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8 tips for founders trying to raise their first round of venture capital
If you’re an avid TechCrunch reader, someone who loves to absorb endless startup profiles and pore through fundraising stories, you might think raising venture capital is easy. In reality, it’s very, very difficult and not the best source of capital for most businesses.
For startups hoping to scale far and wide as fast as possible, VC may be the right fit. To shed light on the process of raising equity capital from venture capital firms and provide some exclusive tips and tricks for Extra Crunch subscribers, we sat down with three experts on the subject. Below are the top pieces of advice from Charles Hudson, founder and managing partner of Precursor Ventures, Redpoint Ventures general partner Annie Kadavy, and DocSend founder Russ Heddleston. The following has been lightly edited for length and clarity.
1. First, make sure your company is fit to raise venture capital.
Charles Hudson: I think venture capital, it’s really a specialty type of capital. It’s really for companies that have the aspiration to grow really quickly, to build really large businesses … If you’re not a company that needs to grow quickly, venture capital might not be the right source of capital for you. There has to be a really big prize at the end of the journey.
2. Raise capital early if you’re stressing about small costs or fretting competition
Russ Heddleston: If you’re thinking about whether or not to raise, there are a couple of reasons that I will often advise people to raise early. One is if they’re really stressing about buying a whiteboard for their office, or like some something of relatively small cost. If you think it could be a big company, and you’re stressing about small things, raise money and buy the whiteboard, hire the additional person and get back to what you should be doing, which is running your business and growing it quickly.
The other thing is if you ask the question, ‘is there a competitor I don’t know about?’ If you heard tomorrow, that competitor just raised $2 million, or $5 million or $10 million, how nervous would that make you? For some businesses, you’re like, I don’t really care, it’s a services industry, it’s not a winner take all market. And other times, you’re like, oh, I’d be really nervous. So if either those apply, that’s a good reason to make a compelling case to someone like Charles.
The number one thing you can do to get a VC’s attention is make [your pitch] really simple. Precursor Ventures’ Charles Hudson
3. It’s OK to take a salary
Annie Kadavy: I’d be hard-pressed to think of an example where a founder is not paying themselves, the question, though, is how much? You’re paying yourself enough so that the basic costs of life and running your business are not giving you anxiety, because as an early stage investor one of our primary roles is to try and keep the baseline stress as low as it can be, because it’s really hard to go build a company.
If a founder is coming in at the Series A and they say I’m going to go pay myself $300,000, we might be like, well, that doesn’t really feel right, shouldn’t you want to put some of that money into the company? The ranges I’ve seen are anything from $60,000 up to probably $120,000 at the Series A, or maybe $150,000. Then, as the company grows and as the balance sheet grows and it’s de-risked, your salary as an executive at the company will scale with that.
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Verified Expert Growth Marketing Agency: Torch
CEO Jeremy OBriant never intended to create Torch, an agile growth marketing agency based in San Francisco. He started his career as a CPA, but after leading a growth team at Sidecar and running growth projects on his own, forming Torch was the most obvious thing to do. He now leads a team that implements “agile growth,” an iterative approach that involves setting clear goals and running smaller experiments over the course of monthly sprints. Learn more about their approach to growth, their ideal client, and more.
“Torch offers custom solutions to whatever you need. They are fast and deliver on what they promise. They are also scrappy and willing to try stuff to solve unique needs.” Head of Product in SF
Torch’s approach to growth
“We aim to be the thought leaders of Agile Growth. We didn’t invent the term, but we are certainly becoming the leading voice of the process in the growth marketing world. Agile simply means being able to move quickly and with ease. We start with clearly defined business goals and prioritize growth tactics based on the impact, cost, and efficiency. Then collaborate with growth teams to execute a handful of items in recurring growth sprints, typically on a monthly cadence.”
On their ideal client
“Our ideal partner has product-market fit, is redefining their category, and is ready to scale in a sustainable way. We are very strategic in the types of businesses we work with and steer clear of doing narrow prescriptive tactics. We love to collaborate with partners that are open to taking a fresh strategic look at their entire growth stack and embrace the agile approach to discover the right strategy for their unique situation.”
Below, you’ll find the rest of the founder reviews, the full interview, and more details like pricing and fee structures. This profile is part of our ongoing series covering startup growth marketing agencies with whom founders love to work, based on this survey and our own research. The survey is open indefinitely, so please fill it out if you haven’t already.
Interview with Torch CEO Jeremy OBriant
Yvonne Leow: Tell me about your background and how you became a growth marketer.
