Software founders have never had so many metrics thrown at them by VCs on how to run a business. Across social media, in newsletters and at events, it’s been hard to escape charts on measuring CAC, cash burn, growth and efficiency.
We’ve never believed that great businesses are built solely on metrics or KPIs. Rather, 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’ve put together some answers to the questions we keep hearing around growth and fundraising.
What’s the goal of the journey from Series A to Series B?
Just as the journey from the seed to Series A stage is about finding product-market fit, the journey from Series A to B is also defined well.
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.
The best founders take as much advice as they can, but they know their business well enough to understand what will work and what won’t.
By the time of your Series B, 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 helpful to have that goal in mind when planning your spending and team structure.
Most common mistake: Getting to Series B without a scalable go-to-market plan.
How aggressively should we grow this year?
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. We say: Don’t let the financial markets dictate your strategy.
There is no definitive answer to this question. Just remember that you raised money to capitalize on an opportunity not to preserve cash. 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 short notice.
Fortune favors the brave. If you are benefiting from structural tailwinds, now is not the time to pull back.
On the journey to Series B, strategy is more important than metrics by Ram Iyer originally published on TechCrunch
https://techcrunch.com/2023/02/14/strategy-trumps-metrics-on-the-journey-to-series-b/
