On raising a Series A

One of the main questions I get asked from other founders is how they should approach raising a Series A.

Instead of saying the same thing every time I have attempted writing down my thoughts in notes/bullet points in an attempt to pass on what we did in a more scalable way.

On series A funding: 

  • Make sure you have 6 months of runway
  • Get series A metrics and see how you benchmark in terms of growth 
  • If below benchmark see if it makes sense to get a bridge funding 
    • Only makes sense if you have an event imminent that will change your trajectory Or you can try raising on a good story 
  • For an A you want 
    • Some product market fit A metric that’s representative of your cos success growing at startup rate (check the benchmarks for your industry) 
  • Get your deck ready
  • Get a data room in place 
  • Show deck and data room to existing investors for feedback and review 
  • Deck content 
    • Growth chart Show them that your space is big Show them that currently there is a problem in how your customers do what they are doing Show them that your solution does it better (that’s best shown by traction) And if you have network effects or economies of scale or any other moat 
  • Make a spreadsheet with firm, partner, who can introduce you to these partners and to track progress 
  • Figure out who out of your existing investors can introduce you to the partner 
  • You want the right partner at the firm who understands your business, not just any partner
  • Define a fundraising timeline of 5-7 weeks 
  • Get introduced to everyone at the same time 
    • For that you need a blurb with what your co does and a growth metric
  • Define one week for 1st meetings, take all your first meetings in that week, tell investors that this is the week you are starting to meet investors 
  • Tell the investors you meet about your timeline 
  • 2nd week is for 2nd meetings, typically they’ll want you to meet with another partner. Maybe they directly get you a partner meeting 
  • 3rd week is for partner meetings 
    • You meet with the entire partnership 
  • 4th week and after is for due diligence 
    • Have your data room ready Have references ready Every customer you name on your deck and website is likely to get a call from the investors Don’t make too many exceptions about custom data requests 
  • Say you expect term sheets in week 5-7 
  • Have the person who introed you backchannel for you to understand what’s going on. Ideally you get introduced by current investors who have skin in the game 
  • For an A you are going to give up a board seat
    • Do backchannel references on the VC
    • Talk to founders that have had a suboptimal outcome while working with this partner, you want to know how they act when things aren’t going well
    • You are bringing someone on board who will stay a part of your business for the next 10 years, make sure you can see yourself working with them long term

A founder’s guide to coming up with vision and strategy

Coming out of our last board meeting I was given the (very valid) feedback that I am not spending enough time on figuring out what Shippo’s vision and strategy are. The board’s impression was that we are reactive as a company. Things happen to us and we react instead of us creating the future of shipping with a clear plan.

I as the CEO of Shippo have the opportunity of shaping the future of shipping (and with that, of the future of shopping). I can create not just the company’s future but the industry’s future. Now it’s on me to define what the future should be and how to close the gap.

The rough guidance I had in my head about what a strategy means is to identify 1) what Shippo is today and 2) identifying what I believe the future of commerce and shipping will look like in the future and 3) given those believes what I want Shippo to be.

Staring at an empty google doc can be scary given that the task at hand seems very big and also very very important to the company’s success and to give guidance to the team. A strategy is supposed to inform all decisions in the company. This is my attempt at laying out how to come up with a strategy:

Disclaimer, I don’t think there’s only one way of doing this.

Given that every department needs to be aligned with the company strategy you will want to involve your co-founders and your leadership team in the process of coming up with the company strategy. You want to make sure that you have heard everyone’s voice in the room in order to get the buy-in you will need on the execution side of things.

You can be the moderator in this process but if you as the founder moderate the process you’ll need to give the other participants the opportunity of sharing their ideas before you do. When founders share their ideas the rest of the ideas will tend to be influenced by the founders.

As the moderator you need to find a way of capturing all the ideas that are being floated. You can do that on a whiteboard, on sticky notes, in a google doc, whatever works best for you.

The first phase is the brainstorming phase.

The output of phase 1 is your vision.

There are three main questions you want to brainstorm about in this phase. In this stage of the process there are no right or wrong ideas. Every idea is valid, no matter whether others in the room agree.

Question 1: What are the unfair advantages that exist in the marketplace currently?

A few ways to rephrase this question: Is there an unfair monopoly? What are the pain points causing friction?

Example ways to kick this off for Shippo: Amazon Prime

Question 2: What new technologies have emerged?

