How do you know if your business is ready for Series A funding?

Posted in VC
09/02/2021 Duncan Knight

Scaling a B2B Tech / SaaS business is never easy, especially when you have a strong plan, but you don’t have the necessary capital to execute your strategy. You’ve grown your company with an earlier seed-round, but now you’re considering growth capital. This is where raising your Series A comes in. This article covers the main points you need to review in order to consider whether your business is Series A ready.

Positive sales & marketing indicators
Sales and marketing metrics are all important for you to know when to push the plunger of Series A investment growth. You will have been testing and learning for a while now and your indicators are starting to prove your methods can identify, reach and appeal to your ideal customer in a repeatable way. This is (at least beginning) to demonstrate that you are starting to find the all-important product-market fit.

Annual / Monthly Recurring Revenues
For SaaS businesses, Series A often comes with the requirement that you have grown your annual net revenues to the magic £1m net ARR. Investors need to know you’re onto something solid and that is partially proven out with your revenues. These folks are professional investors, they can’t make bets on half-proven businesses with a few ‘lucky deals’ from existing contacts; not with other people’s money. Usually, you can engage with a VC if you are at least £500k+ and growing strongly month-on-month. You will need to meet the VCs revenue requirements by the time you close the round, or may receive less favourable terms, e.g. take a hit on valuation.

Break-even is just over the horizon
Your finances are in good shape. You can see that you have a clear path to break-even. Investors are happy that you need cash to grow and don’t expect you to be cashflow positive after you receive investment. In fact, they want to invest in your business and then execute the plan to grow as quickly as possible, which means spending the investment over the first year or two. This will get you back into a good cash state and back to the profitability horizon.

A lack of investment is holding you back
You know that in order to grow to £10m ARR and beyond, that you need an investment in a team of people that have delivered on those revenues or built scalable products to that level before. That’s not to deride the team you have already, but sometimes we need different experience in product and process to deliver against a big identified market opportunity.

If you are seeing the above indicators, then get in touch. We’ve helped our companies raise £500m of negotiated deals.

Our programme is structured to deliver your document readiness in a succinct period of time. You will receive honest feedback in your assumptions, all designed to take you to market, negotiate your term sheets and close your round as soon as possible.

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