Loading stock data...
GettyImages 1363836297
Technology

Strategy Trumps Metrics When Pursuing a Series B Funding Round

Horizonstocks

As software founders, we’re constantly bombarded with metrics and KPIs by venture capitalists (VCs) on how to run a business. From social media to newsletters and events, it’s hard to escape charts on measuring customer acquisition cost (CAC), cash burn, growth, and efficiency. However, at our firm, we’ve never believed that great businesses are built solely on metrics or KPIs.

Instead, we guide founders to build a strategy that helps them understand when to grow, when to pull back, when to spend, and when to save. Below, we’ll address some common questions around growth and fundraising that we keep hearing from our portfolio companies.

What’s the Goal of the Journey from Series A to Series B?

The journey from seed to Series A is about finding product-market fit, while the journey from Series A to B is also well-defined. The purpose of the capital raised at Series A is to take the company from initial signs of product-market fit to having predictable revenue growth.

By the time you reach the Series B stage, you’re expected to have a go-to-market engine that lets you know if you invest $1 into sales and marketing, you’ll get X back (hopefully, X is more than $1). It’s essential to have this goal in mind when planning your spending and team structure.

The Most Common Mistake: Getting to Series B without a Scalable Go-to-Market Plan

We’ve seen many companies struggle because they rush into the Series B stage without having a scalable go-to-market plan. This can lead to wasted resources, missed opportunities, and even business failure.

What’s the Best Approach to Growth?

In 2021, the answer would have been to grow as fast as possible, regardless of burn. In 2022, you’ve been told to forego growth and pursue profitability. However, we say: Don’t let financial markets dictate your strategy. There is no definitive answer to this question.

Remember to Take Risks, But Not Reckless Ones

As a founder, you should be comfortable with taking risks, but that doesn’t mean you should be reckless. There’s a difference between cutting back on spending because the opportunity isn’t evolving as expected and running out of cash at an alarming rate.

How to Approach Growth Strategically

To approach growth strategically, consider the following:

  • Understand your customer acquisition cost (CAC): Make sure you have a clear understanding of how much it costs to acquire each customer.
  • Measure your cash burn: Keep track of how much money you’re spending each month and make adjustments as needed.
  • Focus on retention: Prioritize retaining existing customers over acquiring new ones. This will help you reduce churn and increase revenue.
  • Monitor your key performance indicators (KPIs): Track your KPIs, such as customer lifetime value (CLV), to ensure you’re on the right path.

What’s the Role of Data in Growth?

Data is a critical component of growth. It helps you make informed decisions about where to focus your resources and how to optimize your go-to-market strategy.

  • Use data to inform your decision-making: Don’t rely solely on intuition or gut feeling. Use data to drive your decisions.
  • Monitor your KPIs closely: Regularly review your KPIs to ensure you’re meeting your growth targets.
  • Experiment and iterate: Continuously experiment with new strategies and tactics, and iterate based on the results.

Conclusion

Growth and fundraising are critical components of any successful startup. By understanding the right approach to growth and using data to inform your decision-making, you’ll be better equipped to navigate the challenges of scaling a business.

As software founders, we’re constantly learning and adapting to new circumstances. Stay agile, stay focused on your goals, and always keep an eye on your KPIs.

Recommended Reading

By following the tips outlined above and staying up-to-date on industry trends, you’ll be well-equipped to tackle the challenges of growth and fundraising.

About the Author

Ophelia Brown is the founder and partner at Blossom Capital, an early-stage venture fund. Imran Ghory is a general partner at Blossom Capital, where he invests in Series A companies in Europe across SaaS, security, and infrastructure.

Contact Us

To learn more about growth strategies and fundraising, contact us at info@blossomcapital.com or visit our website at www.blossomcapital.com.