Raising a Series A vs. Early Stage Rounds – How to Build Your Later Stage Investor Network

May I have your attention please welcome TechCrunch senior climate writer Harry Weber and Connie cyan investor and vice President of Forge Point capital [Music] How's everyone doing [Music] The nice background music play a little Longer maybe but uh So glad to be here Um just to reiterate my name is Harry Weber I cover climate I cover Venture Capital here at TechCrunch Um all right so Connie you're at Forge Point you're a VP there Previously you were at square is that Right yep what did I miss we just update Us a little bit of what you're doing of Course of course so I'm a investor at Forge Point Capital we are a fund that's Focused on the cyber security and Infrastructure software sectors we are Focused on series A and B investing Primarily although we do do some you Know seed and some growth co-investments As well So today we're talking about a few Different things we're talking about Raising a series a and how that compares To earlier rounds the pre-seed the seed But also about those relationships which I imagine kind of can be a bit different Can you talk a little bit about You know is it is it more formal are you

Is it more sort of a buttoned up you Know you want a cloth napkin in your lap When you're at dinner kind of thing when You're raising a series a Um what you know obviously the startup World is pretty informal in general but How just on that you know highest level How are those things different going out To raise a seed going out to raise A later stage round yeah yeah I I would Still say at the early stage series A And B it's still pretty informal Um the biggest difference I would say is You're transitioning from you know Primarily selling uh your team the idea You have to being able to demonstrate That you have the building blocks in Place To start scaling this as a company and So what that means is that you know your Series a investors are going to want to See tangible signs that you've found Your product Market fit as you go even Later stage you know investors will Become even more and more metrics driven But you know at the series a I would Still say that the team and the product That you have are the should be the Highlights of the story but you should Start backing that up with tangible Proof points like you know your ARR your Growth rate your retention Um you know Customer testimonials things like that

To show that you know you can sell Beyond just you know your Your friends and family sure sure now That's just like that's true all the Time right these are these are very Evergreen things this year looks a Little different than last year uh you Know the downturn uh VCS are cutting Fewer checks Um how's that hitting the series a Raises Yeah so series a is definitely still Happening Um I think that you know it's all starts To trickle down from the public markets Right so Um when you see those Public Market Valuations get cut Um it you know the other rounds will Slowly follow Um with series a though I would say you Can expect investors to be a little bit More cautious in terms of the valuations They're willing to give they might you Know have a little bit more involved in Their due diligence process but I Wouldn't say it's you know Screech to a halt or anything like that You just have to be Um Careful as you raise your process as you Run your process what Milestones you're Trying to hit in a way it hasn't it Shouldn't have changed your fundraising

Process But what Has changed is that you know you might Not have an investor step in and you Know throw you a term sheet before you Finish editing your deck sure sure all Right so let's play just a hypothetical Game sure uh you're a seed stage startup Or rather you're a startup you you've Got your company you've raised some Money what would you rather go out and Raise right now seed or a series A If you if you had to which which would You rather know oh I mean I think that's Entirely dependent on where you are at As a company Um if you are in sort of still an Ideation phase you think you you know Have targeted a problem you want to Solve Um but you know you're just a couple of Folks you should probably still just Raise your seed I think in the past Years craziness Um some people went out and raised Bigger rounds than they really needed to Um I don't know if that was ever a good Idea but now you know if you are Um at a stage where you know you have Um some sales velocity your customer Accounts are picking up Um your core team is in place Um then it's still the right time to Raise a series a good just for a show of

Hands is anyone here raising a seed Anybody all right we got a few people More than a few people and then anyone Here out raising an A or later stage Round I'd say almost was it almost equally Yeah Um what are some do's and don'ts just in General then for for going out and going Out to raise let's say I think actually and we'll get to some Questions later and there'll be another QR code showing up here in a bit uh if You want to ask your own questions but One of the questions was I hate Networking Uh do I really have to do that that Sounds so terrible right but you know And yet it's so crucial and important And it's fun it's exhausting so so yeah So what are the do's and don'ts there Yeah I mean I don't think anybody likes Networking that much Um I would say you should really Prioritize building your company because The investors will always be there when You have you know the right product and The numbers to back it up it will not be Hard actually the investors will Probably find you before you're even Going out to fundraise that being said You know I think a good do is if you do Happen to know a couple of investors That you think would be promising for

