The internet is full of tips for refining your pitch deck, preparing for the funding round, the DD phase and the selection discussions.
But what’s on the SME CEO’s desk after the office floor is cleaned of serpentines and empty champagne bottles are taken to the bottle return?
After the funding round, you’ll finally have the euros to realise your vision for at least the next 9 to 24 months. But with finance also comes expectations that investors are counting on you to deliver. Putting the roadmaps you present in investor meetings into practice will set you apart from the tens, hundreds and thousands of other entrepreneurs who have been equally successful in raising finance.
In this blog, I list tips from two sides of the same table: from the perspective of the entrepreneur who has received funding on the one hand, and from the perspective of the investor who has made the investment on the other. By understanding both, you have a better chance of success!
You’ve deserved celebrating
Over the past few months, you’ve been preparing for meetings, running from investor to investor, and going through tough financial and legal negotiations. Very few people ever manage to raise their first round of funding. Your valuation has never been so high, you have euros in your account to conquer the market and the media are hyping the brand new news. So you and your team have earned your champagne!
But don’t splurge on the most amateurish extravagances: an overpriced office with designer furniture, hefty technology purchases, or the most expensive branded clothing.
Bask in the sun and enjoy your time.
Imagine a new space-time
No matter how many rounds of funding this was for you and your company, getting funding marks the start of work – not the end. Investors expect a lot from you and your team in a short period of time. You have recruitment, new offices, product development, internationalisation, marketing, PR… the list is almost endless.
Your already very fast timeframe will be even shorter. Allocating financial resources to projects in line with your vision will accelerate the cycles of your different business areas even more exponentially. Many of your and your company’s business models that have worked until now are likely to explode in a positive way. So going back from the euphoria of a funding round clousure back to “business-as-usual” is in no way “business-as-usual” anymore. Recognise the risk of plutocracy and the chaos peering out from the background.
Clarify common direction and objectives
New resources allow you to put more rounds in the machine. So make sure the change in rhythm ripples throughout the company and doesn’t just stay in the mood of you or your management team.
The new direction should be communicated with extreme clarity, and there is no harm in repeating things even to the point of your own boredom. It is important to think carefully about the metrics that will support implementation, but only the most relevant ones, and to monitor them unambiguously. In the face of hard, sometimes chaotic, and holistic growth, it is tempting to measure everything possible, but at worst you will micromanage your company to death. The wisdom is to choose the right metrics and focus only on what matters.
It is also useful to break down your new vision for the future of your company into time-bound roadmaps. What will be done in what order and why? Quick, short-term wins will give your team hope that your goals are being met and that the plan is working. Long-term, even dreamy visions of the future may otherwise remain too floating.
Take the first steps and communicate progress
Taking the first step is always the most challenging. Keeping things moving is easier than getting them moving. Identify the specific things you need to start moving forward on and act quickly. In big change situations, leaders in decision-making have identified two psychological barriers to taking action: 1) they expect to have all the complete information 2) they expect to have the complete plan. Both are paradoxes in themselves.
The sooner you can experiment and test new ideas, the sooner you have the right data and real-world feedback to guide action. Communicate progress, successes and failures so your team can stay on track and manage their own work more purposefully without your constant intervention.
Put the management system in place to support implementation
Who has previously approved or rejected which projects? On what basis are decisions made? What issues will you possibly bring to your new board for approval? Who will give their opinion on each issue? In what situations will you give your new board members decision-making authority?
Governance as a word may sound rigid, but the truth is at best the opposite: everyone in the company knows what we are aiming for, how exactly I contribute to the big picture together with others, and on what basis decisions are taken in which situation. Unfortunately, it is often the case in companies that it is generally assumed that everyone knows what everyone else is doing. Only later, even too late, do we find out that “the wires were cut”.
In the case of strong growth, it is usually only the future that matters: history does not necessarily reflect the future in any way, and only the future can be influenced. So invest in proper, holistic forecasting and simulation models to proactively steer your ship and avoid the biggest pitfalls in advance.
Think of your management system as a machine, of which you are not a part. Otherwise, the system will be totally dependent on people, and usually on you, since as CEO you play a glue-like role between the different parts. However, this does not scale, you become a bottleneck and the company does not move in the direction you set out in the previous point. To build a working machine, you need planning, the right people, processes, tools, information and the right leadership. That’s how you get everyone rowing in the same direction efficiently and without friction. It doesn’t sound like rocket science, but it is practically challenging and often the key to success.
