How to raise a $33m Series A during an economic downturn

2023 will likely be a robust 12 months for fundraising, and I can converse from expertise. 

In November 2022, we raised a $33m Series A from Radical Ventures and Temasek — and it was no stroll within the park.

We had numerous traders drop out, as few had been ready to provide the bold income multiples and valuation ranges we had been aiming for, and a number of other had been specializing in supporting struggling current portfolio corporations as a substitute of including new ones.

Fundraising is an important a part of your organization’s development, but it surely’s additionally a entice. Spend too lengthy doing it, and the workforce’s morale begins to rot and the day-to-day enterprise suffers. What started as a quest for brand new fortunes can quickly bitter into a bitter seek for survival.

That’s why we wished to share our six prime suggestions to nail your fundraise. 

Hopefully, these learnings will provide help to get your organization funded shortly and energise your workforce, so you possibly can put your head down and give attention to constructing a nice enterprise — till you’ve got to do all of it once more in two years…

1. Start with outreach: get launched to 30-50 funds

Prepare a blurb to share together with your current traders (for them to make intros to traders they is perhaps nice to your subsequent spherical) and to your personal outreach. Remember, fundraising is like gross sales, and outcomes come from succinct and chronic outreach makes an attempt. Here’s an instance of what that may seem like coming from a VC: 

Hey XYZ, I’ve been following V7, a ___ platform for ___. They’re elevating a Series A and have a terrific product.

Here’s a few highlights:

• Founders are ex-founders of ____.
• ___ clients together with ___, ___, and ___.
• _x income development final 12 months. _x development this 12 months
• __x natural customer development in 12 months
• __+ workforce dimension (_x since final 12 months)
• __% retention charge for patrons since 2020
• Raising $__m

Would you be fascinated by an intro to the founders?

Best needs

You can simply adapt this e-mail to your personal chilly outreach immediately to traders.

After that:

1. Create a devoted inbox for the fundraise, one thing like [email protected] You’ll need to share this login with different workforce members to monitor and reply to emails shortly.
2. Hopefully you’ll have already got a record of lukewarm leads who contacted you up to now for an intro name. If not, search by means of your inbox for the phrases “capital” or “AUM” to fish out outdated conversations with VCs, and place them in your CRM (there’s a template for this CRM additional down the article).
3. Get heat intros to funds out of your traders and pals. Start by having your current traders record their potential heat intros on a collaborative spreadsheet to keep away from overlap.
4. Rank your leads by tier. Tier 1 funds are these you’d fortunately get a time period sheet from. Tier 2+ are these you’d contemplate as backups. You’ll need to begin your conversations with funds you don’t essentially need. Practice makes good and when the precise dialog comes by you’ll need to be ready.

Here’s what our mixture of inbound — funds that reached out to us — vs outbound — funds that we reached out to — appeared like. Just like in gross sales, you want to qualify your leads to display out duds. 

Qualified funds are these which we vetted to be a potential match primarily based on capital to deploy (have they got the precise cheque dimension for this spherical? Can they comply with on in our Series B and C?), true curiosity and details about the sphere we function in, a geographic match for our community, and their repute with different founders. Look for real companions and don’t get caught up chasing dumb cash. 

Warm intros, even once they come inbound (that’s, VCs asking our traders or angels for an intro to us) work much better on common; we netted 3x extra certified funds from heat moderately than chilly outreach. Your greatest supply of heat intros are your current traders. It doesn’t matter how cool your organization is, getting one other trusted human to introduce you instantly creates higher rapport. Fundraising is essentially about belief, and an intro helps you.

2. Build a deal workforce

Founders can fundraise alone at seed, however at Series A and past they’ll want a little assist from their management workforce. We divided our roles within the following method:

• Email communication: CEO, head of gross sales and different key leaders ought to rotate the fundraising inbox to reply shortly and prepare follow-ups. If one of many cofounders is the CTO, it’s your decision to defend them from most fundraising tasks so they might give attention to rising the product. You need to reply inside minutes, not hours or days.
• Sales due diligence: Your head of gross sales will spend an hour with promising traders to clarify your gross sales technique, forecasts and key numbers.
• Finances: Your finance or operations chief ought to get very acquainted with your prices, income forecasts, margins and floor key figures in minutes.
• Customer References: Your head of buyer success ought to prime your most attention-grabbing clients for reference calls with traders. Make it clear this can be up to a handful of calls, and promise them a considerate reward in return for the assistance. If your clients are startups make certain to allow them to know you’ll move it ahead.

3. Do your diligence on traders in early calls

An investor name isn’t simply a time for them to do diligence on you. It’s additionally a time for you to be taught extra about their technique and whether or not or not it will be the precise match in the event that they had been to give you an funding. 