Your next round to spend some time with Them to build trust Um that way you know when it is time for You to fundraise they'll be more likely To come out and you know be able to move Quickly they'll just be able to you know Help you out more Um and like an example of a way to build Trust is Um you should you know Talk about your business it doesn't need To be transactional see if they're Excited about the idea Maybe work in a couple of metrics that You're optimizing for whether that's Customer logos or you know ARR growth or Whatnot and then when you start hitting Those metrics over time I think that Builds a lot of trust just real quick if Any any you know there's sort of more The dues right oh you want some don'ts So don'ts what any any faux pas at sort Of you know dinners or sort of things Like that where you So it's it's a it's a very specific World and it's sort of insulated so I Imagine breaking in is tricky and you You might want to avoid the the big like You know embarrassing moment have you Have you had any of those you don't tell Me all the details but have you had any Of those I think that the biggest Joan is just Don't fundraise if you're not ready for

It um you should come prepared Um know what some of your you know key Milestones when you hit them Um what you know you're Your customers are doing with your Product Um just make sure you're ready like does It's different for every company but Make sure who wherever you are you're Ready for that fundraise when you start Meeting investors don't spread it out Over you know a period of like eight Months where you're meeting one investor Per month because the reality is Investors chat with each other all the Time Um and so I think it can be a problem if you know There's a perception that you've been Out in the market for a really long time When really it was just like an investor Reached out to you and you know you had A conversation with them so sort of Compressing that time yeah yeah Definitely Um you don't want to look like no one's No one's interested you you don't want To look like you've been sort of like a House that's been on sale for two months Exactly exactly what's wrong with it Exactly it's like when you um you know Are applying for jobs you want to make Sure that you get all your offers around The same time

So you know some people go to Stanford And then you know they've sort of got This you know Golden Spoon in their Mouths uh yeah firstly I mean Stanford People out here We got a couple all right Must be nice Um you know so if you're if you're if You're not part of that world I imagine it's it's got to be extra I Mean It's Tricky for everyone sorry Stanford people but but if you're not Part of that world you know you're on The outside maybe you can find the Emails maybe you can't you know a VCS Are trying to reach out to I mean is there how do you how do you Not appear too thirsty or how do you not Appear to uh desperate because you're Ultimately asking for money I mean I think Um one of the things you can do is just Start with Um more casual interactions like start With smaller Regional events get to know People who are working on you know Excited about similar ideas as you are Do your research when you uh Target a VC so look at you know the Stage that they typically invest look at The types of companies they've invested In in the past those kind of things can Be good indicators of you know how Um smoothly that conversation will go

Once you reach out it's you know if You're a super early stage and you reach Out to someone who's writing you know 50 million dollar checks even if they Take the meeting they there's probably Not going to be a lot of overlap there So I would just say like as as long as You do your research and prioritize the People you reach out to try to offer Them some perspective they don't already Know Um I don't think they'll you'll appear Too thirsty sure sure well it seems like You play it cool but not too cool right It says yeah yeah sort of it's a moving Target it seems like right Um all right so you know I got a few Questions but one thing I want to ask is So Forge Point there's a a pretty Specific thesis uh around security and Infrastructure yeah is Um is it different in that world I Imagine you know one thing I write about Is climate change more Venture dollars Are going there than perhaps some other Areas just because everyone's thinking About it Um I think there are a few other like Hot spots and then there's some things I Think fintech might have been struggling A little bit this year because it had Such crazy highs a few years ago so is It yeah what what is it like being in That space Civic Focus for for anyone

