How to Raise a Series A

An article we liked from Thought Leader Sophia Bendz:

You raised seed — and now you want to raise a Series A

I have been angel investing since 2012 while at and after spending eight years at Spotify. 

Since then, I have backed 45+ companies and I’m regularly asked one particular question:

“How do I raise a Series A and can you have a look at my pitch deck?”

Several of my angel investments have gone on to raise Series A rounds from VCs. At Atomico, I focused on Series A and, now, at Cherry, I focus primarily on seed. Having seen the process from both sides of the table, I would like to extend my advice to early-stage founders.

Figure out who you want to raise from

Venture capital firms deploy money into startups expecting that a pretty high percentage of those will fail and that only a few will deliver fund-returning outcomes. Depending on the investment strategy and size of the fund, the size of those fund-returner companies at scale will differ. A $100m fund versus an $820m fund (like what Atomico most recently raised) will have different expectations about how big of an opportunity they are looking for. In general, early- to mid-stage VCs are aiming to return 3x on the money they raised to investors, which should give an indication of how big of an opportunity a fund looks for. (Andrew Chen at Andreessen Horowitz has a great piece on VC math if you want to learn more.)

When you’re trying to figure out which funds to raise from, first determine how large you could realistically scale your company and, then, how large the funds themselves are. A lot of information can easily be found through a simple search on the internet. But when you are talking seriously with funds, you should feel free to ask them about previous fund returns and their LP base, which are pieces of information that VCs don’t often publicly discuss.

Also, do your research on who the right person to approach at that fund is. Which partner has done deals in your industry or geography in the past? Have they written anything on Twitter or Medium about their funding philosophies, vertical focuses, or current investments? There are often experiences in their past that have shaped their areas of expertise and interests and, therefore, make them experts in some sectors and geographies. You want to dive directly into the core of the business rather than building the case of why this is an interesting area to invest in. So, to do that, find the partner who’s well briefed on your industry so lead times can be shortened.

Don’t forget — getting venture backing is like entering a long-term relationship. It’s a partnership that will last over many years, so conduct a proper due diligence on the VCs in the same way they do on you. I always recommend asking for references from existing portfolio founders and then collect some informal references from people who have experience working with a given partner and the firm. Through it all, you’ll find out if you share the same set of values, making life easier and, ultimately, more productive well beyond signing your term sheet.

Preparation is key

While you’re figuring out which VCs might be right for you, you also need to set a specific timeframe for when you want to raise money and determine what you need — and when — to seriously pitch. Timelines can change, but they are always good to have in your mind, especially in order to keep up momentum and not let the fundraise drag. A strong recommendation is to plan ahead and start raising money when you don’t need to otherwise you won’t set up yourself for success.

It’s well worth spending some time on creating a pitch deck that tells your story in a strong and appealing way. Personally, I’m a fan of storytelling and communications and, in these types of pitch meetings, it’s important to be able to tell your story smoothly and effectively in a inspiring way. Here, it’s important to remember that smooth storytelling isn’t just about attracting investors, but also...

Read the rest of this article at medium.com...

Thanks for this article excerpt and its graphics to Sophia Bendz, Partner at Cherry Ventures.

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