Over the last 10 years, there has been a transformation in the Series A financing environment—the obstacles are now much greater.
Series A funding refers to the class of preferred stock sold and is the first venture capital funding for a startup. A startup company’s funding rounds follow the order—first the seed round, then Series A funding round, and then the Series B funding round.
With an influx of startups, including a plethora of social media apps, dating apps and instant communications, the competition of finding an investor has increased manifold. So, here are some important things you should remember, particularly when you are raising your Series A funding in a startup.
Fundraising in the current business environment is utterly time-consuming process. Therefore, it is highly recommended that you start the process at least 7-8 months before you actually start raising your Series A financing.
Since underestimating the timeframe may lead to desperation, it can often influence and alter your funding strategy to include diverting attention in order to sustain your business.
Build out your team
It is extremely important to evaluate the key areas where your founding team is lacking and fill the gaps in the form of either employees or advisors, for it acts gives a positive signal to investors that your company is all set to move to the next stage.
Take advantage of your network
Taking advantage of your network and building genuine relationships prior to beginning your Series A fundraising will immensely help you in getting meetings with potential investors. Reach out to your acquaintances which may help you and request them to reach out to their connections to help you in fundraising, as these second-degree networks often have favourable outcomes. Ask your extended network to spread the word about your business or even your PR/marketing initiatives can prove helpful.
Set an achievable goal
It’s always recommended to start your Series A fundraising with a well-understood, well-planned, and well-executed niche—the one that is also able to hold an inspiring, grander vision, but which is achievable.
Choose the VC wisely
Among thousands of VCs, narrowing your search and finding a suitable investor is extremely difficult and time-consuming. So, it is important that you do extensive research before choosing your appropriate VC. You should ask yourself the following questions before approaching one, such as—Who should you approach? Who is going to be the best fit for you so your “newbie” company can rise? Does the VC you are approaching have any domain knowledge?
These questions are important because if the VC you might have approached may have little or no knowledge of your domain, and they may give you poor advice, which could result poorly. Also, since most VCs invest in multiple startups, it’s crucial that you make good relations with them as they may not be so gracious to you in case your company struggles.
Moreover, if you are looking to close with your VC on a long term basis, it’s better to choose someone you can actually talk to comfortably and get along with.
Therefore, if you are looking to raise Series A funding, it might prove beneficial if you get acquainted with what venture funds look for, in order to ensure that your company is Series A ready.
Also, some key factors like revenue, proof of business model, promising unit economics, systems ready to support efficient scaling, customer acquisition strategy and its success, product/market fit, and quality of team can help determine the position of your company with respect to these metrics to figure if your company is all set for Series A.