1. Could you information me by means of the fundamentals of the fund? Your common cheque dimension, classic, do you comply with on at Series B usually? Every VC has a rehearsed reply for this, however take notes on the numbers. The greatest on the market will doubtless reply the remaining questions on this record as a part of this intro so you possibly can focus in your backgrounds and relationship.
2. Have you been our area for lengthy? What are your ideas on its successful route? You’ll need to convey in your board somebody who is aware of how to make you win. Often this isn’t simply deploying capital, however championing the strategy your organization is taking to your class.
3. What is your background and what led you into <agency title>? Build some rapport with the people behind the fund, as they’re those who’ll be part of you as board administrators or observers. You received’t all the time meet companions in your first assembly, nonetheless all the time make an effort to perceive the calibre of people these folks convey into their ranks. VC companies don’t have massive numbers of workers, so the standard of individuals inside the agency can also be indicative of the qualify of expertise they’ll introduce to you as soon as they make investments.
4. Are there any portfolio corporations adjoining to us that might act pretty much as good references, or which have had related development challenges to those we’re doubtless to face? This is a query greatest suited to a follow-up assembly. You’ll need to make certain your traders understand how to help the kind of firm you’re, for instance, an ecommerce firm, or SaaS for builders.

4. Use Pitch to your deck (and steal our template)

Tools are virtually as necessary as course of. Two years in the past, during our seed spherical, we relied on DocSend to ship materials to traders. This time, we used Notion and Pitch, which allowed us to embed movies, Looms and graphs that behave like native components, in addition to customized URLs that we will observe. This took our Series A fundraising to a entire new degree.

5. Get your information room so as (and use our template)

Your information room reveals to traders how clear and measured the interior workings of your small business actually are. An exhaustive information room reduces back-and-forth and accelerates deal stream. Your greatest enemy is clarification calls that occur when there may be a lacking statistic or poorly illustrated graph.

Our information room obtained numerous reward at Series A, so we’ve made the template accessible. Though it’s closely redacted, it provides you an thought of the extent of element you possibly can go into with out doing a lot ad-hoc work. Have a look and should you aren’t monitoring among the information inside it, be sure you begin now.

Standout components that traders actually loved had been the Gong name recording snippets we included that confirmed a real response to the product by customers, an in-depth aggressive evaluation and in depth use of graphs.

None of this materials was produced from scratch for the info room — it lives inside our gross sales enablement, buyer success coaching and different items of the enterprise. 

You can look by means of and create a copy of your template right here: Series A Data Room (Template)

6. Manage traders like a gross sales pipeline, and use a CRM

Fundraising is gross sales. The solely distinction is you’ve got just one merchandise left of the product you’re promoting, so that you’ll need to give attention to coordinating your pipeline phases.

Put your account govt hat on and get organised. Start through the use of a CRM that your management workforce can entry. We went for a easy Notion board to hold issues mobile-friendly.

You can entry our CRM template right here: Series A Investor CRM Template – Used in V7’s $33m Series A (2022)

One factor we discovered helpful was to take a screenshot of the Zoom window for every name to bear in mind everybody’s face. Below it, we might write notes on the backgrounds of the parents within the name, particulars of the fund and what their ideas on our area had been.

The CEO would take the primary and second calls, after which normally move the baton to the top of gross sales. Calls with different management figures together with the cofounder and CTO would normally occur after the third name to keep away from distractions.

Here’s a Sankey diagram of how we did this for our Series A:

Note: Some of the drop-out causes could also be well mannered rejections, or the true motive may have been that our product simply didn’t impress the companion or they didn’t just like the founders.

We used US VC Bessemer’s startup metric benchmarks to give us an thought of how VCs would choose our efficiency in opposition to our friends. We fell within the ninety fifth percentile in accordance to these metrics and had a 5-8% success charge in securing a time period sheet. That tells us a few issues about fundraising — and simply how arduous it’s proper now. 

First, metrics tracked in 2021 and early 2022 not matter as a lot. Cash conversion rating and internet income retention (NRR) at the moment are noticed extra carefully than the expansion charge.

Second, with much less cash round, competitors issues. A frequent response to our pitch was: “Your opponents are very properly capitalised, how will you win in the identical class in opposition to corporations who raised 5-20x greater than you?”

Third, relationships converse louder than numbers: a lot of the funds that made it to the tip knew me and Simon, our CTO, beforehand and adopted our journey.

7. You’ll solely signal one time period sheet, so create FOMO

Part of your leverage will depend upon what number of different consumers are evaluating your startup. Don’t fall into the entice of making an attempt to align your offers as completely different funds transfer at completely different speeds. Instead, transfer as quick as potential within the early phases of the pipeline and get funds to put effort within the course of. It’s simpler to get funds to transfer sooner if one participant is forward, and tougher to move when there’s momentum and pleasure on the early stage. You’ll have extra time to consider presents in direction of the tip of the journey, than to e book follow-ups in direction of the start.

In the suboptimal economic instances we’re in, it’s additionally necessary you stick with it the dialogue with funds that may significantly provide help to at Series B and past. You almost definitely received’t get the income multiples and the identical beneficial phrases you would have obtained a 12 months in the past, however don’t mull over that an excessive amount of: simply get the rattling cash. Pick a fund that’s centered on how to win your class moderately than your skill to keep lean.

It’s a robust time for startups in contrast to two years in the past, but we’re nonetheless in an period of unprecedented entry to capital, and entry to individuals who can deploy it. Start gathering your metrics, get on the market and inform your story!

Alberto Rizzoli is cofounder and CEO of V7, and Bill Leaver is product supervisor at V7.