Here who might be working on security Infrastructure that sort of thing yeah So security A good spot to be in right now because Um you know with the changing Environment in terms of the macro I Think there's Um a general perception that you know Enterprise spending is going to Slow down but with security you know you See all these headlines now with you Know ransomware Software vulnerabilities It's really elevated those conversations To a point that people cannot really Ignore so I think that's going to be a More resilient area For you know customers to be spending on As well as you know VCS who are looking To invest in companies that are growing And I know Zach on our security team he Runs the desk is constantly busy with The breaches to the extent that he that He's not really able to take uh you know Take stories or embargoes or or that Sort of thing on a security Focus start Startups just because the there's just Too much there's so I imagine that that Must be there must be a lot of action There everyone's kind of Even in a downturn we're worried you Know yeah we've got to lock everything Down Um well so you know another thing I

Wanted to talk about Um Speaking of the downturn you know for The thousandth ten thousandth time Um in in some sectors Uh we were talking about how they're Doing well other sectors not so much Um Uh one thing that I saw that was Troubling and it's very very Niche thing But I think I'm I suspect it's true Everywhere else uh pitchbook gave me Some data that said that the percentage Of money that it was going to female Founders uh had dropped this year it was Um gosh it was I think it was So you know in the teens uh and this is Was for a very specific sector it's for Agriculture Um agriculture technology which is a Predominantly male dominated uh largely Male dominated scene so security is that Sort of the same same deal Yeah I mean it's a huge huge problem in Security Um I definitely you know this problem Resonates a lot Um I think even as an investor you know There's not that many female investors Out there Um I think part of the you know onus is On investors to do a better job here Um but uh one thing that I would say for You know the female Founders out there

Is to figure out you know find a career Sponsor or Mentor that can really help You Um like in the weeds Um I feel like the biggest issue with Raising Capital sometimes is if you Don't have that context or that Community it can be a lot more Challenging so just to give you an Example Um one of our portfolio companies has a The company is called sphere it has a Female founder And one of our current board members Who's been on the board for probably you Know eight years or something like that Um he you know has at the early days was Literally in the office helping her like Three days a week When this was back when they were Bootstrapped when we as Forge Point did Their series a Um a couple of years ago he and I Literally built their first financial Model together so having that kind of Hands-On help where the person has a lot Of context too Is incredibly incredibly important You've set up a group too you've got You've got I I don't I don't imagine It's it's taking everyone in I don't Know if it can fit every single person Here but you are you're doing some work In San Francisco building your own

Network can you talk about that in Lessons you've learned from that Yeah so um I started a group called The Cyber mavens Um we're a group of female investors That look at cyber security and we meet Every couple of weeks Um to talk about the deals we're seeing Um we talk about you know Um like things that are going on in our Jobs Um and you know Trends we see in the Market basically like anything as well As you know share potential connections That we may have with one another and so That's been sort of my version of what I Was talking about earlier having that Support Um One of the ways we're looking to broaden Out is to you know host these events in San Francisco where we bring in uh Operators as well so if you're somebody Who's building Um at a security company or if you're an Operator that works with security let me Know because that's one of the ways We're looking to you know connect more With the community so we've got our Twitter or I imagine maybe towards the End of the slide we'll have our Twitter Handles up there but Um yeah please do get in touch uh So you know I'm turning to the questions

Uh hopefully the Q a will let's see oh Well there's the slide there everyone at Us you know uh and then this is what I Really wanted was the Q a so if you scan That with your phone Um I promise it's relatively easy uh you Can ask questions I'll show up here and I'll decide whether to ask it or not We've got some good questions here we've Got a couple very strange ones one Person asked is climate change even real Um that's for you yeah yeah well It's very serious yes Um it's quite real it's uh it's a bit It's a downer topic but I I do care About it a lot Um and so anyways you know what we're Talking about here is we're building a Company you start a company you own the Whole thing uh you need Capital you give A little piece up Um what I'm curious how much Equity this Is this is a question from Anonymous uh It's a funny name Um how much Equity should I own after Series a and and how how about for my Employee option pool Uh so so yeah just in general like that Process of deciding or understanding how Much to to to give out yeah so there's a Couple of different guidelines here I Would say Um the first is to think about how much Runway you'll need as a company

