How They Raised Series A: Paddle

The Family (AAA) Stories

In a world where every tech company wants to be a SaaS, with a landing page that looks like this…

… the need for software that helps SaaS businesses grow is huge. That’s what Paddle does: a single platform that lets software companies manage their entire sales process — including trials and licenses, payments, and analytics. CFO Hugo Grimston was kind enough to give us an inside look at how they raised their Series A round back in 2016 📊

How long did it take you to raise Series A?

It took Paddle almost exactly 4 years from the day it was founded to raise Series A. When you start a business you expect it to take off like a rocketship from day one but this is rarely the case… And like a lot of tech startups, Paddle pivoted away from our initial vision of being the Amazon for software into the e-commerce platform for software businesses that we now are. Once we’d found product market fit it took a while to gather momentum, but when really started adding customers and growth exploded, we knew it was time to seek a VC partner.

Did you think about fundraising/networking with Series A investors since the day you raised seed, or did you ignore it until you felt 100% ready?

Series A was always in the back of our minds after raising Seed, however until we had serious momentum behind us we didn’t feel ready. We were lucky to have 2 very supportive angel investors in Mark Pearson (MyVoucherCodes) and Mark Evans (Balderton and Kindred) and they were invaluable in helping us optimise for our Series A, as well as providing the cash to get us there. We started the process when we felt we were ready and still had more than 6 months of cash in the bank. We knew that the process could drag out and didn’t want to be forced into making decisions we might regret.

How much did you raise and from whom?

We spoke to quite a lot of funds during the process and given that we did a relatively small Series A (£2m) and we didn’t have a huge amount of metrics, our main job was to sell the vision. Luckily, Christian Owens, our Founder & CEO, is one of the best storytellers out there and his back story helps as well (taught himself to code at 12, left school at 15 to found his first business, Paddle is his 3rd business, which he founded at 18). In the end, we had a handful of term sheets and ended up raising £2m from BGF given that they were a new fund at the time and we’d built up an excellent relationship with Harry Briggs who had kept close to Paddle since his days working for Mark Evans at Balderton. Venture is as much about relationship building as it is about operational experience.

What was the biggest difference between raising Seed & Series A?

I think it depends on what your definition of Seed is. There are a lot of Seed investors (e.g. LocalGlobe or Episode 1) who operate in a similar way to Series A investors. However, given that we were angel funded, Series A was way more involved than our Seed rounds, which were super low touch. Series A means meeting a bunch of investors, running a process to keep them all interested and working at the same pace, looooads of meetings and potentially some customer and personal references before getting to the Term Sheet. Post Term Sheet comes confirmatory due diligence which at Series A which means the VC funds’s advisors run through the financial and legal information and all parties agree to a shareholder agreement.

What do you wish you had known before starting? What would you do differently?

We went into Series A with our eyes open, given our angel investors, and I wouldn’t have done anything differently. That said, when people say that it will take longer than you think, they are not lying! Ours took about 5 months from initial meetings to money in the bank.

Can you tell us anything about the lawyers, financial advisors or other service providers you used?

We used Harper Macleod as our legal advisers on Series A and also subsequent fundraisings. They are the same law firm who have provided general legal advice to us since inception (Commercial, IP and Employment). They are an Edinburgh firm and so offer similar advice to the London firms but at a lower price. I would recommend going with your existing advisers, assuming they can navigate their way around a Shareholder agreement and are responsive.

Was your data organised? Did you build a data room?

I had the benefit of coming from a background in investment banking where part of my day job was running sell-side processes, so I knew my way around a data room. I also had a friend who worked in VC send me their standard DD list so I could prep in advance. By the time we were in serious discussions with a few funds, we had a fully populated data room with all the essential stuff (Statutory information, legal agreements, financials, employee information, etc.) so that due diligence was relatively straightforward. If you fail to plan in advance then you will always be on the back foot and the DD request list can become overwhelming. The last thing you want is to lose momentum because you’re pulling together information.

Any other thoughts about your Series A?

Unless you’re the hottest start up out there and you’ve got VC funds knocking down your door, you may need to kiss a lot of frogs before you find The One. Practice your pitch on the 2nd Tier VCs on your list as it will take you a few meetings to hone the narrative and the slide deck. Finally, nothing motivates VCs more than FOMO, so often you’ll need to get a term sheet from a lesser VC to put pressure on your preferred fund. It’s a bit of chicken and egg, but that’s life, sadly.

The Family (AAA) is dedicated to helping ambitious founders raise the best Series A possible. Education is a big part of that, so keep an eye out for more of our content. And of course, if you’re thinking of raising a Series A in the next 4–12 months and want to take part in our programme, get in touch! (👉 pietro@thefamily.co / aaa.thefamily.co)

Thanks to Noah Green for making it possible for us to share this story 🙌