9 tricks to be “Series-A ready”
A bunch of good practices, courtesy of the great PlayPlay team
Yesterday, PlayPlay announced that they closed a 10M€ Series A led by Balderton. While we’ve kept it confidential until now, we, at Point Nine, led PlayPlay’s 1.5M€ seed round a little less than two years ago joined by our friends at Kerala. It’s been a tremendous pleasure to work with Thibaut and his team over the past months. Beyond that, it makes a great case study of what a seed-stage company needs to accomplish to raise what we call a “Tier-1 Series A” (a.k.a. a 5M€+ Series A from a Tier-1 investor). Our mission at Point Nine is to help entrepreneurs “beat the odds” that are against them as only 19% of seed-stage businesses get to a Series A (a little more if you’re a #p9family member, more on that here). Hoping that it could also help other seed-stage entrepreneurs beat these odds, here are “9 tricks from PlayPlay”.
This post starts with a brief intro about PlayPlay, explains why we invested in the company before getting deeper into these 9 important milestones. We could write a post about each of them but hopefully this makes a nice condensed summary for other entrepreneurs at that stage. It’s also a good reflection of the work we typically do with each of our portfolio companies. If you’re looking only for tactical tips, skip the next part.
Our investment thesis
PlayPlay is the simplest (and the coolest) video maker for communication and marketing teams. Their product offers a very intuitive interface allowing any professional with no creative skills to create beautiful videos in minutes with very high-quality motion design. As Christoph says, it’s “Hollywood for your grandma”. Try it out for free here.
We articulated our investment thesis around 5 key points:
1. Empowering non-creatives over creative people
Some of the best opportunities come from the empowerment of certain personas in the Enterprise over certain others that are expensive or capacity constrained. Sqreen empowers developers to tackle security topics. Webflow empowers business users with no web development skills over developers.
This allows for the creation of a new budget from that department over headcounts in the other department and is often a case for market expansion (more users start doing something they could not do before and therefore expand the market). PlayPlay empowers communication managers over creative people and allows them to create more content at a fraction of the price. This shift is one of the key drivers of what we sometimes call “The unbundling of Adobe” (more on that soon). The idea is to create more easy-to-use tools than the Adobe suite to go after the larger opportunity: letting anyone create with a much faster learning curve than if they had to learn how to use one of the tools of the Adobe Suite themselves.
2. Ease of use but beautiful outputs
One can think that the market for video tools is crowded but PlayPlay builds on a unique differentiation —which we believe they’ll be able to build on long term— the simplicity of the creation process but a guarantee of the output’s quality (here the output is the video). We made a similar bet when we invested in Typeform or Loom. The survey or the screencasting creation process on each tool is incredibly easy but the survey or the screencast are simply superior to the one offered by any competing tool (if you’re not convinced, check out Google Forms or Quicktime ;)) . While it’s counterintuitive, we, at Point Nine, are long term believers that superior UI/UX is a long term moat (more on that here).
3. Product-Led Growth
The immediate consequence of the ease of use and the quality of the output is that it can trigger an interesting viral loop. People are amazed by the quality of the videos they see online (the playplays), want to create theirs and share them. By doing so, they trigger a self-reinforcing feedback loop. To understand that in more detail, check this post I wrote some time ago.
Even before we invested and up until today, PlayPlay has been able to leverage an amazing amount of referrals to grow with very little sales and marketing costs.
4. Converging market trends
Quoting a partner at Benchmark, our goal as VC is to “see the present”, not the future. The first market wave for video tools started 10 years ago but we believe that the Enterprise has been looking for video tools only for a few years. This trend is reinforced by the increasingly limited attention span that we all have and therefore for the need to communicate very efficiently with rich content, a.k.a. videos. This is also enabled by a few systemic market trends: the presence of screens everywhere — in our pockets but also outside — and the increasingly large bandwidth capacities available everywhere.
5. Thibaut and his football team
At the risk of stating the obvious, Thibaut is the kind of passionate, obsessed animal with unique industry insights we strive to back. The team of playful, humble, professionals he’s gathered around him makes PlayPlay a low-profile company with a very fast learning curve.
When we invested, the company had a few k of MRR, tens of clients Thibaut had found through his network, about 10 people in the team and no CTO. #bigthingsstartsmall
Here’s what they’ve done right to be “Series A ready” (if you don’t know what that means, check out the napkin here).
9 things PlayPlay has done right
1. Structure the tech team
PlayPlay is the first SaaS company in the history of Point Nine where we invested without having a full-time CTO in-house. The first thing Thibaut did right was to hire Alex, the lead of the development agency he was working with, as a full-time CTO. Any seed-stage company often hires 5–10 developers within the next 12–24 months post-seed round. Therefore, Thibaut and Alex spent time i) structuring a tech recruitment process, ii) multiplying the sources of developer candidates, and iii) creating a good candidate experience to make sure they were hiring the candidates they were bringing on board.
