “a few.” You’re on to something! It’s resonating.
The part that’s hard to quantify is traction and trajectory. If you have 10 customers that love you but it took 5 years to bring them on, that’s very different than 10 customers in 3 months with a pipeline of 20 more.
Also, “10 customers” is assuming they’re paying $500-2000/mo or so, standard B2B monthly subscription fees. If you’re selling really large deals ($100k+), maybe 5 customers who love you is enough. Or if it’s a lower price point ($100/mo), maybe you need closer to 50 customers.
And of course, it’s fine to start with “friendlies” (oh, hi, mom, thanks for signing up!) but you need to be attracting “unaffiliated” customers through the problem you solve.
You’re a real company! You have a product, a process for getting customers, and so many users you don’t know every email by heart.
What is your ARR? (Usually $1-2M ARR is a starting point for Series A)
How quickly are you growing?
What is your net retention rate? (how often do customers leave vs buy more)
What is your burn multiple? (more important now than ever 🥴)
What is LTV to CAC ratio? (good is >3, excellent is >4)
Here’s an awesome post with more detail: The SaaS Metrics That Matter
Plus, founder quality and market size, of course!
$3,000,000 - $10,000,000
A Series A fund will likely lead the round, sometimes the whole thing, or with room for other investors.
Series A companies have metrics to compare against benchmarks.
Basically, does this business look like something that can scale well? Do the unit economics make sense? If you put $1 in, will you get many more $$ out?
The better the metrics = easier to raise money.
BUT - no startup is perfect and investors know this. You need most of your metrics to be great but a few hiccups are okay.
Proactively address areas of improvement. Explain your plan and showcase your leadership and problem solving chops.
Scale, scale, scale!
Same key metrics as Series A (ARR, growth, capital efficiency through burn multiple and LTV:CAC) but less flexibility in performance
Founder quality matters less now as an experienced CEO could be brought in
$10,000,000 - $30,000,000
Some Series A funds also do Series B but you also start to get into “Growth Stage Capital” firms which write the big dog checks (e.g. 10s of millions up to 100s of millions)
You’re definitely talking primarily to the “Coasts” (NYC, SF, Boston) for this stage.
Things are humming and you want to pour gas on the fire.
Companies also start to add new product lines, tackle new markets, or do small acquisitions (“tuck ins”) with this capital.
Usually a term for “need to raise money but not yet at Series A level traction or metrics.”
Mostly likely this raise is coming from existing investors who believe in the long term vision and know the founder needs more runaway to execute.
Have you heard this or thought this before?
On paper, the criteria are met but if you dig deeper, you find out that most of the revenue is:
for services, not software
from one client
from a different product
in paid trials
There are no loopholes in venture funding.
Every investor wants to see true, valid, authentic traction and trajectory — however they define that for their stage.
HOWEVER…there’s no perfect company, perfect metrics, or perfect deal.
Every business has stuff they’re working on, risk areas, or aspects that need to be up-leveled.
We’ve invested in successful companies that:
Delivered “software” through a spreadsheet
Had 50% of revenue from partner sales
Didn’t have a paying customer yet
Expected high churn for a year
These downsides were okay since so many other areas were promising.
So put your best foot forward. It should be a really good looking foot. But not perfect. Every foot is a little gnarly, just like startups!
And on that heel-arious analogy…I’ll see you next week!
What have you seen at each stage? Any key criteria or metrics I’m missing? Any investors with unusual milestones? What’s the most toe-tally outrageous investment analogy you’ve seen???
Steps, recipes, and strategies for less processed food or any type of gradual improvement. No drastic overhaul required!
Read MoreI’m into healthy habits — in case you missed it here, here, or here!
Sleep, exercise, and healthy food make it easier (possible?) to build companies because:
you feel good
your brain works
better emotional regulation (and optimism!)
Of course, like most things, sleeping, moving, and eating healthy food is simple but not easy.
Everyone knows they “should” but it’s overwhelming to add “one more thing” especially when you’re a busy founder!
It can also be overwhelming if you (like me!) are prone to “extreme implementation” when it comes to new ideas.
