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New STARTUP Data: Winning Strategies Series A A Look Inside the Portfolio of Seed VC for Raising Your
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Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

Jul 02, 2015

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At NextView Ventures, we examined our seed-stage startup portfolio of 40+ web and mobile companies and produced this data around which strategies help startups raise Series A. The SlideShare contains data on four key strategies, as well as their success rates in both time to Series A and total dollars.
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Page 1: 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

Page 2: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 3: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

We’re NextView Ventures.

Page 4: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 5: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 6: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.)

Page 7: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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)

Page 8: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 9: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

So we wondered… WHY?

Page 10: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

So we wondered… WHY?

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

Page 11: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

Here’s what we found…

Page 12: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

4

Page 13: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

The 4 Winning Strategies for Raising Series A

Page 14: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 15: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 16: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 17: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 18: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

First, a look at how quickly each group raised their

Series A rounds.

Page 19: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 20: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

303 days (or roughly 10 months)

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

Page 21: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 22: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

Next, a look at

Series A size.

Page 23: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

The average amount raised across all four winning strategies was…

Page 24: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

S5.2M I

The average amount raised across all four winning strategies was…

Page 25: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

$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:

Page 26: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

So what can we learn here?

Page 27: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 28: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

$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.

Page 29: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]
Page 30: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

A comforting finding, really

Page 31: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

Thing We Learned #2

Page 32: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 33: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

$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.

Page 34: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]
Page 35: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

MOON OR

BUST!

Page 36: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

Thing We Learned #3

Page 37: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 38: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 39: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 40: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

Thing We Learned #4

Page 41: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 42: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.)

Page 43: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.)

Page 44: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

So what should entrepreneurs do differently?

Page 45: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 46: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 47: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

So what should entrepreneurs do differently?

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

Page 48: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

So what should entrepreneurs do differently?

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

Page 49: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 50: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 51: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 52: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 53: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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)

Page 54: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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

Page 55: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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.

Page 56: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

BEST OF LUCK! The NextView Ventures Team

Page 57: Winning Strategies Startups Use to Raise Series A [VC Portfolio Data]

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