Jeremy OBriant: People are often surprised when I tell them I started my career as a CPA. I ended up working in the trenches on several M&A deals and heard lots of founding stories from entrepreneurs.
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Verified Expert Growth Marketing Agency: We Are Off The Record
Unlike most agencies, We Are Off The Record’s (WAOTR) mission is to advise and train in-house growth teams to scale their business. CEO and founder Bas Prass prides his team’s “train and transfer method” because it has allowed them to work with tech startups and giant corporations from all around the world. WAOTR is based in the Netherlands, but learn more about their approach to growth, agency values, and more.
Image via We Are Off the Record
WAOTR’s unique approach to growth:
“As far as I know, we’re still the only growth bureau in Europe with our approach to growth — we help startups from within. We work with their in-house teams, which means we are literally in the same room as our clients. We want to lead by example. I don’t believe in any other approach anymore because growth has to come from within the business itself.”
“WAOTR walks the talk: they actually do growth instead of solely advising.” Rutger Planken, Rotterdam, The Netherlands, Director & Founder, FoodServicehub
WAOTR’s ideal client:
“Our ideal clients are the ones that understand that growth takes time and doesn’t happen overnight. They understand that we need to touch multiple domains within their business and that growth isn’t only in the marketing or product department but in the entire culture of the company. This is also the reason we insist to work with founders and/or want involvement from C-level positions.”
Below, you’ll find the rest of the founder reviews, the full interview, and more details like pricing and fee structures. This profile is part of our ongoing series covering startup growth marketing agencies with whom founders love to work, based on this survey and our own research. The survey is open indefinitely, so please fill it out if you haven’t already.
Q&A with We Are Off The Record Founder & CEO Bas Prass
Yvonne Leow: How did you become a growth marketer and start working with tech startups?
Bas Prass: I started designing websites and building websites at the age of twelve and quickly figured out how to survive in the digital jungle. I learned by doing and was pretty active within online communities.
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How should B2B startups think about growth? Not like B2C
Tyler Elliston
Contributor
Contributor
Tyler Elliston is the founder of Right Side Up, a collective of growth marketers that primarily helps early to mid-stage companies scale. B2B clients include Faire, Kabbage, Yelp, Gusto, Crunchbase, Entelo, Farmer’s Business Network, Formswift and many more. Tyler is based on San Francisco and can be reached at tyler@rightsideup.com.
Kevin Barry
Contributor
Contributor
Kevin Barry is the co-founder of Right Percent, a B2B-only performance marketing agency that develops tailored acquisition strategies for early to mid-stage companies. Companies Kevin has helped scale include OnDeck, Zenefits, Segment, Hemlane, Brightwheel, and many more. Kevin is based in New York and can be reached at kevin@rightpercent.com.
Over the years, we’ve seen a lot of B2B companies apply ineffective demand generation strategies to their startup. If you’re a B2B founder trying to grow your business, this guide is for you.
Rule #1: B2B is not B2C. We are often dealing with considered purchases, multiple stakeholders, long decision cycles, and massive LTVs. These unique attributes matter when developing a growth strategy. We’ll share B2B best practices we’ve employed while working with awesome B2B companies like Zenefits, Crunchbase, Segment, OnDeck, Yelp, Kabbage, Farmers Business Network, and many more. Topics covered include:
- Descriptions of growth stages you can use to determine your company’s status
- Tactics for each stage with specific examples
- Which advertising channels work best
- Optimization of your ad copy to maximize CTR and conversions
- Optimization of your sales funnel
- Measuring the ROI of your advertising spend
We often crack growth for companies that didn’t think it was possible, based on their prior experience with agencies and/or internal resources. There are many misconceptions out there about B2B growth, rooted in the misapplication of B2C strategies and leading to poor performance. Study the differences and you’ll develop a filter for all the advice you get that’s good for one context (ex: B2C) but bad for another (ex: B2B). This guide will get you off on the right foot.
Table of Contents
- What growth stage is your B2B startup?
- How do you find B2B customers?
- When do you use which channels?
- What kind of marketing messaging should you use?
- How do you build your sales funnel?
- How should you calculate and use the ROI of your marketing budget?
- In summary
What growth stage is your B2B startup?
