With numerous specialized tracks, Dreamforce does a good job of addressing the needs and interests of different attendees. For me, the Startup Summit was a great opportunity to hear practical tips and get high-level insights from top industry leaders. One of the best sessions there was a panel called “Meet the Power Brokers: From Term Sheet to IPO” featuring partners from Illuminate Ventures, Sequoia Capital, DFJ Venture, and Emergence Capital.
When there are four VCs sharing their thoughts about the current fundraising climate and what they look for in strong fundable companies, it is not a surprise that the conversation quickly turns to the “toughest” round to raise: the dreaded B round.
While Series A funding revolves around product market fit, innovative technology and team strength, Series B is all about business model maturity and the setup for scale out. According to the panelists, showing sales performance metrics has become essential for startups leading up to or coming out of this particular funding stage.
Sales metrics prove that you have a solid understanding about your business model and your sales performance. Metrics answer key questions that investors, such as:
· How are you planning to successfully grow your business?
· What have you done in the last six months leading up to the raise?
· Do you really understand the different metrics that drive your business?
· What are you going to do in the next six months post-raise?
Investors want to understand your sales process and see metrics that support your strategy – and demonstrate how you plan to ramp up quickly.
Based on the panel, and including my own experience taking a startup through funding and scale up, here are three ways to show that you have a good handle on your sales process and that you can rapidly scale the business post a Series B round raise.
Be Ready to Answer the Tough Questions
It’s easy for companies to draw the first customer metric slide, showing strong hockey stick growth curve with increasing customers and paid users. But that data isn’t enough to satisfy a B round investor. They want to make sure that as a management team you have a good handle on what drives that customer growth and how will you repeat it to scale, with a focus dramatically shifting toward sales.
Because investors expect to see a different maturity level with your sales model, you need to demonstrate that you understand why certain sales methodologies are working – or why others are not. Investors want to know whether your sales infrastructure is ready for scale up. They want to know the specific things you are going to do to drive sales, such as:
· Have you identified your target market for both the short and long term?
· How do you target and connect with these buyers?
· Have you defined your sales cycle to move buyers from one stage to the next, and how long is each stage?
Don’t just say that you plan to add sales headcount or spend more marketing dollars!
Put Together a Complete Sales “Blueprint”
Outlining a detailed sales strategy is always important to show the performance of your business. But, being able to show that you have a strong handle on how you get there when you’re doing Series B funding is critical. It increases investors’ confidence that you have moved past “ironing out the kinks” of defining your business model, and you have metrics that will allow you replicate the success, for growth.
According to Accenture, you need to apply digital insights to the following five critical elements of sales growth AKA “s-p-e-e-d”: dubbed “speed”:
· Spend optimization -- optimizing ROI of working sales spend
· Price and profit optimization -- using digital insights to optimize pricing for profit
· Execution excellence -- improving sales operations with prescriptive analytics
· Enablement of talent -- identifying behaviors of success and repeating them
· Digital selling -- applying digital capabilities across all sales channels
Make sure you can explain what your potential sale looks like, why your process is successful and how you will optimize it after funding!
What’s your Cost of Scale?
Before you even think of scaling, analyze your cost of a sale. If your sales cycle is so heavy that you end up spending too much to earn the business, it won’t be scalable. To find out if you have a scalable model, you need to measure all of the parameters around your sales cycle – including what elongates the sales cycle, what compresses the sales cycle, and what makes it efficient.
With insight into your cost of sale, you can reassure investors about the soundness of your business model. The last thing you want is to take a flawed sales model and scale it 10x – you’ll only make it 10x worse.
Series B investors have higher expectations when it comes to proving the effectiveness and efficiency of your sales model. They want to see a forward-looking sales methodology that shows how you plan to scale out quickly. To convince your Series B investors you have what it takes, you need detailed metrics about your business and sales model.