Um the general rule of thumb is that you Know you raise a series a that funding Should last you about two years and you Should be you know able to communicate To your investors what Milestones you Want to hit in those two years Um the other rule of thumb is just you Know from a From what we typically see Um from for a seed round you know it's Like 10 to 15 percent of the company uh Tends to be sold Um and then with the series a uh people Tend to sell anywhere from 15 to 25 Um so those are kind of just some Guardrails of what you can expect Um the reason you would choose to raise A smaller seed round as opposed to go Straight to your series a though is you Don't really want to raise again more Than you need Um and that's because you know founder Dilution is really real I think there's A Uh everyone knows that the valuation Will affect your dilution but the amount You raise also has a huge impact on it So that's just something to keep in mind Sure sure one thing I wanted to or did You did you have a thought I was going To answer the uh the second part of your Question please please so for the um the Option pool Um that's another thing where you can

Kind of work backwards you can see what Key hires you will need to grow your Company Um and then so say you need a cro how Many options do you think you'll need to Allocate for that role and then work Backwards so typically for a series a That ends up being like 15 Of this share should be unallocated for Future options but it could range like If you happen to you know just be a Two-person team and you'll need to do a Lot of hiring that number might be more Sure that makes sense and you know one Thing that that I had wanted to ask and I see that someone did ask a version of This question their question was as a European founder waiting for the Visa How do you show commitment uh of moving Here uh investors are asking for that I Think I think I'm curious about that Question specifically but also broadly If you're not based in San Francisco I Imagine some people here are and some Aren't Um yeah how do you how do you break in How do you show That you're for real about this Yeah I mean I think you know part of it Is just trust if you say you know that's You're in your plan like you know as an Investor I would tend to Tend to believe that if we have a Certain level of trust one way to show

That that's something you're working Towards is where you're building out Your team Um if you're you know hiring for certain Roles in the area that you Um Closer to the area that you're looking To move I think that's a good signal Um And then was there a second part of that Question well I think you know a European specific one but that that kind Of makes me want to ask where your Portfolio companies largely based yeah Our portfolio companies are actually Pretty distributed um we're based in the Bay Area but a lot of our portfolio Companies are actually spread around The United States some in Canada and Then some in Europe I think the The reasons for moving from say Europe To the US is Less about the investor and more about Being able to attract your customers so If you're the CEO of a series a startup You're the primary sales person still Being close to your customers helps and So I think that's what's you know Investors are kind of solving for if They ask you know their portfolio Companies to move So so yeah I see another question here Um reminder please get them in we've got

A little bit of time left for questions Um this this one also from Anonymous uh Let's say I'm fortunate I have interest For multiple investors Um how do I manage that process maybe You're maybe you're feeling really Popular but it's even then it's maybe a Little bit overwhelming so how do you How do you juggle all that yeah I mean That's a great spot to be in Um I think then you just have to do your Research and see who you think is the Best position to help your company grow So like I mentioned before one of the Ways to do that is to look at you know The different portfolio companies this Investor already has where they've shown Interest Um and you know think about like the Advice they've already given you through Their Pro through the process and how Much that advice has been resonating Um at the end of the day I do think it's Good to you know Whittle down to a Couple of key value-add investors Um because you you know don't want a Situation where you have like too many Cooks in the kitchen Um and then you know conversely from an Investor perspective they'll be more Motivated to help if they have more Ownership in the company how many how Many cooks are too many you know you Remember I don't know if anyone