The best growth strategy for your company ultimately depends on whether you’re in an incubation, iteration, or scale stage. One of the most common mistakes we see is a company acting like they’re in the scale phase when they’re actually in the iteration phase. As a result, many of them end up developing inefficient growth strategies that lead to exorbitant monthly ad spends, extraneous acquisition channels, hiring (and later firing) ineffective team members, and de-emphasizing critical customer feedback. There is often an intense pressure to grow, but believing your own hype before it’s real can kill early-stage ventures. Here’s a breakdown of each stage:
Incubation is when you are building your minimum viable product (MVP). This should be done in close partnership with potential customers to ensure you are solving a real problem with a credible solution. Typically a founder is a voice of the customer, as someone who experienced the problem and sought out the solution s/he is now building. Other times, founders enter a new space and build a panel of prospective buyers to participate in the product development process. The endpoint of this phase is a working MVP.
Iteration is when you have customers using your MVP and you are rapidly improving the product. Success at this stage is rooted in customer insights – both qualitative and quantitative – not marketing excellence. It’s valuable to include in this iterative process customers with whom the founder(s) have no prior relationship. You want to test the product’s appeal, not friends’ willingness to help you out. We want a customer set that is an accurate sample of a much larger population you will later sell to. The endpoint of the iteration phase is product/market fit.
Scale is when you have product/market fit and are trying to grow your customer base. The goal of this phase is to build a portfolio of tactics that maximize market penetration with minimal – or at least profitable – cost. Success is rooted in growing lifetime value through retention and margin, maximizing funnel conversion to efficiently convert leads to customers, and finding repeatable tactics to drive prospective buyers’ awareness and consideration of your product. The endpoint of this phase is ultimately market saturation, leading to the incubation and iteration of new features, customer segments, and geographies.
How do you find B2B customers?
Here’s a list of B2B customer acquisition tactics we commonly employ and recommend. Later in this article, we’ll connect each channel to the growth stage it’s best used in. This list is generally sorted by early stage to later stage:
1. Leverage your network. This is particularly valuable for founders who are building a product based on their own past experience.
- Reach out to old colleagues you know have the same problem you had (and are solving).
- Leverage the startup ecosystem. If your startup is in YCombinator, for instance, other companies in your batch may be prospects, along with alumni who will take your call simply because of your affiliation.
- Example: If you’re building an app for marketers, ask past marketing colleagues you’ve worked with to try out your product is a no brainer.
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David and Goliath: Approaching the ‘deal’
Adam Zagaris is an attorney, partner and founder at Moonshot Legal, specializing in commercial contracts. Adam helps startups close deals and move up and to the right.
It is a simple question with a complex answer. How does a startup get from zero to execution when negotiating contracts with potential customers that are large enterprises? The 800-pound gorillas. Situations in which your negotiating leverage is limited (often severely so).
As a commercial contracts attorney, clients often ask me about the one right way to approach deals. Many are looking for a cheat sheet of universal terms they should push for in contracts. But there is no one answer.
Deals are not cookie-cutter, and neither are the contracts on which they are built. That said, a basic framework can help provide startups with some grounding to better think about negotiations with large enterprises. The idea is to avoid over-lawyering, and instead approach the discussion with a legally prudent yet deal-centric mindset.
There are generally six overarching considerations as you head into negotiations with large, enterprise organizations.
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Verified Expert Growth Marketing Agency: TrueUp
It was the perfect storm when CEO and Founder Liam Reynolds finally decided to start TrueUp, a data-driven growth marketing agency/consultancy based in London. After decades of working for large creative advertising agencies, Liam quit his job right around the beginning of Silicon Valley’s growth hacking trend and plunged headfirst into running growth for early-stage startups.
TrueUp has since evolved from a one-man shop into an award-winning agency with a team of dedicated data, paid marketing and conversion specialists. Learn more about how they collaborate with clients and help them develop short- and long-term growth frameworks.
TrueUp’s approach to growth marketing:
“Rather than just saying ‘Look at these amazing results we’ve achieved,’ we would say, ‘Look, these are your growth opportunities, this is the process you need and here’s the framework unlock your true potential,’ We would build business models around this to show the opportunity in numbers, revenue and ROI.
Our approach to growth is anchored in delivering the right message to the right target audience in the right channel at the right time. It sounds simple but we’re amazed at how wrong people get this.
So we’ve created our own bespoke methodologies and frameworks to really explore and identify these hidden killer messages that drive action. We’ve built our own tools that allow us to do a lot of high-tempo, high-intensity testing.
It’s quite common that we have 500 to 600 tests running concurrently on Facebook for any given client. We’re continuously testing, learning, iterating, improving. As a result we’ve achieved some amazing results for our clients.”
Advice to founders:
“We approached True Up to help us establish and scale a UK paid marketing function. The team was highly professional from their initial pitch through the end of the project.” Maninder Saini, SF, International Operations Manager, Quizlet, Inc.