The lack of overwhelming chaos also speaks of professionalism and helps you keep your new great recruits happy when the whole thing is under control. So think of structure as a service to your team.
Create a culture of transparent information
If and when you want to create a culture of transparency, think about how and with what tools you will bring it into your toolbox. How do you communicate your progress to employees honestly, openly and transparently? Where and how can they monitor the progress of your joint company? How will they know if they are making progress towards their own goals? How do you share information about your profits? How do you ensure that the direction remains clear and the agenda does not start to wander?
Even if you are a media person yourself, think about how you can multiply your impact and reduce dependency on you. Remember that while you’re ready to move on to phase three of your plan, you’re still in the back row exploring phase one. The foundation of any relationship is trust, which springs from honesty. Even in difficult things. So think about how to ensure an open and honest picture for everyone, so that the culture can evolve in the direction you want.
Make the board work for you
New investor representatives or observers will join your board. Unfortunately, professionalising board work is usually done the painful way: inefficient and somewhat button-pushing board meetings and email chains are sat through for a couple of months before things get back on track.
It’s more effective to establish common threads and tools from the outset to keep your board informed of your progress and, in turn, get timely help from them. Share relevant and appropriate information in an easy-to-understand format. Don’t indulge in over-analysis at first glance followed by ever-fading reporting, but excel with timely ongoing communication.
“Where focus goes, energy flows” applies equally to your board members. So where do you want their focus to be?
Keep your investors in the loop
How would you feel if you lent money to someone you knew and then didn’t hear a peep from them? Would you be confident that you would get your money back? Or would the silence cause concern and mistrust?
When put like this, investor communication seems obvious, but unfortunately often the next communication from the funded company after the money has been transferred is something like this: “We’re out of money, we didn’t succeed in things X and Y so we’ve invested in a completely new thing Z, would you like to fund our company further?”
Investors don’t like unpleasant surprises. When things go wrong, as they most certainly will at least in part, you want it to be done in an open and transparent discussion. Ongoing investor communication builds trust on which to build future funding rounds.
Do the groundwork for future funding rounds
Yes, future funding rounds. This may seem illogical now that you’ve just run the previous round of funding together. On the other hand, you have all the friction you had to overcome to get this funding: financial modelling, DD, communicating to investors, justifying your choices with data, and so on.
Together with your current funders, you have agreed on what that famous “next level” actually means. Is it a specific MRR? A certain number of clients? A specific CAC or CLV? A specific market opening? Successful launch of certain product features?
Whatever your goal, you need the right data over the longest possible timeframe, both to communicate your progress and for ongoing decision-making. Do the groundwork properly now, so that in future funding rounds you can show what you achieved with the previous money and what the new funding should be used for again. This will send a message to investors that you are not raising finance just to fill a huge hole in your bank account, but that the new capital will help your business get back to the next level faster. Your pitch will be much easier and more credible.
This doesn’t mean you’ll start sending out investor pitches around town again, but building relationships with potential backers is a smart way to start early.
Maintain a laser-like focus
With multiple resources compared to your previous situation, it’s tempting to say “yes” to a number of projects: new features, new marketing, new hires… Maintaining focus, both on your own and, more importantly, on the essentials, and only on the essentials, is an extremely underrated skill that few people master.
Generally speaking, after finance, growth is the biggest theme of all. Of all the 100 things on your to-do list, maybe 98 will develop your company in a linear fashion. The two remaining things might allow for an exponential slope. Focus on those and the other smaller heartburns will resolve themselves.
As your team grows, maintaining shared priorities and constantly saying “no” can feel challenging. With the growth in staff numbers, the average seniority will shrink enormously and tacit information will no longer be available. So invest in systematic and objective communication. Your growing team will appreciate it.
Remember you are not alone
As you can see from this text, your job is extremely broad and responsible. Your time will be stretched in all directions. You can’t do it all alone and that’s why you have a team to support you. But very rarely does a CEO think that help is also available outside the company. In SMEs in particular, it is often the CEO who is saddled with the management responsibility, and it is naïve to expect him or her to have the answers to every challenge thrown up by the modern world.
So talk to advisers, fellow CEOs and coaches. Don’t be left alone. Other perspectives and opinions are needed, even if you ultimately make the decisions. In the best case, outside help will multiply your own influence 10-fold. And no one, not even your board or your investors, assumes that you alone can get it all done.
Understand also what it would make sense for you to delegate to outside professionals. Now you can afford it. Or more directly: you may not be able to afford not to use certain professional services because a growth company rarely has the tolerance for very large risks to materialise.