Preparing For Your Next Startup Funding Round

As a CTO, I typically look at companies from three different viewpoints — how they structure organisation; the processes that underpin the organisation; and the technology that is pivotal to the business. Every company is at some level of maturity here with each of these. From seed stage, these elements refined, transformed appropriately to suit each stage of the business. It’s important to ensure they are in an appropriate stage for each funding round.

I often get asked by companies:

What do we need in-place for our next funding round?

This is normally seed growing into Series A, but also Series A growing into Series B. If you’re in regulated industries (healthcare, finance) then it’s even more important to have a plan in-place.

Under each of the three points above, I’ve prepared a sample of questions that get asked during due-diligence when I’m drafted in to assist with funding decisions.

Organisational Structure, Teams & People

Questions you may be asked around the ‘people part’ of the organisation include:

• Do you have the right leadership for product and technology? What does that look like today and what plans do you have over the next few years?
• If you’re a tech business do you have a technology leader at Executive level who is pivotal in strategy?
• Where does the technology leader spend their time - who do they work with on a daily basis within the company?
• Do you have a well understood, efficient hiring process in place?
• Is there a clear plan for learning and development in place at the organisation?
• What’s the employee churn rate for the company as a whole? Are people frequently leaving and joining?

Organisational Processes

When we’re looking at processes in the business, we’re looking for appropriate processes to generally mitigate risk, ensure a high-quality product and handle ambiguity from strategy through to delivery.

• Is there a good understanding of business and technology strategy amongst the executive team? How do you map between these?
• How do you track ideation and carry out product discovery in the business prior to product development?
• Can the team breakdown large projects into smaller components effectively for estimation and planning?
• Do you have a realistic forecasting process in place for planning projects with your teams based on estimated capacity?
• Are the team consistently delivering what they said they would at the start of the development iterations with quality?
• Is there a clear and well-understood product and technology roadmap in place?
• Does the team have effective monitoring in place for the systems and the business? Can they respond, escalate and communicate when outages occur?
• Does the team have solid processes in-place around technical design, development, test, continuous integration and release?
• Does the team have reliable operational systems in place with backups, disaster recovery when things go wrong?

Technology

Technology is a key focus in the companies I work with — especially when they are deep-tech, tech-first (rather than tech-enabled). I ask the following questions:

• Is there a sensible balance between projects used to deliver a competitive product and a solid platform (reliable, robust, secure, performance)?
• What do customers say about the product in terms of feedback?
• Is there a good approach to measuring internal and external quality with the product?
• Is the operational platform well-architected in terms of non-functional requirements?
• Is there an issue management system in place with clear, well-structured behaviour specification and tasks?
• Is there appropriate tooling in place within product and engineering for projects, issues, development, support and quality?
• What’s the general policy for addressing technical debt in the codebase to mitigate productivity issues and system understanding?
• Is the codebase well-structured in terms of high-level components down to lower-level components?

Consider an Independent Perspective

As an interim and fractional CTO, working with growth-stage startups, I offer support in preparing for future funding rounds in an independent capacity. The companies I work with are generally deep-tech in healthcare, high-scale e-commerce, fin-tech, or insurance spaces. The type of support I provide, in the run-up to your next funding round, includes:

• Due-diligence for investors to help with investment decisions at Series A and beyond;
• Carrying out tech audits for gap analysis to transform companies from their current state to a state suitable for meeting their funding goals;
• Advisory for pre-seed companies helping them build out pitch decks, defining their product/tech strategy and approach to build;
• Transformation of companies with a large seed fund (generally with close to £1m+ funding), helping them to prepare them for their Series A in terms of product & technology, their team and supporting processes;
• Transformation for Series A/B for their next funding round (some of whom have missed the relevant parts in their previous funding step). This is the grown-up processes, 50+ in product/engineering sort of engagements. Normally, there’s a degree of transformation required if they’ve skipped some things at Series A or B which can be quite painful to perform depending on how far things have gone.

I typically work with companies where there’s a tech-first/deep-tech focus, often with analytics at their core, high-scale SaaS, companies utilising hardware integration etc.

In Conclusion

Focus on the questions above and prioritise working on solutions for each. This will give you a good start towards growing a healthy technology company while nurturing a happy team and quality products.

HW Integral

HWIntegral.com is a consulting firm that specialises in audits of technology companies, transformation for funding rounds, and due-diligence for investment purposes. Get in touch to discuss your next funding round.