“For earlier stage startups, it’s to focus on achieving product-market fit and having awesome user experiences before worrying about growth. We worked with and mentored a lot of startups that immediately jump to, “Look I need to get X number of customers in X months.” However their products/services are often seriously lacking. This creates very weak foundations for growth. So their efforts would be better spent on creating products that genuinely meet a customer need. Once they’ve achieved product-market fit, it’s to communicate benefits not features. There’s always at least one killer message that cuts through but more often than not it’s hidden and not what the founders think it is. So a structured test program to explore this is also very much needed!”
Below, you’ll find the rest of the founder reviews, the full interview, and more details like pricing and fee structures. This profile is part of our ongoing series covering startup growth marketing agencies with whom founders love to work, based on this survey and our own research. The survey is open indefinitely, so please fill it out if you haven’t already.
Interview with TrueUp CEO & Founder Liam Reynolds
Yvonne Leow: Tell me about how you got into growth marketing and why you decided to start TrueUp.
Liam Reynolds: I started my career at a data marketing company called Dunnhumby. They were famous for managing the data science and intelligence behind TESCO’s Club Card, a very large loyalty program in the UK.
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Verified Expert Brand Designer: Studio Rodrigo
Ritik Dholakia worked as a startup product manager before he co-founded Studio Rodrigo, a branding and product design agency based in NYC. Unlike traditional branding firms, Studio Rodrigo is proud of its product design chops, especially when it comes to helping early-stage startups build version one of their product. It’s not an easy balancing act since most companies eventually want to bring their product design talent in-house, but it turns out, Studio Rodrigo can help with that too. Learn more about the studio in our Q&A with founder Ritik Dholakia.
Studio Rodrigo’s unique approach:
“Studio Rodrigo listened to all of our goals and dreams, concerns and uncertainties, and created a brand identity, website, and marketing materials that were true to our vision but better than anything we could have imagined.” Tze Chun, NYC, Founder, Uprise Art
“Basically, we’re a full-stack product design team. We have people who can do brand identity from a pure graphic design and visual communications standpoint, and who can also connect the dots between design and technology, business, and customer needs. We don’t have a traditional agency model with a project and account management overhead. You work directly with our designers.”
On Studio Rodrigo’s ideal client:
“We like working with clients that are solving big, meaty, challenging problems. We’ve got a smart team that likes to wrap their heads around the kinds of technologies that are pushing industries forward. For us, that’s currently technologies like machine learning and artificial intelligence.”
Below, you’ll find the rest of the founder reviews, the full interview, and more details like pricing and fee structures. This profile is part of our ongoing series covering startup brand designers and agencies with whom founders love to work, based on this survey and our own research. The survey is open indefinitely, so please fill it out if you haven’t already.
Interview with Studio Rodrigo Co-founder Ritik Dholakia
Yvonne Leow: First things first, how did you get into brand design and product development?
Ritik Dholakia: I’ve been in digital design and product development for about 20 years now. I actually started my career as a product manager at a startup. I worked for two venture-backed startups as the first product manager. I was part of the Series A team, managing product development, acquiring initial customers, and building market traction.
The first startup was an enterprise software platform for customers doing triple bottom line reporting. The second one was one of the earliest social networking platforms, pre-Facebook, and around the same time as Friendster, LinkedIn, and Spoke.
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Verified Expert Growth Marketing Agency: NoGood
NoGood CEO Mostafa Elbermawy describes how they evaluate a client’s growth challenges by quoting Zen teacher Hunryu Suzuki: “In the beginner’s mind there are many possibilities; in the expert’s mind there are only a few.” Rather than deferring to in-house playbooks, NoGood adopts an open mind combined with a methodical, data-driven approach to find untapped growth opportunities for its clients. Learn more about how NoGood came to be and why they’re willing to say no to potential clients.
On NoGood’s approach to growth:
“Our work is methodical. It’s intentional. We have to talk about it. We are very transparent about what we do and it’s completely process oriented. Hacking is a misnomer. Growth is not about clever shortcuts. It has to be sustainable and repeatable, and if it’s not, we won’t do it.”
On NoGood’s proudest accomplishment:
“They helped us launch our business. They are our CMO and our CTO. Would recommend to anyone.” Erica Tsypin, Washington D.C., Co-Founder & COO, Steer
“Our success in jumpstarting Steer’s business is one of our proudest accomplishments this year. Steer is an electric car subscription startup that asked us to increase their activations. Basically, our job was to generate new active members, which not only meant encouraging more users to download the app, upload a license, and get approved, but it also meant delivering a car to a member’s door, having them drive that car and leaving a review. We were able to demonstrate signup traction for Steer and help them launch in under three months.”
