5th Oct 2020

Raising a Series B: Product

As a Seed and Series A investor, we put a lot of focus on helping our portfolio companies to become 'Series B ready'. We're distilling this advice into a series of private sessions for our portfolio with founders and growth investors who have been through the journey, and we'd love to share some of what we're all learning.

Over the coming weeks, we'll be running sessions and sharing insights in areas including fundraising, product readiness, getting your go-to-market in good shape, and building a Series B-ready management team.

The first in our series was a session on how best to approach Series B fundraising. You can read the key takeaways here.

The second in our series was a session on focused on 'Product'. In this session we spoke to Gaurav Kotak, VP Product at Showpad and Blake Bartlett, Partner at OpenView (a product lead VC) about how the product management function changes as companies scale, and how all things product are assessed in the fundraising processes.

Product readiness at each stage of growth

As start-ups grow and evolve, VCs ask different questions during the funding stages. It is important to understand what they expect and how they assess it. At a very high level, when looking at Product you can categorise those questions and stages as follows:

  • Seed stage: Founder-market fit - you should intimately understand the customer, of what is causing their pain, and a have a potential solution to that pain. Essentially, you need a hypothesis on which you then go and build.

  • Series A stage: Product-market fit - you should be asking if your market agrees with your hypothesis? Are customers actually buying the product to relieve the pain you hypothesised existed? There should be some evidence to support this such as revenue-paying customers or user growth by this stage.

  • Series B stage: Readiness to scale - you should have repeatability in the value proposition. Your hypothesis in the Seed was validated with some initial data points in the Series A which should now have sound evidence across multiple data points. If you call your customers on a qualitative basis, they should be saying the same thing and that consistency creates the opportunity for repeatability and acquiring more customers.

Remember that at Series B you are still a very early stage company and VCs aren't going to expect you to know your exact strategy around Product. As mentioned above you should have a deep hypothesis as to what the core pillar of value is for the Product and market as well as seeing evidence for this. However, around that core pillar you should explore other areas. If there is no core pillar at this stage and you are trying everything then you may be a little too raw and experimental for Series B investors.

The right people, at the right time

In the early days your first Product Managers will likely be internal hires. They will already have a culture fit and knowledge of the product and domain. Focus on the people who have deep empathy for the end users and that you think can build trust. Once you get to scale, you can hire a seasoned manager who is focused on process, decentralisation and setting up frameworks to brainstorm and prioritise your roadmap.

Hiring a VP Product too early, or the wrong kind, can be a mistake. The skills of a product leader who focuses on scaling decentralised processes are unlikely to be the skills you need in the early days of the business. Instead, focus on those with deep intuition and empathy for the users.

You can't do everything

Once the business gets to Series B stage and beyond, the founder should not be doing multiple roles. For example, by Series B a founder should not be both CEO and Chief Product Officer. This can create a bottle neck within the company and slow down operations.

As well as not holding multiple positions within the business, founders and senior leaders should also be delegating more as the business scales. Decentralised decision making is key at this stage as you are not going to make the right challenge, or focus on the right solutions, if you are doing everything. Move away from setting tasks and instead focus on setting outcomes and priorities that your teams can use their own creativity and subject matter expertise to execute on (this is true no matter which position you take when you scale).

Visionaries and managers

As you get to the Series B stage and beyond, it is important to make sure you have both sides of product journey covered. You need visionaries but you also need managers. The visionary understands how to invent the future, to build something that has never been built before, to solve a problem in a new way. It is equally important, however, to have good product managers. They will make sure you are actually getting things done, running on time and executing in a structured way. There can be a tendency at series A stage and beyond to over emphasis one or the other.

If you are a visionary you need to augment and supplement your visionary aspects with something that will be more project management led. If you are a disciplinarian and you are really good at project management you need to make sure that you bring someone on who has that more visionary aspect of it... both are as equally important in order to continue scaling and to continue to build big value in your space.

Avoiding distraction

When you are growing a company, there is no shortage of tempting shiny objects thrown at you. You should be considering these when you are in planning mode, but when you are in execution mode, the blinders come on and it should be impossible to distract from your objectives. This is particularly important for a product team, otherwise you will be pulled in different directions and won't be able finish anything on time as well as consistently second guessing yourself.

A lot of Product Managers make the mistake of going to broad vs going to deep, they underestimate what it takes to build great software which is useful to the customer. Things become a lot more complex over time and if you embrace the complexity then it will get unmanageable, both in terms of the team and customer scale. It is often a red flag to VCs if the messaging and priorities aren't clear and simple. The complexity will get unmanageable and it will start to fall apart. It might seem like a small thing but the amount of downstream ramifications to the rest of the organisation are a lot bigger.

This all starts with making hard choices and prioritising. The job of the product team is saying no more often than saying yes and by having this sound strategy you also have a guiding policy that makes is easier to align quickly on how to approach a problem, how to prioritise it, when to say no and creates clear communication throughout your organisation and to your customer. It is a journey constant process of iteration and improvement so therefore making sure you have a fully cross functional team that can solve on particular user problem is key.

In the next session we will be talking to Bethany Ayers, Chief Customer Officer at Peak and Sam Baker, Vice President at Scale Venture Partners as we dive in on Go to market (GTM) and metrics: How VCs assess the GTM function and what metrics they are most focused on.

The final session in the series will be:

  • Talent: What senior leadership needs to be in place by the time funding is raised and how talent acquisition and retention are assessed.

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