RTC #2: Series A - Meeting the mother of Venture Capital

Why today’s issue is valuable to you

Hello Series A 👋 

• When do you qualify for a Series A round

• Get all relevant stats/data with the Series A elevator summary

• Latest trends on Series A rounds

• A clear plan on how to execute your Series A fundraising successfully when currently raising/planning to raise 2024

Hands-on insights from Peter Lasinger (Founder of VC fund 3VC) 💡

• 75% of his companies have grown beyond $100M in market cap and 25% have grown to over $1B in market cap

• His exclusives on

  • The unconventional success metric for start-ups’ success post Series A

  • The future of Series A investing

  • Common misconceptions about Series A and Founder/Investor dynamics

Get prepared for 2024 ✏️

• Global IPO volume is down

• European PEs loading their bags: fundraising volume is close to an all-time high

Series A - The mother of Venture Capital

Season's Greetings! I hope you're enjoying a peaceful and joyous holiday season. Today’s issue is released in the heart of this festive period and (fittingly) we will explore the “heart” of Venture Capital: the pivotal Series A funding round.

The Series A is a special type: it's the stage where things get serious in venture capital. The 3,500 start-ups that globally raised successful Series A rounds this year (hopefully) have a pretty good understanding of it - but besides them, there are only a few investors or entrepreneurs across all stages who haven't heard of it and (believe to have) at least some kind of idea what it is about.

So let’s dive right in….

“Googling” is always a good start

Before we dive into details and special insights, let’s start with googling “Series A round” and see if this can give us already a first and good understanding:

“Series A financing refers to an investment in a privately-held start-up company after it has shown progress in building its business model and demonstrates the potential to grow and generate revenue. It often refers to the first round of venture money a firm raises after seed and angel investors”
Investopedia 

“A series A round (also known as series A financing or series A investment) is the name typically given to a company's first significant round of venture capital financing. The name refers to the class of preferred stock sold to investors in exchange for their investment.”
Wikipedia 

I think already helpful as a starting point - one thing that struck me as not so common knowledge and worth highlighting was that “the name refers to the class of preferred stock sold to investors in exchange for their investment” - good to know! 💡

Let us tick the boxes: when do I qualify for a Series A?

Generally speaking, it is considered the 'make-or-break' stage, where startups prove their worth beyond the initial concept:

• Product / Market Fit exists (!)

  • Recurring revenues on a consistently growing basis

  • Various customer acquisition channels

• Scalable Business Model

  • Being able to demonstrate a business model with the potential for long-term growth and profitability

• Strong Team

  • A complementary team that has the capabilities and skill set to execute the business plan

  • Finance team (check out the advice that Stephan Garabet gave in our previous issue on building up the finance team)

• Competitive Positioning

  • A clear understanding of the market (including competition!)

  • Know how your product or service is uniquely positioned

The difference between a seed and Series A round is that while at the seed round, investors are betting on a scalable idea and the team behind it, at Series A, you need to demonstrate a business model with the potential for long-term growth and profitability. 

Series A Elevator Summary

Trends, Trends, Trends

• Between Seed and Series A, there are now “Pre-Series A” funds 

• Family office participation in venture capital slows down in the wake of global turmoil (but not expected to persist long-term) 

• Series A fundraising “pipeline” 2024: 3x as many companies competing against each other for Series A checks

Hands-on guidance on how to execute Series A fundraising successfully…

See two useful guides on how to execute your fundraising with a clear plan when planning to raise soon (or currently raising and you still need some EUR/USD)

🚨 Best advice and insights on Series A dynamics, metrics and a potential advisor for your fundraising come from Peter below - love your statement on the unconventional success metric 😊👇👇👇

🔥💬 Let’s dive right in…with Peter Lasinger

👉 Unconventional Success Metrics:

RTC: "Could you name an unconventional metric that you believe is a strong predictor of a startup's success post-Series A?"

Peter: “I think a good one could be employee satisfaction (0-100%) multiplied by revenue per employee. This would bake in efficiency, ability to serve customers as well as some indication of motivation and future success. In practice, it is a combination of revenue, growth, and efficiency measures that are most predictive.”

👉 Deal Sourcing Methods and Advisor Impact:

RTC: "In brief, how do you typically source your Series A deals, and what's your perspective on startups having advisors during this process?"

Peter: “There is not THE one way. Ideally, you become aware via multiple channels and there is a social referencing component to it. Advisers are often a sign of founders lacking the ability to raise funds and sell their ideas. They make sense to structure a process or work with more institutional investors.”

👉 Misconceptions in Founder-Investor Dynamics:

RTC: "What's one major misconception founders have about Series A investors, and vice versa, that you'd like to address?"

Peter: “Series A investors have their own limitations (e.g. regarding time) and goals that might not perfectly align with the founders. When you take an equity investor on board, you must think about the exit and that refers to both sides (so if you invest equity in a company you have to talk about an exit).”

👉 Future of Series A Investing:

RTC: "In two sentences, how do you see the role of Series A investors evolving in the next decade with emerging market trends?"

Peter: “A lot more transparency and data will require skills to move from sourcing and identifying the right deals (reduced asymmetry in information), towards establishing a trustful relationship with the founders and being available and helpful to drive value.”

💎 Investor Gems

Grow your outreach / investor list:

👀 What I found useful to read this week

And that is it for today…I hope you liked it and that we fulfilled our one and only mission:

To deliver something valuable to you. Each week.

Cheers,
Stephan 👋

Issue #2 | 26 December 2023

P.S: Thank you for your valuable feedback – if you loved this issue, help us grow our community by spreading the word and inviting others to join us on the 'Road-To-Capital' journey 🙏👇