winning strategies startups use to raise series a [vc portfolio data]

New STARTUP Data: Winning Strategies

Series A A Look Inside the

Portfolio of Seed VC

for Raising Your

“Data,” eh? I’m skeptical. Who are you, and how did you get all that?

We’re NextView Ventures.

We’re NextView Ventures. A seed-stage VC firm with a single mission:

We’re NextView Ventures. A seed-stage VC firm with a single mission: Help founders give their web & mobile companies the

B e s t p o s s i b l e s t a r t

We’re NextView Ventures. A seed-stage VC firm with a single mission: Help founders give their web & mobile companies the

B e s t p o s s i b l e s t a r t

(We think about those three words a lot, so we thought we’d be transparent about what works for our portfolio.)

We’re NextView Ventures. A seed-stage VC firm with a single mission: Help founders give their web & mobile companies the

B e s t p o s s i b l e s t a r t

(We think about those three words a lot, so we thought we’d be transparent about what works for our portfolio.)

40+ web & Mobile Startups (All U.S.-Based)

70+% For context: of our portfolio startups that attempted to raise Series A successfully did so. (The industry average is ~27%.)

Industry data via tomtunguz.com

So we wondered… WHY?

So we wondered… WHY?

Why do they succeed? What were their narratives? What altered their timelines to raise? What affected their total dollars raised?

Here’s what we found…

There were distinct approaches used to successfully raise Series A. (We’ll call these the “winning” strategies.)

4

The 4 Winning Strategies for Raising Series A

The 4 Winning Strategies for Raising Series A

BUILD AUDIENCE MOMENTUM •  Organic user growth translates to big topline figures. •  Attractive graphs, while vanity metrics, contribute to the story.

The 4 Winning Strategies for Raising Series A

BUILD AUDIENCE MOMENTUM •  Organic user growth translates to big topline figures. •  Attractive graphs, while vanity metrics, contribute to the story.

Generate real revenue •  Strong sign the company is investable. •  Especially in B2B, indicates product-market fit.

The 4 Winning Strategies for Raising Series A

BUILD AUDIENCE MOMENTUM •  Organic user growth translates to big topline figures. •  Attractive graphs, while vanity metrics, contribute to the story.

Generate real revenue •  Strong sign the company is investable. •  Especially in B2B, indicates product-market fit.

Craft a Small Scale machine •  Shows deep (if narrow) engagement or market penetration. •  Attractive small-scale economics, including LTV/CAC ratio.*

*Lifetime Value to Customer Acquisition Costs

The 4 Winning Strategies for Raising Series A

BUILD AUDIENCE MOMENTUM •  Organic user growth translates to big topline figures. •  Attractive graphs, while vanity metrics, contribute to the story.

Generate real revenue •  Strong sign the company is investable. •  Especially in B2B, indicates product-market fit.

Craft a Small Scale machine •  Shows deep (if narrow) engagement or market penetration. •  Attractive small-scale economics, including LTV/CAC ratio.*

*Lifetime Value to Customer Acquisition Costs

SELL HUGE VISION & UNSTOPPABLE PROMISE •  Convey and generate excitement via qualitative means. •  Sensational press/advisors/pilot customers all contribute.

First, a look at how quickly each group raised their

Series A rounds.

Across all four winning strategies, the average time between raising seed capital and raising Series A was…

303 days (or roughly 10 months)

Across all four winning strategies, the average time between raising seed capital and raising Series A was…

The exact timelines varied slightly across each strategy. (We’ll interpret this data in a few slides.)

309 days 323 days 320 days

261 days

Days BETWEEN Seed & SERIES A

Startup Operating Strategy

Audience Revenue Small Scale Promise

Next, a look at

Series A size.

The average amount raised across all four winning strategies was…

S5.2M I

The average amount raised across all four winning strategies was…

$4.5M

$5.9M

$4.8M

$5.6M

SERIES A DOLLARS RAISED

Startup Operating Strategy

Audience Revenue Small Scale Promise

Series A dollar amounts varied a bit more than the timelines when you examine each strategy:

So what can we learn here?