Remembers too many cooks that was like a Funny well yeah that's way too Niche but You can Google too many cooks if you Want to be upset it's a funny internet Video but how many cooks is too many I Think it really depends on how involved Some of them are like sometimes you know You'll have a couple of seed investors And then by the time you're raising your Series a it's kind of like well they you Know helped you in the early stages and Then now you know a series a investor is Going to come in and it kind of like the Involvement gets replaced Um I would say you know a handful you Know is probably Um a good idea like say on a board for Instance having two different investors Is probably uh the most at this stage Really just and then maybe a few other And then you know like yeah and then People who know the industry right right I would definitely caution against you Know too much uh investor crowding what Is that process like Um because I know you you both invest And you you play an operational role as Well what is that like when this you Know a tiny tiny Start up with just a few people starts To grow and you you need the board you Need you know you start to add in it you It gets more formal you you bring in More people

Um is there sort of are there Growing Pains there Yeah there definitely are like as an Investor you know I actually spend time With my companies helping them get ready For board meetings and things like that In terms of board composition going back To the earlier question I think it's Just about getting a diversity of Perspective so you know having someone Who's maybe if you're a first-time CEO Having a you know long time CEO sit on Your board to provide some operational Guidance and things like that a customer Persona certainly helps Um but in terms of like the uh you know Tactics of getting ready for a board Meeting I would say that you just have To remember that Um you're trying to get The most out of your board members as Advisors too so um showing them both the Good and the bad and where you are Focused on where you need help make it Easy for them to jump in and provide That kind of guidance Through you know Board check-ins every you know maybe two Months or so I'm trying to interpret Another question Um just you know not to not to blow Through them too quickly Um yeah but you know what makes a VC Act Is one question being interested

Um Getting to a term sheet is is there is That an is that really an answerable Question because it seems so specific to Each company but are there certain Things that you're like ah yes all right Now I know I now I know I'm I'm in you Know I'm just curious what makes What makes the VC say Yes I want to invest So what gets the VC super excited I Guess sure sure yeah so I think it's a It's a couple of different things at the Series a again it's still a lot of it is You know the problem that you're solving And how you're addressing it so if You're able to show Um that you're solving a clear need in a Very unique way Um and you know you're doing so in a way That customers are going to pay for Maybe you help you know Drive Revenue at Other businesses things like that I Think get VCS really excited because There's also a timing element right Um there's a lot of problems out there But what are the next problems that you Know need to be addressed that customers Will pay for I think that's the that Timing element is what's tricky about Investing and it's what investors will Ultimately be looking for just we're Hopping around a bit that's sort of the Nature of the Q a thank you for sticking

With with me on this I just have a Couple more here Um I thought this was interesting do you Have a perspective on how long a board Member should stay on the board they Said after a while this is from Sandra They said after a while it seems to be Declining value that an individual can Add so you know do they overstay their Welcome what's how long Um from I I think there's kind of a Natural transition that happens Um you know For us if we're doing you know seed and Series a Investments we'll have Sometimes a couple of board members but When new investors come in you know it's Completely natural for someone to take a Step back and for you know the new Investor to get a seat at the table So I I think there's you know depending On the phase of the company Um that is something that happens and You know as a CEO you should be vocal if You want to keep your board at a certain Size Um to avoid just growing it and growing It over time Just going through just you know we've Got a couple seconds left Um what this is one last thing it's just A strategy question I imagine you'd come Across it a lot what functions or roles Must I must I have hired must have I

Hired uh by the time I raise a series a Are there certain green I'd say green Flags you look for just just as we run Out the clock yeah yeah so I would say As you're raising your series a you Should have your core team in place so What that means is that when you receive That extra Capital Um you're ready to hit the ground Running in scale so say like the series A is for scaling sales and marketing Which it often is maybe you have like That VP of sales identified Um maybe you've you know already made a Couple of those early hires on the sales And business side of things and that Your exec team is fully in place cool Cool well thank thank you so much for Taking the time to talk with us we're so Thrilled to have you here thank you for Watching and that'll be it for this Panel but stay tuned for more there are More coming [Applause]

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