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Seed to Series A Financing

In the founder journey, the challenge of raising capital is a priority and can seem like a mystery, especially from inception to institutional investment. M13 is all about execution and accelerating outcomes for founders, so I gathered a panel of experts and M13 friends in early stage investment and on the operating side to unpack a company's journey from Seed to Series A. Our conversation covered the challenges and opportunities in the cycles that the market and investment community naturally go through –– all of which have been accelerated by  COVID-19.

The M13 constellation includes lots of superstars on the founder and investor side. Participating in our Seed to Series A discussion were innovator & disruptor, Co-founder of Gilt and Glamsquad amongst others, Alexandra Wilkis Wilson, Techstars Managing Director Jenny Fielding, and General Partner at IA Ventures Brad Gillespie. When it comes to funding, there are practical tips for founders and managers across different sectors. Together we explored what qualifies a company for seed investment, starting the journey with an investor, and knowing when you’re ready.

Alexandra brings expertise from her previous roles as Co-Founder/CEO at leading on-demand mobile beauty services company, GLAMSQUAD; and Co-Founder/CEO of wardrobe organization service, Fitz; and Co-Founder at e-commerce sensation, Gilt. Alexandra is currently SVP of Consumer Strategy and Innovation for pharmaceutical company Allergan.

Jenny speaks from her experience as Managing Director of Techstars in New York, where she leads the program. She is also the founder and General Partner at The Fund, a first check fund investing exclusively in New York-based companies. Jenny’s insights also stem from her Corporate Venture and Digital Innovation role at BBC Worldwide, where she made strategic investments and led business development deals.

Brad helped start IA Ventures in 2010, having seeded over 100 companies including Datadog, The Trade Desk, Flatiron Health, Transferwise, and Digital Ocean. Spending over fifteen years in product, technology, and leadership roles prior to IA, Brad holds a PhD in Electrical and Computer Engineering.

Below is a recap of our conversation, followed by the full discussion.

What qualifies a company for seed investment today?

  • Product-market fit with market validation. Many investors are seeking someone who deeply understands their customer’s problems and can deliver against that.
  • Raw potential. Investors are looking to see if there is excitement and raw potential around the concept.
  • A great founder track record. Being a second-time founder and having a track record helps give a better understanding of the potential.
“One thing you really want to be able to demonstrate is engagement. Do you have consumers who love your product or service? ...Are [they] investing their own time and energy to give you feedback because they really want your business to exist?” – Alexandra Wilkis Wilson

What sort of investor should you look for?

  • Think about the investors you want before you need them. Start building those relationships. A lot of investors do track you and your company's growth for a pretty substantial period of time.
  • The early stages are not formulaic. Think of unique combinations of qualities you can sell to an investor. Do you have incredible metrics? Are you a second-time founder? Find ways to sell your credibility.
  • Relate to your investor on a human level. Investors that understand your business on a more personal level will relate better to your vision and could be better positioned to help the company. 
“...The highest value for me in that engagement is actually seeing how you, the founder, are thinking and evolving the business over time.” – Brad Gillespie

How do you know when you’re ready?

  • Cash is king. You need to have your eye on your cash constantly. Understand your burn. Are you being as prudent as possible? It is best to raise capital when it is not needed.
  • How are you packaging your company? Ask yourself if you can prove an irrefutable product-market fit.
  • Show that you understand pain points. Investors value a customer domain expert.
“Investors come in many flavors, and we just encourage founders to get to know them as much as they can… Don't just think about valuation or reputation really – do I have a connection with this person because they're going to potentially be helping me or not helping me for the next 10 years?” – Jenny Fielding

How should investors think about helping guide companies to the right lead investors for the next round?

  • Raise off of narrative and raise off of metrics. There is always a balance between narrative, that sells the vision, and metrics that essentially prove the narrative. In the early days narratives must lead but over time, your metrics should tell eventually tell the story for you. 
  • Look ahead to a more profitable mindset. How are we building a company that is sustainable?
  • Why can this be a truly important company? Why will it be truly legendary down the road? The journey validates later stage investment.
  • Engagement matters. You must have an understanding how your users are using your product or service, and why.

One of the key takeaways here, as Brad says, is that “engagement ultimately ends up being something every investor… views as valuable.” When it comes to growing and acquiring funding, now and in the future, there needs to be engagement and a product-market fit. Watch the full video below for our insightful round table conversation.

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