When is your business ready for Series A funding?
Movac Investment Director – Jason Graham
30 August 2019
Series A is the lingo we use to describe capital financing one step up from seed funding. Movac is a series A and beyond tech investor so let me explain what we look for if you come knocking for capital for your business.
While an angel investment may still be at the product development stage, a business ready for Series A will have a product in market, based on a “go to market” strategy that seems to be working. Your business is not only getting a return on capital but you know what future returns are going to be.
Imagine your business as a black box. You feed in capital at the top, you crank the handle, and hopefully sales come out the bottom. Once you can crank that handle with capital and have a fair idea what’s coming out, you’ve got a repeatable and scalable sales process. You’ve probably moved on from doing the door knocking yourself to having a full on sales team and you’re looking to expand.
Here in New Zealand we’re talking at least $1 million of product revenue to get a look in for Series A, substantially less than in the US where you’d need $2m to $5m in revenue to qualify. In the US you’re talking 200% to 300% growth rates year on year, which is also a fair bit higher than New Zealand.
What are some of the other key ingredients you look for. A company that knows how to build a relationship is definitely ahead of the pack. Vend, the retail software developer, is a great example of this. We first got to know them in 2013. We didn’t end up investing at that point but their team was great at keeping in touch and we also kept in touch with them. This two way conversation over time built up a great relationship. When they were looking to raise capital, it just so happened we’d just raised a new fund and there was an easy conversation in 2016 about investment, helped by the way they provided well organised detailed information so we could do the due diligence with ease.
We’re also looking for an exceptional team with a track record of executing. All elements of the team don’t need to be in place on day one, but we’re looking for the self-awareness and planning for what capability needs to be added. We’re really happy to help finding the talent your business will need, leveraging our networks in New Zealand and offshore.
Finally, your business needs to have some kind of defensible or long term competitive advantage – what we call a “moat”. You need to show you can defend your turf, perhaps in the form of data, or IP.
Movac has been investing for the last 20 years from seed all the way to series E and F. A typical investment time frame for Series A and beyond is seven to 10 years, so if you’re looking to raise money, get in contact so we can get to know each other.