Below, you’ll find the rest of the founder reviews, the full interview, and more details like pricing and fee structures. This profile is part of our ongoing series covering startup growth marketing agencies with whom founders love to work, based on this survey and our own research. The survey is open indefinitely, so please fill it out if you haven’t already.
Interview with NoGood CEO and Growth Lead Mostafa Elbermawy
Yvonne Leow: To kick things off, how did you get into growth?
Mostafa Elbermawy: Well, I went to school for archaeology, but hieroglyphics weren’t paying the bills, so I taught myself how to code and started a web design studio after college. I started building websites for clients, and they started asking me how to drive more users to their sites to help grow their business.
I started tinkering with growth out of curiosity, and eventually joined the digital experience team at American Express. That job helped me gain some marketing and growth experience, and I ended up falling in love with that part of the job.
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Verified Expert Growth Marketing Agency: Growth Pilots
Growth Pilots is one of the more exclusive performance marketing agencies in San Francisco, but they know how to help high-growth startups excel at paid marketing. CEO and founder Soso Sazesh credits his personal experiences as an entrepreneur along with his team’s deep understanding of high-growth company needs and challenges as to what sets Growth Pilots apart. Whether you’re a founder of a seed or Series D stage startup, learn more about Growth Pilots’ approach to growth and partnerships.
Advice to early-stage founders
“I think a lot of times, especially at the early stage, founders don’t have a lot of time so they’re willing to find the path of least resistance to get their paid acquisition channels up and running. If things are not properly set up and managed, this can lead to a false negative in terms of writing off a channel’s effectiveness or scalability. It’s worth talking to an expert, even if it’s just for advice, to ensure you don’t fall into this trap.”
On Growth Pilots’ operations
“They have good business acumen, move fast and work as an extension to your internal team.” Guillaume McIntyre, SF, Head of Acquisition Marketing, Instacart
“Something we pride ourselves on is working with relatively few clients at a time so we can really focus all of our team’s efforts and energy on doing the highest quality work. Each of our team members works on a maximum of two to three accounts, and therefore they’re able to get very invested in each client’s business and integrated into their team. We really try to simulate the internal team dynamics as much as possible and pairing that with our external capabilities and expertise.”
Below, you’ll find the rest of the founder reviews, the full interview, and more details like pricing and fee structures. This profile is part of our ongoing series covering startup growth marketing agencies with whom founders love to work, based on this survey and our own research. The survey is open indefinitely, so please fill it out if you haven’t already.
Interview with Growth Pilots Founder and CEO Soso Sazesh
Yvonne Leow: Tell me a little bit about your background and how you got into growth.
Soso Sazesh: I grew up in northern Minnesota where there is no tech industry whatsoever and then after high school, I came out to Silicon Valley and got exposed to the epicenter of the technology industry. I became very interested in startups and hustled to find startup internships so I could get experience and learn how they operated.
After a couple of startup internships, I got accepted to UC Berkeley and that gave me even more exposure to the startup ecosystem with all of the startup events and resources that UC Berkeley had to offer. I worked on a couple of startup projects while I was at UC Berkeley, and I taught myself scrappy product management and how to get software built using contract developers.
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Who helped your startup grow? Nominate a growth marketing agency.
Growth marketing is critical to a startup’s survival, but it’s not always clear how to successfully pull it off. How do you jump the chasm from one to 10 million customers? Should you recruit an in-house growth team or hire an agency? How do you actually get content marketing to work? How much money should you spend before writing off or doubling down on a marketing channel? What does it take to build an extraordinary team at every stage of your startup?
There isn’t a silver bullet when it comes to growth, but we are tapping some of the most brilliant minds in growth marketing to share their experiences and advice to entrepreneurs.
Last month, we launched an initiative to find the industry’s best growth marketing agencies, and since then entrepreneurs from all around the world have submitted their nominations.
If you haven’t already, take two minutes to nominate a growth marketing agency that has helped your company scale and reach its target customers.
We’re zeroing in on a short list of top firms, and we’ll begin publishing their profiles in the next few weeks, but founder recommendations, like yours, help determine who we feature.
Similar to our work with startup lawyers and brand designers, our goal is to make it easier and faster for entrepreneurs to find the right service provider, but without real and relevant founder recommendations, we can’t accomplish our mission. Growth is the latest iteration of Verified Experts (with more to come).
Help us support early-stage startups by nominating a growth marketing agency you’ve worked with.
Have any questions? Email ec_editors@techcrunch.com
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