It looks something like this…
Read a book about carbs being bad → throw out all carbs
Listen to a podcast about how whole grain fiber helps longevity → re-buy carbs
Watch a documentary on farming → dig up backyard to grow your own food
Learn about a work “uniform” → buy 10 black turtlenecks, overnight shipping
Take 1 meditation class → launch meditation app to change the world
And those are just the personal examples! I didn’t even get into work improvements.
Bias-toward-action is great, of course. But total overhauls are not always the best way for a sustainable change or improvement.
It’s taken many years and many reminders from my husband to embrace the radical philosophy of GRADUAL IMPROVEMENT OVER TIME!!
My default mindset:
“If some is good, more is better.”
“Why go 25 mph when you could go 100 mph?????”
While it can work sometime, it can also backfire with burnout, poor adherence, or making you so miserable all the health benefits are negated!
Here is the story of one of my gradual improvement wins…eating less processed foods.
I share the process, the recipes, and how it can relate to anything you’re working on — no drastic overhaul required!
One day I opened our fridge (probably after bingeing a nutrition podcast), took a hard look, and realized…this is not the kind of food I want to put in my body.
Nothing terrible.
We weren’t eating Twinkies every night.
But as a health nerd, it seemed like an area where I could improve and get more aligned with my wellness values!
I considered several realistic options:
(A) Move to a homestead, grow and cook all of my own food over an open flame
(B) Spend at least 3 hours per day making every item from scratch.
(C) Get better a little over time.
Sigh. Fine. I’ll go with boring, reasonable (C).
And guess what??? IT WORKED!
Here are the 4 steps I took to (slowly) kick (most) processed foods and you can too!
Or pick your personal “area of improvement”, apply these same gradual improvement principles, and behold the slow (but meaningful!) transformation.
I picked one frequently-eaten processed food item to tackle at a time.
I found a recipe for that food with high ratings that seemed easy.
Easy is key.
I was looking for something I could do sustainably over time.
I don’t really like cooking. I want minimal steps, ingredients, and clean up.
Once I found a reasonable recipe, I made it!
Usually on a weekend, often while yelling at, I mean, working together with my kids.
The first 2-3 times, it would take a while to make the recipe.
All the checking back, making sure you get the amount and ingredient, knowing the technique or tools.
And 99% of the time, I’d forget a step or ingredient so it was mediocre to start.
Always plan to be the worst when you’re getting started!
BUT THEN…
I could pull out the ingredients without having to check the recipe 500x.
I learned how to consolidate steps or have fewer dishes to wash.
And one day I realized…
I CAN MAKE A HOMEMADE BALSAMIC VINAIGRETTE IN 3 MINUTES!!!!
Watch out, Martha Stewart.
Here’s where the gradual comes in.
Once I had one food item mastered, I added another one.
I repeated steps 1-3 until that new recipe was on autopilot too.
It would take about a month or two per recipe.
It felt slow but within a year, I could reliably and easily make 6-7 homemade versions of common foods!
While we’re not quite an off-the-grid-grow-everything-homestead, we do have many more homemade items in our fridge.
And, we don’t always have homemade everything. That’s why it works. Progress over perfection!
If you’ve thinking about a new healthy habit, fighting off afternoon office-snack brain fog, looking for less expensive food options (homemade is usually cheaper!), or like the idea of eating stuff you make yourself, here are some go-to recipes!
I promise they are easy because I am lazy efficient. Also, for goodness sake, wash your food processor in the dishwasher. I also love the instant pot and our mini blender.
Here’s the stuff we DON’T make from scratch. Either we tried and it didn’t take or I took one look at the recipe and ran away screaming.
Some might call that quitting or lacking in resilience. I call it, PRIORITIES and ROI!!!! 😁
Corn chips
Kombucha
Crackers
Pretzels
Bagels
Pita bread
Kimchi
Dehydrated fruit or meat
Also, I do have friends that make all of these homemade so it’s possible! Just not for me right now.
Looking for quick office snack swaps?
Prepackaged trail mix → Make your own
Granola bars or protein bars → Protein energy bites, homemade granola
Chips → Air popped popcorn in 3 minutes
Oatmeal packets → Overnight oats
Chex Mix or Ranch-flavored anything → Hummus or Greek yogurt + soy sauce (sounds weird but my kids LOVE it) with baby carrots or little peppers
Here’s also 5 ideas for quick and healthy lunches.
Making more homemade foods was my gradual improvement.
