KEEP CALM and PMF

Yes, I am doing the T-shirts and the mugs

What has changed for seed-stage startups who are planning to raise Series A? It is normal that in a new climate of uncertainty with SaaS valuations on a rollercoaster (SaaS is back folks), founders at the seed stage question how early-stage investors will react to what is happening in the public market and at late stages. I have been chatting about this topic with the founders/CEOs of the SaaS companies at seed stage that I work with. They are in a strong position: not sitting on high valuations and with relatively solid runways (18 months+). The debate encompassed runway and burn, valuations and proof points. Eventually, it boiled down to WHEN is the right timing to fundraise Series A.

My immediate answer was: KEEP CALM and PMF.

The extended summary of our conversations 👇👇👇

  • Public and late-stage markets are on a rollercoaster and the perception of infinite growth have changed. The effects for it will likely trickle down to the early stage.
  • The bar is likely going to rise, the pace is likely going to slow down.
  • When it comes to fundraising Series A, we need readiness plus momentum
  • Readiness=PMF. Key SaaS milestones and metrics. ARR level, but more importantly, ARR quality. Rule of thumb: >$750k ARR, 10+ sweet spot customer logos, 3+ flagship happy customers, strong customer love. GTM: repeatability of the growth engine, funnel velocity, conversion to paying rate, valuable uses cases, expansion motion. Of course: no or low churn.
  • Momentum = Growth. Let’s not confuse market momentum with company momentum. Company momentum= growth rate. Key indicators: MRR monthly growth. Rule of thumb: 15%+ MoM. Pipelines growth, signs-up growth, product engagement metrics growth (e.g. MAU, volume of product units, of APIs calls, etc). Market momentum: yesterday was negative, today is better, tomorrow. The point here, do not time the market.
  • Sometimes readiness is enough. But this is only true for high conviction, thesis-led VCs.
  • Let’s allocate capital and focus on the activities with the highest ROI: exceptional hires, product excellence, customer value, category narrative.
  • Play your own game. Good things will come. It will take us to be ready, to generate growth momentum and to fundraise successfully.

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Believe in the power of software products to improve people’s lives on a massive scale. Co-founder and Managing Partner at Connect: (www.connectventures.co)

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Pietro Bezza

Pietro Bezza

Believe in the power of software products to improve people’s lives on a massive scale. Co-founder and Managing Partner at Connect: (www.connectventures.co)

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