How to Raise Seed & Series A Funding…
A group of aspiring entrepreneurs and founders from Dublins vibrant and ever-growing SaaS startup scene (one that has produced breakout successes like Intercom, Boxever, and CurrencyFair) gathered in the NDRC on Tuesday, Feb 23 to learn from some of the industrys foremost investors about how to go about raising seed and series A funding.
The panel of expert speakers at Dublins second SaaS meet-up, hosted by SaaScribe and SaaStock and sponsored by Tribal VC, included: Brian Caulfield (Partner at Draper Esprit), Will Prendergast (Partner at Frontline Ventures) and Conor Stanley (Founder at Tribal VC).
— Startup Dublin (@TechinDub) February 23, 2016
A quick guide to raising early-stage funding
The speakers, whose credentials include not only a long list of successful SaaS investments but extensive entrepreneurial experience in their own right, fielded questions from an audience eager to learn what it took to raise the early-stage funding needed to get their fledgling SaaS businesses off the ground. In the process, they produced some key insights into the perspective of a VC investor and some invaluable advice for those founders embarking on a fundraising journey.
1. Why most companies fail to raise VC funding
80% fall out of the process because they fail to demonstrate the size of the market opportunity which they are targeting this needs to be significant to attract VC.
A further 15% drop off due to a perception by the VC that the founding team doesnt have the right DNA or experience to actually execute in the market.
2. To bootstrap or not to bootstrap?
Dont bootstrap If youre in a highly competitive market which is developing quickly, and the speed at which you win customers is crucial. In this case, a bootstrapped business risks being steamrolled by a larger VC-backed competitor.
Bootstrap if youre in a less competitive market and you have deep IP that gives you a distinct competitive advantage.
— Frontline Ventures (@Frontline) February 23, 2016
3. Checklist of collateral to prepare before you go fundraising
A compelling elevator pitch that you can deliver in a matter of seconds
A short, graphic-driven slide deck that you can use at a pitch event
A 10-12 slide deck that you send to an investor in order to get a meeting
A more detailed 25-30 slide deck that includes your financial model and milestones
4. The dos and donts of a good pitch deck
Do convince the investor that there is a large, high-value, unsolved problem which you aim to solve for your customers. Always start with the scale of the market opportunity and reasons why you solve the problem in a differentiated way
Dont say to the potential investor that your superior design and user experience give you with a competitive advantage while presenting a poorly-designed PowerPoint deck full of clip art they wont take you seriously
Do include examples of the obstacles that stand in your way and the hardest things that you are going to have to overcome to be successful this shows awareness and foresight
Dont make your pitch deck too long. It should be 15 slides or less, short, snappy, and to the point but enough to show a solid, nuanced understanding of your market.
5. Think long and hard about your pricing
Potential investors will look at your pricing and how it relates to your sales model or, or in SaaS metrics terminology, your average contract value (ACV) relative to your cost of acquisition (CAC). The temptation with SaaS is to build cheaply and sell cheaply but its hard to justify and pay for an inside sales team at an ACV of 5/user/month – so consider your costs and price your product wisely. Also, if the opportunity arises, dont be afraid to revert to the old enterprise software model of annual, upfront payments this will help to better align your costs and revenues, manage cash-flow, and reduce the need for external funding while also saying a lot for the value your customer sees in your product.