Maybe that resonates with you.
Maybe you’re like, ARE YOU OUT OF YOUR MIND? I DON’T EVEN HAVE TIME TO SHOWER.
In which case, processed foods is definitely not the right gradual improvement effort right now!
Focus on what makes sense for you and tackle it a little at a time.
Do you like the idea of gradual improvement or are you an all-or-nothing type? What’s your favorite quick and healthy recipe? Any food swaps you’ve made recently? What other office snack alternatives do you like?
I’d love to hear from you!
One of the most common questions for early startups — who should handle upgrades? Here are examples of what works, what doesn't, and how to figure out what's right for your company!
Read MoreOne of the most common questions for early startups — who should handle upgrades?
If I HAVE to pick, most of the time, I’d say:
Customer Success should handle upgrades.
But there’s a number of different considerations specific to YOUR business!
Here’s what I’ve seen from the front lines and what questions to be asking about your particular product, company, and team!
It’s worth spending time thinking it through because — in the words of the late Charlie Munger —
Show me the incentives, and I'll show you the outcome.
Here are different sales/customer success/commission configurations I’ve seen:
Sales gets commission on new logos; customer success handles upsells and renewals but no commission
Sales gets commission on new logos; customer success gets commission for renewals; sales and customer success split commission for upsells
Sales gets commission new logos; customer success gets commission on renewals and upsells
Sales gets commission on new revenue (including upsells); other teams get commission on their specific focus like renewals, upsells, product area
And 100 other variations.
What’s the right way?
Depends what you’re optimizing for!
Here’s a few examples:
Want the world’s greatest customer experience? → no commission
Want to aggressively expand existing accounts? → commission to “hunters” for upgrades
Want to focus on renewals? → give more commission for renewals than upsells
All that said, for most startups, here are 3 questions to consider…
MOST startups want their “hunters” aka sales people focused on getting new companies or “logos.”
Yes, you can get more revenue, more easily, at less cost from existing customers. It’s tempting to focus on the easier money.
BUT — in the eyes of investors and looking at long term growth trajectory, you can always upsell later (by improving your pricing strategy, for example).
A repeatable, cost-effective playbook for getting new customers is the #1 priority in the early days.
Yes, customers need to stay with you (renewals) and get more value over time (expansions). These are important measures of a healthy business.
But if your new business sales funnel is not working, renewals and expansions don’t matter!
Large companies focus more on account management. They have many products to sell and different parts of a company to sell into.
Don’t be tricked into copying a mature company sales structure!
What works for Salesforce today isn’t the optimal setup for your startup.
In the early days (for most companies), it’s a land grab for customers!
Who is the target customer for your company?
How large are the initial deals compared to expansion opportunities?
What about the complexity of the sale?
As an example, at Rigor, we sold to large companies including F500s.
We followed a scrappy, startup strategy though.
The sales person would “land” a small deal, usually within 1 team or 1 project. The manager could pay for the software monthly via credit card — quick sale, no red tape.
When they saw good results, we’d work to “expand” into a 6-figure deal, navigating big company complexities like legal, procurement, and multiple stakeholders.
Not a process for the faint of heart!
We wanted our best hunters working that process so sales reps received commission on the expansions.
For comparison, an expansion at Pardot would be $1000/yr or maybe $12,000/yr for a very large one. Very different business case for $100,000 vs $12,000 expansions!
Where does your company fit in terms of deal size, complexity, and expansion potential??
We have a company in our portfolio with a very sticky product and 99% retention rate.
I highly recommend they NOT focus on the renewals process. 😂😂😂 If it ain’t broke, don’t fix it!
This is not upgrades, per se, but an example of “normal rules do not apply.”
What is unusual about your customer, product, or business?
Should you adjust your account management strategy in some way?
Maybe you have multiple products, self-serve upgrades, main users who are not buyers, huge amount of referral sales, a robust partner network, one pricing package, or some other factor that means the “usual” suggestions don’t make sense for you.
That’s okay!!
You do you!
The whole point of building innovative companies is that something will be new and old paradigms evolve. Maybe this is where you break the mold!
People think org structures are created from business strategy.
FALSE.
