6 Steps to Avoid Pitfalls and Problems After a Series B Funding Round
“To be prepared is half the victory.”
If you’re closing on a Series B round of funding, you are about to enter into one of the hardest phases in growing your business. Yes, you’ll have the money to buy what you need. But now it’s time to execute. And while you’re building your sales pipeline and performing day-to-day business chores, you also have to quickly establish your organization’s foundation.
So pat yourself on the back; you’ve passed a major hurdle. But instead of spiking the ball, strap yourself in. You’re about to kick off four, five, maybe six of the most challenging months in your business’ development.
The rubber’s about to meet the road!
Prepare to Up the Ante
At HG Data, we closed on our B round eight months ago, and we’re just now settling into our new normal. As the dust settles and we breathe a collective sigh of relief, we see many new faces in the corridors. We’ve filled several key leadership positions and added both domain experts and support people that are enabling us to up our game across the board.
If you’re just entering the post-funding phase, expect to hit the ground running every single day. It takes nothing less than the Herculean effort of everyone—especially senior management—to reach your own new normal.
The expectations on everything have just gone up. You’ve doubled or tripled your valuation, and you have major investors to satisfy. You can’t rest on your ideas, your initial proof of concept or the satisfaction of early adopters. Closing on money is not the big win either; that’s just about selling equity. The big win comes when you sell product.
You’re leaving that “just get it done” mentality behind. You now have a compressed amount of time (four to six months) to set the foundation for your business and ramp up to a fully operational business mode.
Knowing what’s ahead and what you can expect will help you succeed.
Key Steps You Can Take
Before getting into some dos and don’ts, here’s a bit of advice: During the early phases, you and your senior management probably went at it pretty hard. It’s natural for people who are trying to build a business to be passionate, and that can lead to some heated discussions and differing opinions.
That’s not going to change. In some ways, it becomes more important than ever. To move forward with the best plans, you need to poke holes in ideas and battle test everything through open, unfettered discussion. That’s not to say that plans won’t change or need to be revised—especially as new leadership joins your ranks. So welcome healthy dialogue—even disagreement—in the spirit in which it is offered. It’s not personal, just good business.
1. Focus on Hiring Professional Leaders
You have the money to fill the positions that of necessity had remained empty boxes on your org chart. These are going to be professionals that have the expertise and experience to run their departments. When hiring these people:
- Involve your entire management team in the interviewing process. That includes vetting people who are outside one’s area of expertise. This needs to be a joint effort leading to a consensus.
- Move quickly but follow a professional hiring process. Post jobs. Schedule interviews. It’s no longer about someone bringing in a friend of a friend to fill a spot.
- Remember that a hire made in haste can set you back months. Recruiting takes a few months, and then it takes another 3 to 6 months for a new senior hire to have an impact on the organization. If you select the wrong person, you have to start over again and delay your time to execution.
2. Build a Strong Organization with Strong Employees
Talented, empowered employees are critical to building a strong organization. You need to get your new people up to speed while keeping your original employees comfortable with the many changes occurring around them:
- Onboarding is about more than introducing new employees and explaining your business. Encourage new hires to listen and establish connections with the core of your organization—the startup employees.
- Ensure that these new professional leaders fully understand the way things were done in the past. Context is important because bootstrapping represents necessity, not ignorance or incompetence. While it’s time to change the old ways, you don’t want your startup team to feel chastised or stupid because they relied on short cuts in the past.
- Just as new managers are building rapport with their staff, you want to reassure your startup people that they have been instrumental in getting the organization to where it is today.
- Encourage your startup people to build personal relationships with their new managers—even it’s just to have lunch or grab a beer together after work—and let them know they have a certain amount of say in the decisions being made.
3. Don’t Forget Your Day Job
Prepare for some long days because along with building the organization you still have to execute and perform. That means overseeing the day-to-day tasks, following up with customers and keeping your sales pipeline healthy:
- While it’s important for all your senior executives to participate in hiring and decision-making, your sales executives are your primary customer-facing people. You want then on board with the direction the company is taking.
- That said, you don’t want to overburden sales leaders to the point that the pipeline dries up.
- And don’t sweat the small stuff. Maybe you don’t get a finance report out on time one month. The world won’t come crashing down. But if you aren’t driving sales, closing business and increasing revenue, that’s when you’re going to get into trouble.
4. Acknowledge the People Who Got You Here
In some cases, people’s jobs are going to change. Some will need to give up certain roles and become more focused. They need to know that letting go isn’t a criticism; it’s just part of the growth process:
- Organizations are about people, and each person needs to know that he or she was extremely valuable when the company had 25 people and just as valuable now that they are 50 people. They have job security.
- Emphasize that this change is an opportunity to become more of an expert. They can focus on fewer tasks, learn from highly experienced professional managers and maybe even gain a mentor.
5. Maintain Strong Communication with All Your People
When you’re stuck in endless interviews and meetings, it’s easy to forget to keep your people in the loop. But communicating with employees one-on-one, with departments and with the entire staff assembled are all ways to make people feel good:
- The more people know what’s going on and feel a part of the process, the more they will embrace change.
- Keep communication a two-way street. Encourage people to ask questions and express any concerns.
6. Keep it Fun
Just as you patted yourself on the back at the beginning of this process, take time to pat your founding employees on the back:
- Hold an off-site event just for fun, and just for your startup team. This is an outing where everyone can relax, feel appreciated and remember that they’ve been through something special.
- Remind them that they are members of a very special club—a startup that’s on its way to developing a thriving future. And they all had a hand in that achievement.
The next few months will be challenging, but if you anticipate some of the potential pitfalls, you can mitigate problems. Your new normal lies just ahead. And while you’ll experience several new normals going forward, each will be a bit softer than this.