The Four Pillars For Founders, How To Scale From Seed Round to Series A

You just raised your first official round of equity funding – congratulations! Now what!¬† As my good friend Chris Beall likes to say, “when you hear the starter pistol (boom!), you better be running” because you just started the clock on the next 12-18 months of your companies development… and guess what? 9 out of 10 companies don’t make it past the first 12-18 months.

What is Seed Funding?

Seed funding is the first official equity funding stage. It typically represents the first official money that a business venture or enterprise raises; some companies never extend beyond seed funding into Series A rounds or beyond.

You can think of the “seed” funding as part of an analogy for planting a tree. This early financial support is ideally the “seed” which will help to grow the business. Given enough revenue and a successful business strategy, as well as the perseverance and dedication of investors, the company will hopefully eventually grow into a “tree.” Seed funding helps a company to finance its first steps, including things like market research and product development. With seed funding, a company has assistance in determining what its final products will be and who its target demographic is. Seed funding is used to employ a founding team to complete these tasks.

There are many potential investors in a seed funding situation: founders, friends, family, incubators, venture capital¬†companies, and more. One of the most common types of investors participating in seed funding is a so-called “angel investor.” Angel investors tend to appreciate riskier ventures (such as startups with little by way of a proven track record so far) and expect an equity stake in the company in exchange for their investment.
While seed funding rounds vary significantly in terms of the amount of capital they generate for a new company, it’s not uncommon for these rounds to produce anywhere from $10,000 up to $2 million for the startup in question. For some startups, a seed funding round is all that the founders feel is necessary in order to successfully get their company off the ground; these companies may never engage in a Series A round of funding. Most companies raising seed funding are valued at somewhere between $3 million and $6 million.

Read the full post here.

 

There are Four Pillars to making your company investable – as shown here.

 

Pillar #1 | Story – what is your sector/industry? What is the problem? What is your solution?

Most early-stage seed-funded companies think they know the answer to these questions until they begin to scale.

Traditionally: Most companies hire a CRO, and then rely on that person to reach out to prospects the best way they know-how. So depending on the time period in which they learned how to sell, they will either use advanced prospecting techniques, or they won’t. When they don’t, it can take months to learn what’s going on in the marketplace. Is there a product/market fit, does the “dog hunt” or not? A traditional CRO will drive a handful of sales calls per week, reach out to people in their network, with the goal of landing the first 3-5 customers in 12 months.

The Role of AI for Sales (and Marketing): Accelerate the speed at which your company collects information about the market so that pivots can be made much more quickly, and founders can land dozens of customers in months instead of the traditional 3-5 in the first year!

How does AI for Sales Work? Companies like ScaleX have combined DATA + DIGITAL outreach + DIALS into a single done-for-you model to deliver 10X more sales (and marketing touches) in a fraction of the time. More meetings = more sales.

 

Pillar #2 | Team – Can your team execute the story you just told?

Traditionally: There several CROs who have a track record of success stories. And there are thousands more than don’t (yet). Traditionally the CEO could choose a CRO, and pass the pipeline / top-of-funnel problem on to the CRO.

The Role of AI for Sales (and Marketing): The CEO is ultimately responsible for the success (or failure) of a business. So hiring a CRO to handle the top-of-funnel problem isn’t always the best decision in today’s complex selling environment. By partnering with an AI for Sales (and Marketing) company, Founders & CEOs can de-risk the first year of their go-to-market.

How? By executing the same number (and quality) of sales and marketing activities that would normally take a year, into < 90 days!

 

Pillar #3 | Exit/Return – How are you defining the win?

Traditionally: Many investors in silicon valley are looking for a triple, triple, double, double, double. Meaning Year 1 you triple, Year 2 you triple again, years 3-5, you double again each year. Traditionally, this meant adding bodies to the process. For every $X in headcount spend, it meant $Y in revenue increase.

The Role of AI for Sales (and Marketing): AI for Sales (and Marketing) can lower a companies dependence on headcount to grow revenues. By collaborating with an AI for Sales (and Marketing) company to help you drive the cost per MQL down, and therefore the cost per SQL down, means more pipeline, more meetings, and more sales.

 

 

 

Pillar #4 | Investment Vehicle – What structure is the capital being held and delivered in? (How you take in capital affects everything – hiring, the next round, exit, ability to be acquired, ability to grow).

Traditionally: Companies get started by selling something, they raise some funds, and then they look in the rear-view mirror and wish they did things differently.

The Role of AI for Sales (and Marketing): By collaborating with a company that offers virtual SDRs and BDRs (and sales ops/marketing ops) in the cloud, you can gain better control and understanding of your market, before ever bringing an investor in. By operating more efficiently than other funded start-ups, you give up less equity, keep control, and ultimately create a better exit for yourself and your co-founders/employees.

 

 

 

In conclusion – there are four pillars that Founders need to get right in order to go from Seed Round to Series A (and beyond). AI for Sales enables Founders to do more with less, which ultimately means giving up less equity and keeping more for themselves, and for their shareholders and employees.

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