Is Your Business Ready For Venture Capital Investment?
Here's another quick read that I wrote earlier for The ScaleUp Accelerator blog...
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 VC's revenue requirements by the time you close the round or may receive less favourable terms, e.g. take a hit on valuation.
Breakeven is just over the horizon Your finances are in good shape. You can see that you have a clear path to breakeven. Investors are happy that you need cash to grow and don’t expect you to be cash flow 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, you need to invest 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 experiences in product and process to deliver against a big identified market opportunity.
I’d love to hear from you if you're looking to raise in the next 12-months ahead!
Happy business growing! 😊