How to Raise Your Series A
Early stage investing has remained exciting and seen healthy, even increasing, capital flows since 2010. While it is defined differently by different venture industry participants, at Ascent, we separate angel and seed into a separate category that comes before the early stage. Those that are successful in the early stage and want to raise more capital continue on to the growth or later stage. In addition to more total capital being invested, deal sizes have continued to creep up since 2010, when the median sum offered for angel/seed-funded companies was $500k and $2.5 million for early-stage VC rounds. Fast forward to 2017, and median figures for angel/seed-funded and early stage companies have each doubled to $1.0 million and $5.0 million, respectively. We are clearly in the “greed” part of the cycle today.
Within the early stage category, looking at Series A in particular, the difference is even more apparent: the median funding has risen from $2.5 million in 2010 to $6.0 billion in 2017. So, as a startup looking to raise funding and ride this VC wave, where do you begin?
Do your research. As always, being thoughtful and putting time in to prepare upfront saves considerable time and frustration later. Much like employing account based marketing at a B2B tech company, we recommend looking into the following early on:
- Funds that are active (have capital) and are making new investments
- Funds that invest in your particular stage (seed, early, growth, etc.) and your type of business (consumer, B2B, life sciences, etc.)
- Funds whose typical check size is aligned with your capital needs
- General Partner(s) that look like they’d be the best fit, such as those that have made similar investments or that don’t have too many board seats filled
- Opportunities in your region. For Series A, they are more likely to be in your region, unless you are looking to use the funding to relocate
Start with a broad list but narrow it down to the firms that are potentially the greatest fit. Focusing your efforts on the 10 – 12 firms that are the best “fit” will be more productive and fruitful than canvasing the entire venture community and spreading yourself too thin.
Start early. Ideally, try to meet or set up an intro with your target firms or partners before you begin fundraising. Seek their advice, not their capital. Start a dialogue using your network – LinkedIn, and networking at conferences and local events are great places to begin. You can also look to connect with them via other CEO’s or executives they have backed. Commenting on firm’s or partners’ blog posts is a great way to get a conversation going as well.
Deliver. Once in contact, you can begin planting seeds with investors by sharing a few milestones that you are confident you will hit over the next few months, as appropriate. VCs love to see companies achieve their goals and meet the expectations they have set. Share a periodic flow of positive press or insightful blog pieces. Showing potential investors that you are building momentum over time and delivering on your plans will make your fund raise that much easier.
ABR (Always. Be. Raising. – with apologies to Glengarry Glen Ross) The best fundraisers are those who see it as a critical part of growing their business rather than as a distraction or side chore. They have the mindset of “always be raising,” or at least always looking to meet people that could be good financing partners down the road. It is possible to take this too far and not focus enough on your business, but it is usually wise to allocate some time each quarter to building connections and updating relationships with future funding sources.
If venture capital is the right way to fund your business, then raising capital is going to need to be an area of strength for your management team. It is true B2B partnering of the deepest kind, and doing your homework and being focused is critical as you are not just looking for growth capital, but also for the right partner who will be smart, supportive and help in other ways beyond money. It’s an exciting time to be a startup in today’s VC market, and these tips will be good to keep in mind not only for raising series A, but also for other series down the line.