The three KPIs to monitor here are i) the number of candidates per opening, ii) the conversion rate between a job offer made to a hired candidate and iii) the percentage of “poor hiring” made, meaning the number of people you end up letting go after a few weeks/months because they’re not performing well enough. The latter would mean that you’re not putting the bar high enough.
In case that’s helpful, cargo.one hires only 3% of the developers that come at the top of their pipeline. They’re very selective in their hiring process but it sounds right to think that you should discuss with 10 to 20 developers to find the right one (a 5% to 10% conversion rate in the hiring pipeline).
2. Professionalize the PM function
As someone who had experienced the pain of having to create videos at Eurosport, Thibaut had a great vision for the product but needed someone to operationalise it. At the time, most of the product mockups were still done in Powerpoint! Marc at Kerala did a tremendous job and found Pauline, who had spent a few years at Expedia and Balinea and was eager to join a very early-stage company. Since she joined, she’s streamlined everything PM at PlayPlay from user research to product delivery, implemented the right tooling and optimized the allocation of development resources. While it’s not an obvious hire because often times founders think that they can do product management themselves, we tend to believe that PM is a key area where experience can play a big role.
We’ve seen in many companies that hiring an experienced PM right after closing a seed round is often a game-changer when it comes to aligning the business and the product part of the company. It can also have an immediate impact on the delivery of the company. Do that one early ;)
3. Review the pricing grid
Another key topic we worked on very early on was to adjust the pricing grid. At the time, PlayPlay had a somewhat custom pricing based on each client. We spent time thinking about the “3Cs of pricing” and what “Good/Best/Better” pricing meant for PlayPlay.
Oftentimes, founders are tempted to adopt a usage-based pricing (pricing on a per video basis here) which we believe can go against the principle of letting anyone create as many videos as they want and therefore derive as much value as possible from the software.
The trick here was to adopt a feature/user-based pricing while putting a cap on each plan on the total number of videos.
Here are a few resources to help you think about pricing at a seed-stage SaaS company:
- The 3Cs of pricing
- “7 DOs and DONTs for seed-stage SaaS pricing” by my colleague Rodrigo
- A great article from the founder of RainforestQA on how they approached pricing. If you’re lazy, the learning is you’re always underpricing ;)
4. Put the right monitoring in place
When we invested, PlayPlay had close to no monitoring in place except from an excel sheet with the list of clients and how much each of them were paying.
The few things they did well was to:
- Implement Hubspot to streamline and monitor their Sales and Marketing operations
- Implement a usage analytics tool (most of our companies use Amplitude)
- Create a SaaS monitoring dashboard with the most important metrics
- Monitor the amount of account receivables to make sure they were collecting as fast as possible. If you’re interested in the impact that good cash collection can have on your growth, check out this post by Tomasz Tunguz.
- Create a proper budget to monitor runway
If you’re at that stage, here are a few resources we’ve been writing to help you put the right monitoring in place:
- The slides I wrote some time ago and a video of a presentation I did at Station F some time ago
- Christoph’s (infamous) SaaS financial plan
5. Hire an HR leader
The team at PlayPlay scaled from ca. 10 people to roughly 40 in about 20 months. This means, they hired 30 people and probably screened thousands of people and interviewed a few hundreds to get there.
Just doing these maths and how much time it requires is often a good argument to convince founders to hire an HR leader, often called a Head of Talent or a Head of People, rather earlier than later. Thibaut therefore “stole” Gilliane from Mention, another #p9family member that had just been acquired — we would not have let him do that otherwise ;). Beyond the time required to hire that many people, there are many HR-related topics to be tackled between Seed and Series A such as i) goal settings (OKRs), ii) review processes or iii) compensation topics.
The key HR topics any seed-stage companies should spend time on are:
- Hire a Head of Talent, if you’re wondering why, check out this post
- Setup company-wide and align individuals goals — most often our companies use the OKR methodology
- Setup review process and 1o1
- Streamline and structure the hiring process
- Work on defining the culture of the company and start working on the employer brand
6. Nail the GTM motion
We often say that we invest at the “.9 stage” i.e. a stage at which there is some good evidence of Product-Market Fit. Our mission is then to help founders get to what we call “Go-to-market Fit”.
This means nailing the GTM motion in order to help companies understand how they i) attract leads, ii) convert them in the pipeline and ii) measure what unit economics look like. When we invested in PlayPlay, the company was onboarding clients manually, provisioning accounts one by one.
In 20 months, here’s what PlayPlay has done to nail their GTM engine:
- Open a self-service: this way, they’ve let anyone derive value as fast as possible from the product and potentially pay with their credit card without speaking to a salesperson.
