Funding by Stages
Jon Maroney - September 2021
One of the areas where we’ve experienced confusion between investors and entrepreneurs is getting to a common vocabulary for the current stage of a company. An entrepreneur might say, “We’re raising a $5m Series A to build our product and run pilots with 10 customers,” which in many cases sounds to an investor more like a seed or pre-seed investment rather than a Series A.
To try to all get on the same page, we’ve created a series of matrix that shows stages of company growth along with characteristics that we might expect to see at that stage. Our goal with these documents is to allow entrepreneurs and investors to use a common language to talk to each other about a company. We’ve found that if we can get a joint understand on where a company is today, we can then create a very clear plan for where they need to be in the future to be successful.
The characteristics (for example, # of customers) by which a company is viewed by us as investors varies from stage to stage (pre-seed when you are building the product is different from when you are raising to increase revenue from $1m to $5m). We’ve also found that the characteristics for each stage differ depending on the type of company – a Series A company developing a new magical technology is different than one developing a workflow solution – so we need to look at these all differently as well.
With all of that in mind, our first attempt to communicate this is attached here. It is for companies that are in the sector that we are calling ‘Application and Infrastructure Software’. This sector is for companies that are building software that enables businesses to conduct their business more efficiently. This may mean products that replace spreadsheets for tracking and email for communication and are designed for specific functions, or it may be software that runs in the background allowing businesses to run more smoothly. From our portfolio, companies in this camp would be Hubb, Opal, Brandlive, Bright.MD, Bigleaf, Cloud Campaign, Trova Trip and Rigado.
In the future, we will publish similar matrices for other sectors that show how we look at marketplaces, consumer products, Deep Tech, etc.
Hopefully, the matrix is clear and understandable, but if not please let me know! We view this as a working document and greatly appreciate your feedback in making it better and easier to understand.
This conversation all started with a question by one of our longtime and most valuable investors, Scott Grout. His simple question was “Are we really thinking about this potential investment with the right lens?” Thanks, Scott, for pushing us and driving the conversation!