Org structures, especially at early stage companies, are usually a result of who can handle what. 😂
(That said, I LOVE Molly Graham’s post on Designing Power Centers Strategically. I recommend startups follow this! I also know that sometimes you hire the best people you can find and figure it out as you go. 😁)
So - think about the people on your team currently and their skill set.
Brilliant sales person who doesn’t have patience for account management? Let them “hunt” and hand off!
A Customer Success Manager with a strong sales background? Maybe they “Land and Expand” your large customers.
A highly technical support person not inclined toward account management? Have your sales team do upgrades.
You need to be consistent across everyone in the same role but look at the cast of characters as you’re deciding your strategy.
This applies to managers or executives too. They will be best at (and default to) hiring and training what they know and their own strengths.
Remember: YOU CAN ITERATE AS YOU GO!
You’ll have new learnings, new team members, new products, new types of customers, and evolving business strategies.
When something isn’t working or it could be better, change it!
It’s not uncommon to have pricing and/or commission structure change frequently (2-4x/year?) at an early stage company. You want to be fair to employees and keep the right incentives for your sellers, of course! Explaining why and showing the business math behind the decision can help with a change.
Even at large companies, commission and org structures change annually.
You can also use SPIFFS, challenges, bonuses and other incentives to test new selling strategies!
Who handles upgrades at your company? How did you land on that? Other advice or iterations you’ve seen that work well?
Would it be helpful to see some example incentive or compensation plans? Reply or comment to let me know!
Francis Cordón is an O’Daily hero. He’s a Customer Success genius and a great human! Learn about his Journey Map of Value that changes how you help customers.
Read MoreFrancis Cordón is an O’Daily hero.
I worked with Francis at Rigor and learned SO much about strategic Customer Success from him.
He’s a genius (and a great human!). Customer Win Slides and aligning to your customer’s North Star both came directly from Francis and are simple, easy-to-implement strategies to 10x your customer experience.
When Francis offered to share more about the Journey Map of Value he outlined in this blog’s comments section, I jumped at it!
I’ve heard “Journey Map” used a few different ways in the business world, so I’m going to clarify what we mean for today’s post.
Imagine you’re visiting Madrid, Spain. You enlist a tour guide.
Your guide asks:
“What would you like to see?”
This question can bring immediate frustration:
“I don’t know! You’re the expert here. You tell me what I should see.”
Maybe you’ve done some research, maybe you have a few ideas, but you’re paying them to be the expert!
Now imagine, instead of a totally generic opener that puts the burden on you, your tour guide asks about your preferences and goals:
What are your goals for this day and trip?
What do you love? Favorite interests?
Any “must-see” items?
They’ll also look for clues:
kids (family friendly?)
mobility (more or less walking?)
your cool tattoo (into art?)
camera equipment (photography buff?)
“I love seafood” shirt (foodie?)
Then, they make customized recommendations based on you and your goals.
Makes sense, right?
Now substitute “Tour Guide” for “Customer Success.”
Are you guiding your customer? Or asking them to figure out what they want?
Are you giving them a list of every possible feature in your tool? Or curating it based on their business goals?
Do you give them a progression? (“First, we’ll see El Prado, then stop for lunch.”) Or give a full list on Day 1? (“Here are the 10 things we’ll do today.” Eek! Overwhelming!)
THIS is what we mean by Journey Map.
Clearly laying out a reasonable plan based on your customer’s goals.
(Note: there are also “journey maps” in the presales process or sometimes looking at the full customer experience from first exposure to the brand through multi-year renewal.)
Francis made an amazing point when we chatted:
Often times, the buyer is not the power user. The buying executive hands off the implementation to someone who reports to them but doesn’t have all the details, context, or vision but needs to make the project a success and get results.
Customer Success can help this power user be a hero!
But enough of literal Spanish tour guides!
Let’s get to it and hear directly from our Customer Success Spanish tour guide genius himself on the 3 common Customer Success pitfalls and the 4 components of a great Journey Map.
Heeeeeeeere’s Francis…👏👏👏
In the Journey of Customer Success, I like to focus on value and business outcomes, as well as on the personal aspect of it. This journey is marked by numerous challenges and opportunities, where the path to value realization is often obscured by common pitfalls. Drawing upon my experience as both a customer (when I was at the BNY Mellon dealing with so many vendors and investing in them, yet rarely getting the CS I really needed) and later building the CS practice at amazing organizations (including the awesome Quantum Metric where I currently have the honor of working), I've identified three prevalent pitfalls that frequently impede this journey. However, with a strategic approach and a well-defined roadmap, these obstacles can be overcome, paving the way for sustained success.