- 7-day free trial: they’ve offered the product for free for 7 days, a short enough duration for people to really try out the product while still creating urgency in the sales cycle. If you’re interested in the impact of the duration of the free trial on conversions, check out this post from Tom Tungusz.
- Scale the sales team: Clement did a terrific job hiring a handful of people that were hitting their quota before the Series A.
- Focus on the most scalable customer segments: PlayPlay was attracting a bunch of leads with very different sizes and willingness to pay for the software. A good exercise we’ve run was to understand the profitability and the scalability of each market segment to focus on the best ones.
Each SaaS company is different but PlayPlay is a canonical case of a SaaS company that managed to apply several tactics to improve its funnel: open a self-service with an option to pay by credit card, a 7-day free trial, and focus its sales team on the most profitable market segment.
The objective of all these experiments is to structure the growth engine in order to understand the profitability of each $ invested in growth while maintaining a scalable payback. This is a key criteria to raise a Series A. PlayPlay’s payback (and therefore its growth efficiency) is one of the best we’ve seen for a long time — congrats team 👊!
7. Professionalize the CS function: make sure clients are super happy and increasing usage, get to net negative churn
As most SaaS gurus will tell you, growth does not matter if you have a “leaky bucket”, i.e. if customers churn. When we invested, Thibaut had a few interns (great ones) managing a handful of clients. Here’s what they’ve done to professionalize their CS function:
- They’ve hired Sophie
- They’ve defined their North Star Metric: the key metric to understand the health of their client base. More on the methodology to find your north star metric here.
- They’ve monitored their NPS on a monthly basis and took action on most increase / drop in the NPS.
- They’ve come up with creative ideas to delight their clients posting the “PlayPlay of the week” (the best video their clients had created during the week) or organizing a customer conference: “the PlayPlay Awards”.
- Last, they’ve started working on an account expansion strategy.
SaaS companies can’t grow if they can’t keep their clients and grow some of them to pay more as they add users or more product features. Monitoring NPS, finding your north star metric and coming up with creative ideas to create customer loyalty are a few of these typical CS tactics. The ultimate goal is to get to “net negative churn”: when the expansion of your existing client base outgrows the churn. It’s a testimony that the company is ready to scale as the addition of any new cohort of clients leads to additional revenues month after month. A good figure to have in mind is that acquiring new MRR is 4x more expensive than expanding your client base. Best-in-class SaaS companies typically have 30% of their revenues coming from expansion. More on that here.
8. Get a few customers internationally
The last key piece Thibaut and his team had to prove before gearing up for Series A was to show that they could attract customers internationally. This means finding international leads but also proving that the product was proving of value outside of France. Video is not like payroll, it’s not a country-specific problem but selling internationally still requires understanding the pain points of leads abroad, competing with new players and servicing clients in another language.
When we invested, PlayPlay had a handful of French clients, here’s what they’ve done:
- First, they made sure the primary product was in English. It might seem obvious but we very often see companies that start with another language than English.
- They started generating traffic internationally and used the self-service product as a way to prove value to clients internationally.
- They’ve sent a few key members to a few conferences abroad (one of them actually stayed a few weeks) to close a handful of clients.
While PlayPlay is only beginning its internationalization strategy, the company now has clients in 14 countries.
If the point of a Seed round is to go from PMF to GTMFit, the point of a Series A is often to prove that a company can scale internationally. Before investing, any Series A investors will want to find good signals that the company’s expansion strategy will be successful. The creative tactics that PlayPlay used greatly helped in that perspective.
9. Prepare the series A
We never announced the seed round but the news quickly spread in the community of Series A investors in France, in the UK and in the US. We typically recommend our companies not to speak with curious Series A investors too early because it distracts them from their operations. But we knew early on that the company would need to fundraise to achieve its ambition.
Here’s what they’ve done to prepare their Series A
- About 6 months after the seed round, Thibaut started meeting informally a few good Series A investors. The point is rather to build a relationship and get feedback than showing metrics or disclosing any clear fundraising plan. I actually remember shortening a breakfast with OpenView after pitching them PlayPlay. I sent them directly with their luggage to Thibaut’s office ;)
- When it was clear that i) the team was complete, ii) the GTM was working, iii) unit economics looked great and iii) the (international) expansion plan was clear, we were missing only one piece: clarifying the long term vision of the company.
- We then spent 1–2 weeks working on a deck, comma after comma and a storyline for Thibaut to explain the PlayPlay story and their ambitions.
- Christoph and I only had to shoot a few intros to later-stage VCs in the UK and the US.
In less than 3 weeks, Thibaut and his team signed a 10M€ Series A led by Balderton.
WELL DONE, team 👊
On to the next stage 🚀