Why Founders Should Only Raise One Round, Advice from a $3.5B CEO, How to Nail the Go-To-Market Slide - Tactician #0037

17/01/2024

WHY FOUNDERS SHOULD ONLY RAISE ONE ROUND

Jason M. Lemkin, SaaStr Founder, presents an alternative approach to startup funding, advocating for raising just one funding round to retain more control and optionality in “Venture Backed or Bootstrapped? There’s a Third Way. Just Raise One Round.”

• Debate Between Bootstrapped and Taking VC-Funding:

  • "Bootstrapped you maintain control, and the unit economics. But many see it as so much harder. And it’s almost always longer. VC can let you go faster, but it can become an addiction. And the dilution all-in generally ends up being 60%-70% by the time you approach an IPO."

• The Third Way - Just Raise One Round:

  • "The debate misses a simple, clear Third Way: Just Raise One Round."

• Benefits of Raising Less Than $10 Million:

  • "The point is, if you raise less than $10m, especially less than $5m or so, you really do maintain almost all your optionality and control. And most of the cap table."

• It Is Not Always The Right Strategy:

  • "I did a version of this myself, raising $9m in each of my two startups and stopping there. It has its cons. You have to stay very efficient, and the competition can often outspend you. It’s not always the right strategy."

• Final Reflection - 'One and Done' in VC:

  • "It’s at least worth thinking about. One and Done in raising VC. It’s a real option."

ADVICE FROM A $3.5B CEO

Rex Salisbury, Founder at Cambrian, interviews Pete Flint, Founder of Trulia (sold for $3.5B) in “Legendary $3.5B Startup Journey”

• Speed as a competitive advantage:

  • "Optimize for Speed... and that’s easy to say but how do you instrument your systems, how do you set expectations... and to be able to execute fast you need to learn really fast as well... and so [...] optimizing for that gives you such a dramatic competitive advantage versus other folks and other incumbents who are just running slow."

• On Evaluating Cultural Integrity:

  • "The culture is incredibly important and trying to find out what is the culture that you want to work in also that is aligned with success... we tracked how our employees felt that we were delivering on these values like a product manager would track NPS."

• Decision Framework for Mergers and Acquisitions:

  • "Have the rules of the game changed... is someone going to pay current value for future execution... are you number one in the category."

HOW NAIL THE GO-TO-MARKET SLIDE

Igor Shaversky, Partner at Waveup, highlights the common mistakes startups make in their go-to-market (GTM) slides and to provides actionable guidance in “Why most GTM slides suck — and how to fix them”

• Differentiate GTM from Marketing Strategy:

  • "Your go-to-market ≠ marketing strategy... Your GTM is about much more than marketing. It’s an overarching approach that should cover elements such as the target market segment (i.e., ideal customer profiles) and the acquisition and distribution strategies you’ll employ to launch and promote your offering."

• Implement a Beachhead Market Strategy:

  • "Once you’ve conquered [the initial market segment], you can move upmarket or broaden your geography, adapting your product and acquisition strategies. This approach is known as a beachhead market strategy, which is what investors seek in your GTM plan."

• Specify Your Growth Motion:

  • "Specifying your growth motion — why you’re choosing it and what it will be — is paramount at any stage. Your motion type depends on your market, product, and competitive moat."

• Incorporate Competitive Moats in GTM Plan:

  • "The No. 1 mistake from all the decks we see is generic go-to-market strategies... The fix is easy. Think about your assets or moats that will allow you to scale faster or cheaper."

• Use Numbers to Support Your Claims:

  • "Whenever you’re trying to drive a point home, nothing does it better than numbers that reflect real traction... LTV: CAC, payback time, conversions, organic referrals growth: If these metrics stand firm against industry benchmarks, pull them up."

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