January 27, 2016

CES 2016: How to Get From Seed to Series A

Photo: Techstars
During my visit to CES 2016 in Las Vegas, Nev., I had the opportunity to attend a panel discussion hosted by Techstars titled "How to Get From Seed to Series A." Moderated by Techstars' Ari Newman, the panelists included Anjula Acharia-Bath of Trinity Ventures, Adam D'Augelli of True Ventures, Jenny Fielding of Techstars, and Nihal Mehta of ENIAC Ventures. While you can listen to a recording of the full panel via SoundCloud, there are a few items worth discussing in this post.

In his blog post summarizing the event, Mr. Newman notes: "One of the themes that came out of the panel was that Series A is still about the overall story. Metrics do play a part, but the investors have to share the vision and the long term potential about a huge return at this stage."

While I agree with the importance for early-stage companies telling their story to potential investors since metrics may not be plentiful given the short market traction of the company, the company's founders must still present key performance indicators (KPIs) for the short- and long-term future. In my experience, while investors understand that metrics may play a small role when evaluating the worthiness of making an investment in an early-stage startup, they also want to know the founders are thinking about the future through measured results.

Photo: Techstars
The panelists collectively agreed that seed-funded companies are seeing a more competitive environment in attracting investments from early-stage investors. This, in my opinion, may be the result of a volatile investment climate, a growing number of startups looking for funding, or a combination of the two. Regardless, founders must do their homework and understand the investment behavior and interests of prospective investors. "Do your VC research deeply and make sure they are a fit on paper so you don't waste time," Mr. Newman wrote.

Ms. Fielding provided a very important piece of advice for entrepreneurs: Develop your relationships with potential investors prior to requesting money. It may take a year or two of develop a business before the point outside funding is necessary. Entrepreneurs should take this time to develop relationships with advisors and potential investors.

The previous sentence leads to another point, which was addressed by Ms. Acharia-Bath: "Don't ever tell someone that you are raising money because the moment you tell them you are raising money, [the investor] thinks you are selling to them. And that always works against you." Rather, Ms. Acharia-Bath continued, "if you ask for money, you get advice. And if you ask for advice, you get money." I completely agree (with both points)!!

Lastly, a panelist noted, if a business does not have enough cash to sustain its operations for more than six months, then the owner(s) need to focus on raising funds from investors.

What advice would you give to an entrepreneur seeking funding for their enterprise?

Aaron Rose serves as President and CEO of ROI3, Inc., a Seattle, Wash.-based company that empowers people in emerging economies through innovative, technology-based solutions. He is also the editor of Solutions for a Sustainable World.