Post Seed Rounds in Europe for SaaS Startups (or Why You’re Not Ready for a Series A)

Most early stage company financings go something like this these days:
(Self-funded / Friends and family / Accelerator / Pre-Seed Round) –> (Seed Round) –> (Late Seed Round) –> (Series A)
(Seed) -> (Late Seed) -> (Series A)
Very few go from Seed directly to Series A which was the norm for a very long time in the venture capital industry. Why is this happening?
Following a seed round of $500k to $1m+ most saas companies increase headcount in engineering and product and eventually make their first commercial hires. Depending on the complexity of the sale and the size of license, most startup founders will close the first 10-20+ deals before hiring anyone in sales. If you are in a category where you can survive and grow through self-service, then most of your ‘commercial’ money will go towards growing your marketing and support/ops teams.
The best saas companies I’ve seen across Europe over the last two years raised less than $1m in seed and were able to get to $300k+ in MRR and continue to grow organically without needing venture $ (but still took venture $ to grow even faster). In very good cases, companies raised up to $1m in seed and by the time they closed their A round were on more than $100k MRR and operating at close to cash flow b/e. In most other cases, I see companies get to anywhere from $10k to $75k MRR on their seed capital. For some companies selling into large enterprises with large 5 or 6 figure ACV deals (for example many security co’s or next-gen infrastructure co’s) I’ve seen several of them go through $1m of funding and have several live POC’s but no real revenue, just the hope of converting an attractive pipeline (which is a huge positive btw). 
Controlling for team, product, market and time – until about late 2015, these numbers used to attract Series A investors who would lead rounds of $3-5m. But the majority of these investors have moved up market and now want companies on a minimum of $1-3m ARR with positive sales economics and at least one or two quarters of renewals. This is all-good, and makes a lot of sense for some funds, but what do you do as CEO when you eventually find product/market fit AND an early replicable sales model and need to raise further funding to support your growth.
Welcome to the land of late seed, post seed, pre-A, – wade through the nomenclature and pick your own term for what this is….(I prefer late seed for no reason in particular). What late seed is not, is a bridge round where you need more cash to hit product market fit. Some companies spend all of their pre-seed or seed capital before hitting pmf, and it is typically existing investors who throw good money after bad to continue to fund them, not new investors.

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The Internationalization of Startups

For years, I’ve been deeply fascinated in how startups go from their home market to new international markets. From what I observe, it seems like the pace of international expansion is only getting faster. This might be a result of companies raising larger rounds earlier in their lives, drawing on the experience of executives who have launched products and companies in new markets, and the proliferation of the internet and new communication platforms that make it easier for companies to reach new customers and allow employees to communicate with each other more effectively.

I’ve personally been a part of numerous international expansion efforts. Some went fairly smoothly. Others flat out failed. But it’s always more expensive than we’ve budgeted for and more time consuming than we planned on. Through these experiences, I’ve amassed many techniques that I hope will help future companies plan and execute their internationalization efforts.

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Build the Win/Loss Review Habit Early

If you’ve ever spent time with an enterprise sales team you’ll understand what a win/loss review is. For those who are unfamiliar, it’s exactly what it sounds like. Typically, when a deal you should have won didn’t close, you review back over the sales execution to see where you failed. This shouldn’t be applied to deals that were never appropriately qualified by your BD reps, but rather genuine qualified opportunities that fit your typical buyer profile. And inversely, you should also analyse why you have won deals instead of just drumming the gong and moving on. Continue reading →

The 4 Steps to Compare Venture Debt

This post is not about the pro’s and con’s of raising venture debt for startups, it is about how to go through the process of deciding whether to take venture debt at all – and how to do it.

Each company is unique and I have seen venture debt extend a company’s runway enabling them to get to cash flow b/e without founders taking any more dilution; and I have seen companies not hit their plans and the ramifications this means when the note is then called. But it is a pretty common instrument and even Facebook took venture debt early on before the cloud existed when they needed to buy servers. And in my experiences with the lenders that we have worked with, they are always much more flexible when covenants are close to being breached or when there is a workout situation than your typical risk averse banker. They also tend to work quickly and will be ready to give you a termsheet in under two weeks after your first meeting. Continue reading →

Stop Closing All of Your Bookings at the End of the Quarter

We’ve all seen this chart in a board meeting or in an email from the CEO or VP Sales.

Screen Shot 2015-01-05 at 23.27.29

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How Startup Founders and CEO’s Rate the Top VC’s in SV

Someone shared the latest YouGov Entrepreneurs Poll with me recently and the findings are very interesting.

They interviewed a select group of founders about their experiences working with different VC’s and asked them about what they wanted from their VC and what they were actually getting from them. Here are some of the key findings: Continue reading →

Startupland – How 3 Silicon Valley Outsiders Built a Billion Dollar Business




Mikkel Svane is one of my personal heroes. He has quietly built Zendesk into an extraordinary business which IPO’d earlier this year at just under a $1b market cap and which today is valued at nearly $1.8b – and growing fast.

They have over 50,000 customers globally and have grown revenues substantially over the last few years – $38m in 2012, $72m in 2013 and are on track to hit $125m this year! It’s nothing short of amazing and this is why I was so excited to learn that he had written a book to tell the Zendesk story. Continue reading →