Successfully closing a Series A funding round marks a critical milestone in a startup’s funding journey — but it’s just the beginning. Within 36 months, most startups are hoping to kick off their Series B funding round, which can inject as much as $30 million in additional capital into your company. The catch? The Series B round is often considered the most challenging funding quest in the life of a startup.
Teams who are able to successfully secure additional funding start positioning themselves for Series B scrutiny early on. The preparation process is far-reaching, but places special emphasis on one non-negotiable aspect: Your people. Here are the steps you can take to get your team Series B-ready.
What Do VCs Look for in Series B Funding?
To ace the transition from Series A to Series B, startups must prove their potential for market dominance and their ability to cultivate a strong culture that attracts top talent. VCs need to be convinced that they’re not likely to lose money and that there is a great potential to multiple their investment, up to 10x or more.
While your Series A investors were looking to invest light and see a proof of concept through, Series B investors expect it to be clearly evident that your organization is on track to scale up and lead the market. Not only will you need to pull actual data to demonstrate your growth and performance so far, but you’ll also need to get investors to buy into a critical component: Your team.
“The abilities of a founder and management team are the most important factor driving investment decisions — often more important than even a product or technology itself.’ Stanford
Investors want to know that you’re capable of putting the right people in the right positions at the right time. This means having a fully developed recruiting and onboarding strategy, along with detailed plans for talent management, upskilling, internal promotion, and succession planning. However, to sell investors on the value of your people, your efforts must go beyond what you can put on paper.
How to Build a Series B-Ready Team
Above everything, VCs know that startups with a strong culture and strong foresight are the most likely to succeed. This means having a tight-knit, highly agile team in place, and forward-looking plans to develop and scale that team as your company grows. These steps will help you get Series B-ready.
1. Invest in Workforce Planning
Team structure and dynamics will change rapidly as your startup grows, especially if you secure another injection of capital. Likewise, through the nature of scaling a company alongside ever-evolving technologies, you’ll need to show that you’re capable of achieving continuous innovation through recruitment, upskilling, and promotions.
If you haven’t yet invested in strategic workforce planning (which goes far beyond a staff audit), now is a good time to start. During investor scrutiny, workforce planning exercises will help you prove that you’ve been able to secure stellar talent in top-level positions and demonstrate that you are looking ahead and proactively considering how and when to fill future roles.
Read more about The Role of Recruiting in Workforce Planning.
2. Make a Roadmap for Talent Management
A major part of the workforce planning process revolves around labor forecasting, which entails planning out how roles will be added, dissolved, and shuffled as your company reaches various milestones. However, investors expect to see more than plans to simply add or subtract from your headcount.
In addition to a paper plan, which may consist of organizational charts showing how teams will evolve in the coming months, you should seek to assemble a 6- to 12-month strategy showing how you plan to recruit this talent. This means considering both external recruitment strategies (which should support cultural alignment and diversity of thought) along with internal recruitment strategies, such as career planning and succession planning.
When it comes time to go in front of investors again, you should be certain that you can confidently address three questions: What talent do you need over the next year? How will you attract it? How will you manage it in a way that steers your startup toward key goals?
3. Double-Down on Cultural Initiatives
Investors recognize that attracting and retaining the specialized talent necessary to fill your upcoming roles will require a strong company culture. Now that your startup has been operating for some time, investors will want to see real numbers on employee performance, satisfaction, and retention. If you already have a disengaged team or are experiencing high turnover, that’s a major red flag — both to investors and, presumably, to your leadership team.
Every startup hopes to lead with strong values from day one, but this doesn’t always work in practice nor does employee passion always translate to a metric that you can show to investors. Being Series B-ready means getting clear on your purpose and ensuring every single employee understands why you exist, how you’re different, the role they play in your success, and the bigger impact that your startup has, or wants to have, beyond sales.
With a strong identity established, your startup will be capable of retaining and attracting the right people leading up to your Series-B funding rounds, and prove to investors that you have the strategy and culture necessary to continue scaling.
4. Affirm Your Internal Processes
Slower decision makers do not necessarily make higher-quality decisions. Moving quickly does not have to be detrimental to decision-making, but achieving both quality and speed means taking three steps back to evaluate how your startup functions.
Traditional hierarchies slow down processes, often separating those making the decisions from those best equipped to inform the decisions. Flattening your organizational structure and empowering decision-makers at every level will enable your teams to move quickly while asking higher-ups to focus only on the most important decisions that are core to your business.
If leaders are uncertain about delegating decisions, it could mean that you do not trust the capabilities of your team members. A flattened hierarchy requires immense trust in your people, and you can resolve concerns by ensuring you’re taking a skills-based approach to hiring while emphasizing cultural alignment and continuous learning.
Startups that are able to work efficiently with a flat hierarchy prove through everyday operations that they are capable of putting the most capable and qualified individuals in every role — and that tells investors everything they need to know about your capacity to scale successfully.
Getting Series B-Ready
The Series B funding round represents another critical milestone in your startup’s evolution. While challenging, so long as your startup has demonstrated its proof of concept and can showcase an ability to foster an unbeatable culture, investors will see your potential.
To achieve Series B readiness, the next steps are to invest in workforce planning, create a talent management roadmap, strengthen your cultural initiatives, and empower your employees to act quickly and assertively when opportunities arise. In the meantime, if you need assistance getting strategic about your upcoming hiring decisions, it might be time to partner with an external expert.
For help with skills-based, forward-looking recruiting, reach out to our team.