If an investor group handed you a check for $8 million, would you be prepared?
The clock starts ticking as soon as the check is deposited. You now have quarterly board meetings. You now have sales targets to hit.
That’s a lot to handle when it comes to growing revenue quickly AND keeping the clients you’ve already acquired.
Somewhere between cashing the check and a few weeks before that first board meeting, there’s an “oh crap” moment where you go from making projections to figuring out how to deliver on them.
And that’s the disconnect; because people don’t invest in your business for what it is today. They invest in it for what you tell them it’s going to become.
There is an unspoken understanding that goes something like this: “Hey, this isn’t necessarily going to happen as we planned.”
But the fact is that somebody is going to be looking at the promises you made and hold you accountable to them, most importantly for revenue growth. You’re going to be measured and judged on achievement.
And you may no longer be your own boss.
Many startups haven’t anticipated the necessary shifts that have to happen to the organization once they receive funding, and so they scramble to become operational and build a scalable business.
Let’s take a look at what successful startup founders typically do prior to a major funding event to ensure that their startups are adequately prepared to shift their organizations.
Which comes first—sales or marketing?
The smart CEO brings on advisors early in the process so they can quickly ramp up sales and marketing programs. In the past, the balance of dependency tilted towards scaling the sales organization first as you could more easily and cost effectively add personnel in a sink-or-swim model.
It’s become much harder to scale on the back of a sales organization because even the best reps have trouble engaging with prospects. More salespeople than ever are sinking—especially those selling a complex product (a.k.a. the enterprise sale).
We’re seeing successful startups reversing this process where the balance of dependency is tilted toward marketing in order to scale operations faster by generating a larger share of demand.
Not to say that salespeople aren’t responsible for driving their own opportunities, but it’s next to impossible for them to drive opportunities quickly enough to scale, satisfy investor expectations for revenue growth and achieve quota without a marketing engine that helps pull the weight.
Marketing leaders who have sales process expertise and respect the sales profession are extremely valuable. Sales leaders who understand and value the role that marketing plays in sales enablement are also extremely valuable.
This was a trick question, by the way. You need both sales and marketing effectiveness to scale.
Marketing and product development
Marketing can’t just be about demand generation. It must also lead product management to ensure relevance, because if your product isn’t important enough for people to spend money on, you’re not fielding a winner.
Your product must be positioned as critical to success in your prospects’ minds (that’s where thought leadership comes into play). Product management, positioning and messaging is what converts “nice to haves” into “must haves.”
Choosing the right growth marketing agency.
Once there is a degree of certainty behind a funding round, you should be soliciting proposals from qualified partners including sales training, recruiters, growth marketing agencies and PR firms.
So if you’re a SaaS, be sure to look for a growth marketing agency that has SaaS expertise that’s deep enough that its principals can provide strategic advice on the response of your business model to market conditions and not just execution of projects and tactics.
It’s hard enough to do a great job driving opportunity for software companies in good times. And I think in today's world, the strategies, tactics, and the realization of those things, the content, the resources, the events, whatever it is, none of it can be naïve.
It has to be very hard hitting and direct to the problems at hand. So, um, I'd say, look for domain experience.
When engaging with an agency prior to funding, don’t waste time going through a lengthy sales process around what your strategy might be. Qualify quickly based on capabilities and get ballpark budgets established.
And make sure they have capacity to quickly ramp up once the liquidity event has happened.
If this preparation hasn’t been done, and a liquidity event happens, then what?
“As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know.” – Donald Rumsfeld
As a marketing leader, the most worrisome is the unknown unknowns. Let’s say you’re the CMO in place and your startup just raised $8 million. Now there’s real money in play, and you may not know what to do with it.
Marketing is probably getting a decent portion of that money and may have to start doing things you haven’t done before to achieve the next level of growth.
Take advertising for example. In the past, maybe you’ve spent a conservative amount, like $5,000 a month; easy enough to DIY.
But what can you and should you do with a budget 10 times that much?
Unless you have the right background and access to the tech stack, you should be bringing in a media buying agency.
The biggest recommendation here is to build the team that can take you past the fundraising, not just to that day. When you’re hiring, bring in people that your company can grow into.
Make sure the core group has skills that won’t be surpassed when the scale-up starts for real (credit for this recommendation goes to Neil Wu Becker of Behavox, as he explains in an upcoming episode of our SaaS Backwards podcast.
Building a team of highly qualified people will position the CMO and CEO for success after the investment is made and make it more likely that the promises made to VCs can be kept.
Want more tips on how to succeed post-investment? Download our eBook, “How to Ramp Growth After Your First Major Funding Round.”