309 days 323 days 320 days

261 days

Startup Operating Strategy

Audience Revenue Small Scale Promise

Thing We Learned #1

Companies operating with a focus on revenue growth took the longest to raise

their Series A. However…

Days BETWEEN Seed & SERIES A

$4.5M

$5.9M

$4.8M

$5.6M

SERIES A DOLLARS RAISED

Startup Operating Strategy

Audience Revenue Small Scale Promise

Thing We Learned #1

…they raised the largest dollar amounts.

A comforting finding, really

Thing We Learned #2

309 days 323 days 320 days

261 days

Startup Operating Strategy

Audience Revenue Small Scale Promise

Thing We Learned #2

Startups pitching the more qualitative, future-looking “promise” strategy raised quickest, perhaps needing to strike while their story

still had momentum.

Days BETWEEN Seed & SERIES A

$4.5M

$5.9M

$4.8M

$5.6M

SERIES A DOLLARS RAISED

Startup Operating Strategy

Audience Revenue Small Scale Promise

Thing We Learned #2

And, somewhat surprisingly, they raised

the second-highest Series A rounds on the backs of

these stories.

MOON OR

BUST!

Thing We Learned #3

Thing We Learned #3 Having larger, lifecycle VCs (i.e. firms known for investing in later rounds) invest in a startup’s seed

round had no meaningful impact on how quickly they raised Series A.

Thing We Learned #3

However, these VCs did appear to help startups raise larger

dollar amounts.

Having larger, lifecycle VCs (i.e. firms known for investing in later rounds) invest in a startup’s seed

round had no meaningful impact on how quickly they raised Series A.

Thing We Learned #3

With large VCs involved in seed: $5.9M Series A average

Without large VCs involved in seed:

$4.9M Series A average

Having larger, lifecycle VCs (i.e. firms known for investing in later rounds) invest in a startup’s seed

round had no meaningful impact on how quickly they raised Series A.

However, these VCs did appear to help startups raise larger

dollar amounts.

Thing We Learned #4

Thing We Learned #4 Higher founder salaries did not appear to have any meaningful impact on Series A timelines or dollars.

Thing We Learned #4 Higher founder salaries did not appear to have any meaningful impact on Series A timelines or dollars.

(There’s a popular opinion that founders who take higher salaries are less hungry or driven, which could affect their success in both operating and fundraising.)

Thing We Learned #4 Higher founder salaries did not appear to have any meaningful impact on Series A timelines or dollars.

(There’s a popular opinion that founders who take higher salaries are less hungry or driven, which could affect their success in both operating and fundraising.)

(This is not an opinion shared by NextView.)

So what should entrepreneurs do differently?

So what should entrepreneurs do differently?

First, accept that there isn’t one “right” or “best” way to raise Series A. In reality, there are many ways.

So what should entrepreneurs do differently?

First, accept that there isn’t one “right” or “best” way to raise Series A. In reality, there are many ways.

So what should entrepreneurs do differently?

So rather than seek THE way, you should instead be explicit about WHICH way you plan to operate.

So what should entrepreneurs do differently?

So rather than seek THE way, you should instead be explicit about WHICH way you plan to operate.

So what should entrepreneurs do differently?

So rather than seek THE way, you should instead be explicit about WHICH way you plan to operate. Focus on it, set goals through it, tell your story around it, and pitch with it.

Once you pick that strategy and begin to focus on it, you’ll have a better idea of how to orient your company towards a successful Series A.

Once you pick that strategy and begin to focus on it, you’ll have a better idea of how to orient your company towards a successful Series A. Selling hype and promise? Go for Series A sooner

Once you pick that strategy and begin to focus on it, you’ll have a better idea of how to orient your company towards a successful Series A. Selling hype and promise? Go for Series A sooner Generating real revenue? ANTICIPATE A LONGER TIMeLINE to raise (but ask for more dollars) Etc.

Once you pick that strategy and begin to focus on it, you’ll have a better idea of how to orient your company towards a successful Series A. Selling hype and promise? Go for Series A sooner Generating real revenue? ANTICIPATE A LONGER TIMeLINE to raise (but ask for more dollars) Etc.

(So says the data)

In the end, the seed stage is all about traction, which ultimately informs the story you use to raise Series A.

In the end, the seed stage is all about traction, which ultimately informs the story you use to raise Series A. To find success, identify your strategy early and optimize Everything around it.

BEST OF LUCK! The NextView Ventures Team

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