Thursday, September 21, 2023

How to Raise Late-Stage Capital: Skedulo Founder Matt Fairhurst Reveals the Strategy Behind SoftBank’s $100 Million Series C in Productivity Startup

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In July last year, Brisbane-based US-based workplace productivity software startup Skedulo announced a A$100 million (US$75 million) Series C from Japanese VC powerhouse SoftBank. In this special behind-the-scenes analysis, Founder and CEO Matt Fairhurst and Skedulo Chief of Staff Nathan Merzvinskis reveal how they built the strategy behind the raise.

You made it – almost. Your startup has completed several rounds of successful fundraising and you have started making a profit.

Now you want to boost your business growth with a Series C or D round of fundraising.

While not entirely different from early stage fundraising, the stakes are higher in late stage fundraising. The average series C round results in $50 million in funding that’s double the average financing amount for Series B. This level of investment brings new types of investors to the table and can significantly affect the future of your business.

Earlier this year, our company, Skedulo, secured US$75 million in a Series C round of fundraising, which we attribute to our thorough preparation, deliberate strategy and momentum as a company. We’ve summarized our lessons to help you understand the unique features of late-stage financing as you work to develop your own financing strategy.

Key Differences in Early vs Late Stage Fundraising

Just like in the early stages of raising venture capital, you need to go into the late rounds of funding with a plan. But there are some key differences in Series C and Series D fundraising that you should know:

  • It’s not just about your story anymore: Early stage fundraising is all about the founder’s ability to prove themselves and the value of their idea. With late stage financing, your ‘idea’ is now a fully fleshed out company with a proven track record of success. You are probably ready to expand into new markets or product categories. Potential investors will be much more interested in quantitative data points such as revenue, gross margin, and projected growth than in your ability to be impressive.
  • You have already caught the attention of investors: During seed funding and Series A, you compete for the attention of potential investors. But by the time you raise a Series C or D, your company has gained some influence within the venture capital community. Instead of finding and approaching investors, investors are most likely to find you – whether they’re genuinely interested in partnering with your company or have just heard your name. While this reversal can be exciting for a founder, it’s easy to bark up the wrong tree and waste your time if you don’t narrow your focus.

8 Tips for Series C (and Beyond) Fundraising

To ensure that your late-stage financing round is both successful and aligned with your company’s growth goals, you must begin the process with a well-developed strategy. Whether you’re a founder, CEO, or a support staff member, the following tips can help you get the most out of a Series C or Series D fundraising round.

Pre-meeting, research phase

In the pre-meeting phase, everything revolves around targeted preparation. During this phase, we put together our pitch decks, key financial information, and a list of investors we wanted to focus on.

  1. Form a team: Given the significant amount of capital that may be involved in late-stage fundraising, it’s more important than ever to personalize every interaction with investors. Due to the high amount of research and preparation required by the process, for the first time in Skedulo’s history of raising capital, we have created a dedicated team to focus on fundraising.
  2. Limit your focus: As mentioned before, in late stage fundraising you have the upper hand, so it’s important to be selective about the companies you invest time in. Start by making a list of investors with whom you, your board, and your previous investors have a relationship. Ensure that the people you target have a track record of helping companies in your industry and seek the expertise that will help you reach your next growth stage (e.g. an IPO or international expansion).
  3. Be strategic and organized in outreach: If you involve stakeholders from across the company to keep in touch, make sure you provide them with adequate support and coordination. If the outreach process is disorganized, it’s easy to drop the ball and annoy potential investors. After narrowing down our list of potential investors, we used our team’s connections to start conversations and make getting in touch as easy as possible for them. We also created a spreadsheet to keep everyone on our team organized, assigned introductions based on existing relationships, and created an introduction email template.
  4. Lean on your previous partners: Use the knowledge and expertise of your previous investors to your advantage. We relied heavily on our partners to practice pitching and solicit feedback. Their perspective helped us fine-tune our deck, prepare for potential questions, gather the right stats, and hone key messages that were likely to resonate with potential late-stage investors.

Active pitching, meeting phase

Once you’re done with research and preparation, it’s time to meet investors. This phase of the fundraising process moves much faster and requires you to be agile.

  1. Link the data to your story: While hard data points are helpful (and necessary) in late-stage fundraising, it’s still important to use the data to tell a story. As a software-as-a-service (SaaS) company, the metrics our investors were interested in were our annual recurring revenue (ARR) and average ARR per full-time employee. But this numbers alone don’t explain Why we have been successful and true we see ourselves going into the future.
  2. Be aware about timing: Try to keep all investor conversations at the same stage as you go through the process. The venture capital community is a relatively small group, so if an investor discovers that you are much further along in the conversation with another investor (even if unintentionally), the relationship could deteriorate. We’ve held all of our pitch meetings in week one, contacted interested investors in week two, and had final phase conversations in week three. You don’t want to miss out on a relationship with your dream investor or get tied up with a less-than-ideal partner because of poor planning.
  3. Always follow through: It’s okay if you don’t have all the answers at investor meetings, especially since questions are usually about financial modeling or historical data. But your ability (or inability) to follow through and thoroughly answer their original questions speaks volumes to potential investors. A designated note taker can record questions and forward answers to you later in the meeting or help you locate them in a follow-up communication.
  4. Pool knowledge: During this process, investors will likely have similar questions, so pooling your team’s knowledge will help streamline communication. We created a master, vendor neutral Q&A document and assigned answers to the most relevant team member. Once answered, we personalized the answers for each investor. This process allowed us to handle investor inquiries quickly and efficiently.

Fundraising isn’t easy, but who said it has to be hard?

Navigating the world of venture capital can be challenging. And the stakes are high — especially for late-stage financing, the investors you go with are likely to stick with the company long-term.

But with thoughtful preparation, a strong support system, and a well-organized strategy, Series C fundraising can also be an exciting and fruitful journey.

Take it from someone who’s been there before: the stronger the strategy, the sweeter the reward.

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