A few ways to rephrase this question: Has something changed in the meantime? Why is now a good time to do something differently?

Examples for Shippo: new carriers that ship faster than before

Question 3: What are your beliefs about the future?

Rephrasing this: What beliefs do you have about the world? About technology?

Examples for Shippo: In the future people will live on Mars and we need to ship to Mars  

For all of this you should start by inviting all ideas and then discuss all ideas on the table, ideally leading to a conclusion that you as the founder truly believe in. In the end, it doesn’t need to be a consensus.

Part two of this process is about overcoming the gap and being real about constraints.

The output of phase 2 is your strategy.

Coming out of part one you should now have a good understanding of potential future outcomes. Now it’s time to bridge the gap between where you are today and where you want to be in the future.

In this part you come up with a core set of strategic theses. The question you want to ask yourself is not “do we do this” but every department should try to answer “how might we do this from the function that we run”. Part two is about operationalizing it.

Once you know how you might do it it’s time to be real about your constraints. What can you do with the funding you have and the team you have (as two examples of resource constraints)? In order to survive you might want to break down the “how to reach your vision” to what are you going to do first before you can do something else.

Example: you currently have a simple product that’s suitable for SMBs, eventually you want products that are suitable for larger companies, e.g. a more complex product. To raise your next round of financing that will help you to build a more complex product you need to focus on making SMB customer acquisition scalable.

To close it out, you need to articulate your outcomes to the team and make sure everyone knows and understands the strategy. Once I start working on that I might write another post.

Most of this came out of a conversation with my coach, Khalid from Reboot. Thank you, Khalid!

New talk: learnings from shipping 70 million packages

Wrote a talk about some of the shipping trends we’ve seen after having shipped more than 70 million packages. I was able to give that talk for the first time at Traction Conference in Vancouver a couple of months ago.

Here’s a video of the talk https://www.youtube.com/watch?v=F_7-zG5wSRg

And here are my slides https://www.slideshare.net/tractionconf/3-market-forces-shaping-how-we-buy-sell-things-laura-behrens-wu-ceo-shippo

Some pictures of the event

Some learnings from a leadership training

I just spent 4 days at a leadership training with a small group of CEOs. Was deeply impacted by the experience and also truly grateful that I have been given the opportunity to invest in myself. Here are some reflections:

Some reasons I felt compelled to go:

  • I’ve been running Shippo for 4.5 years and my role has changed from being a doer to a manager. I want to learn how to not only be a manager but also be a leader.
  • I have mental models that served me well in the last 4 years and they might be outdated now. It’s time to refresh my mental models and see what applies now.
  • What got me here won’t get me there. Wherever “there” might be.
  • I want to understand why people should follow me as their leader.
  • Leadership is not the same as management.

A snapshot from my notebook with learnings/insights. In no particular order:

  • Our default mode (in and outside of work) is to not express emotions.
  • Being vulnerable =! being weak.
  • I can learn as much about the person giving me feedback as about yourself when I receive feedback.
  • What got me here won’t get me there: what got me here was to be hard charging, determined, hard working and lucky (to overly simplify this), what gets me there is to inspire a group of people working for my vision.
  • Everyone at my company could go work somewhere else, instead they choose to come to work for me. It’s their choice.
  • There’s a lot more going in people’s minds than they articulate at any given moment.
  • Saying “I feel (an emotion)” is not the same as “I feel like/that”. Example: I feel sad when you say this vs. I feel like you are mean.
  • Instead of “you are” I can say “I experience you as”.
  • I can give feedback on behavior, not character.
  • It is okay for me to say when it is not the right time for feedback.
  • Other people feel more connected to me when I am being vulnerable & when I share my feelings.
  • There are appropriate and inappropriate emotions to express, depending on setting.
  • It is okay to clearly state what I need. In fact, people feel more connected to me when they know there is something they can help me with.
  • Instead of “I disagree” I can say “I have different feelings”.
  • No feelings are invalid.
  • In a room of people there are many different perceptions about the exact same thing that has been said.
  • Influence is to impact other people’s thoughts and actions.
  • To have influence people need to feel connected to me. Without connection I will not be effective.
  • You cannot selectively numb yourself.
  • A “why” question makes people defensive. A “what” question is a better choice.

Brené Brown’s Ted Talk:

The power of vulnerability

There was consensus in the room that the Silicon Valley archetype of an emotionless/robotic founder is running out of time and the next generation of founders and leaders care about human connection.