Many organizations fixate on projected ROI, neglecting the achieved outcomes. Admittedly, this can be challenging, especially with some solutions and platforms, but it’s an area where Customer Success as a partnership with the customer is absolutely essential. It ensures that value realization is documented, celebrated, and trended over time, in relation to the customer goals.
Becoming passive instead of proactive in managing the customer journey hinders success. It's tempting to wait for customers to voice concerns, but true Customer Success demands an active leadership role and the map for that is what we will discuss in pitfall #3. This means adopting a proactive approach and constantly aiding customers in achieving their goals. By focusing on individuals (and making the person in front of us a hero with the focus of bettering their lives) and connecting their needs with our solutions, we become true partners in their success journey.
Relying too heavily on anecdotal evidence of value rather than implementing a systematic approach can lead organizations astray. While one-off success stories can be inspiring, they often lack the substance needed to sustain long-term engagement. To mitigate this risk, we need a structured roadmap comprising value realization milestones tailored to the customer's specific use cases and goals. This roadmap serves as a guiding beacon throughout the customer lifecycle, enabling a progression from simple wins to more sophisticated endeavors. By painting a clear picture of the path ahead and the future value to be realized, we can avoid the pitfall of short-sightedness and ensure sustained success over time.
When done well, this Journey Map of Value Realization can help overcome all three pitfalls.
A mature Journey Map isn't fluff; it offers concrete steps and outcomes that are achievable with the existing SaaS platform. It’s a true map of ‘things we will do together’ throughout the lifecycle of the customer. It provides a clear roadmap for both the Customer Success Team and the customer, guiding them towards tangible results rather than abstract promises. It is not a project plan of tasks, it is a roadmap of value milestones to be achieved in partnership with the customer.
It caters to diverse industries and use cases, customizing its approach to suit specific needs and challenges. Whether it's a large financial institution or a medium-sized travel agency, a mature Journey Map can be tailored to fit the unique requirements of each industry and use cases. So one could say ‘Be Water’ :) as our dear Bruce Lee said!
Starting with simple, out-of-the-box solutions and gradually advancing to more complex configurations, it eliminates the false dichotomy between quick wins and in-depth value creation. This ensures that customers can derive value from the platform at every stage of their journey, without feeling overwhelmed or left behind. This is absolutely essential, do not sacrifice quick value for sophisticated wins too late, when the customer has run out of patience. But at the same time, do not settle for quick wins, it may not create differentiation enough for your platform and services and you can do so much more for your customers!
A mature Journey Map covers all aspects of the customer lifecycle, from onboarding to ongoing support and beyond. It not only focuses on achieving short-term goals but also paints a picture of future value, ensuring that customers remain engaged and invested in the long term, eliminating the syndrome of ‘diminished returns’ (a term I learned from the great Daniel Marsh!).
At Quantum Metric, we've embraced this approach through our Maturity Model, seamlessly integrated with our robust QM platform. Together, they form an unparalleled delivery system poised to revolutionize the landscape of Customer Success. In essence, the journey towards value realization is not a solitary trek but a collaborative odyssey, guided by a meticulously charted roadmap.
If you combine this approach with your genuine focus on the person in front of you, connecting the dots to the buyer’s goals, you’ll see the difference.
Yes, you’ll retain and expand a lot more, but above all, you’ll go to bed knowing you are doing a lot more to make many people’s lives much better!
“True living is living for others” after all, as Bruce Lee said!
Disclaimer: I am so honored to be guest writing this for the O’Daily and feel absolutely insecure about not being good at adding the right emojis at the right time, but nevertheless, the O’Daily is a source of inspiration to me, so this is such a treat!
(Thank you, Francis! It’s an honor to have you and thank you for letting me share so many of your ideas on this blog. Emojis here: 🙏 👏 🥳 🙌 🧠 🚀 - Kathryn)
Has anyone implemented some or parts of this Journey Map concept for their customers? Francis and I chatted through a few specific examples. Let me know if you’d like a follow up post to hear about those!
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