How to have a successful Series A funding round

In 2017, one-third of our portfolio of 18 investee companies completed successful Series A funding rounds. Between them, the six enterprises raised over $50 million to help them grow. You can read the release here

Series A funding is a significant endorsement of a company and its management. While not a guarantee, it can set a group on the way to becoming a business ready for a possible IPO or acquisition by a big industry player in the coming years.

The step up from being a start-up backed by friends and family, or angel investors, to being ready for Series A is a big one. One of the reasons, companies choose to work with Breed Reply is our commitment to preparing them for this step. It can often mean a significant change to how the company operates, its culture and its approach. There are six key things that a company needs:

1. Sustainable competitive advantage — the company needs to have a well defined strategy and proposition that can survive in the long run also taking into account the reaction from competitors

2. Market Scalability — Investors want a business with a technology that can be replicated and sold across multiple markets and territories. Something that is too complicated to mass manufacture or adapt or with a complicated customer deployment process will restrict growth and investment interest.

3. Proven commercial model — The business needs to be able to demonstrate to investors that it has a product that customers want to buy and they can sell it. It must have revenue generating customers who have actively acquired the product, used it successfully and not just been using it on trial.

4. Technology that works — it seems obvious, but Series A investors need to see a proven technology working in a commercial setting. Not just a good idea or something that has only worked in a test environment. The product needs all the bugs ironed out.

5. Corporate governance — the business needs to have the structures and processes of a professional company and not just dominated by the founder. Professional means critical roles such as CFO, COO and Commercial Director filled by high-quality, experienced individuals. Investors will want to see evidence of proper board processes and financial controls if they are to invest in the enterprise.

6. Time (or Planning) — the Series A process is likely to take six to nine months and the potential investors will go through an in depth due diligence and negotiation activity, hence it is crucial that the company plans this in advance taking into careful consideration their cash position

Having these things in place will put any business in a strong position to have a successful Series A funding round. To achieve this often means business owners taking a long hard look at themselves, reviewing and scoring how they are performing against these criteria and putting in place a set of actions to eliminate their weaknesses and effectively communicate their business to the potential investors.

When we review companies for Series A investment we look in detail and question whether the company will tick the right boxes against these criteria. As well as providing funding, we work closely with companies to achieve this.

Firms with ambitions for Series A Funding shouldn’t fool themselves that they can skip on any of the elements. Series A investors have a set process and woe betide anyone who breaks their rules.