Software founders have never have so many metrics been thrown at them by VCs on how to run a business. On social media, in newsletters, and at events, it’s been hard to escape charts on measuring CAC, cash burn, growth, and efficiency.
We have never believed that great companies are built on metrics or KPIs alone. Rather, we help founders build a strategy that helps them understand when to grow, when to exit, when to spend, and when to save.
Below, we’ve put together some answers to the questions we keep hearing about growing and fundraising.
What is the purpose of the journey from Series A to Series B?
Just as the journey from the seed phase to the Series A phase is about finding the product-market fit, the journey from Series A to B is also well defined.
The purpose of the capital raised during Series A is to move the company from early signs of product market fit to predictable revenue growth.
The best founders take as much advice as possible, but they know their business well enough to understand what will work and what won’t.
At the time of your Series B, you’re supposed to have a go-to-market engine that lets you know if you invest $1 in sales and marketing, you’ll get $X back (hopefully X is more than $1).
It’s helpful to have this goal in mind when planning your expenses and team structure.
Most common mistake: moving to Series B without a scalable go-to-market plan.
How much should we grow this year?
In 2021, the answer would have been to grow as fast as possible, regardless of the burn. In 2022, you were told to forego growth and pursue profitability. We say: Don’t let the financial markets dictate your strategy.
There is no definitive answer to this question. Remember that you raised funds to capitalize on an opportunity, not to hold onto cash. As a founder, you need to be comfortable with taking risks, but that doesn’t mean you have to be reckless. There’s a difference between cutting expenses because the opportunity isn’t going as planned and running out of cash in the short term.
Fortune favors the brave. If you are benefiting from structural tailwinds, now is not the time to retreat.