The capacity for innovation and invention never ceases to amaze me.
In my role at YFM I constantly see examples of originality, brilliance and potential that demonstrate how dynamic the region’s tech sector is right now, even against a challenging economic backdrop.
It goes without saying that the tech sector holds massive promise both in terms of growth and positive economic impact, and the venture capital industry has been quick to respond.
Last year the UK’s small business sector received almost £17bn of equity investment, with the largest chunk of that funding being channelled into tech ventures.
Some of the most compelling success stories that I’ve been a part of as an investment manager started when businesses secured Series A investment, with a view to accelerating growth.
Series A funding can be transformative as part of this scaling journey, propelling young ventures to new markets, product innovations and international expansion – but only if the money’s used in the right way.
An overnight injection of millions of pounds of capital into your business is an exciting but daunting prospect – and I’ve witnessed what that responsibility can strike into the hearts of founders!
You need to be sure that you’re spending the investment wisely and exploiting the opportunities it opens up fully.
If you have the right kind of investors in place, they’ll support and challenge you every step of the way.
My experience of working alongside founders has taught me that getting the absolute most out of your Series A funding means being led by few key principles.
Series A investment doesn’t just provide you with capital, it affords your business the space, time and cash runway to try out new things, while still at a relatively early stage of evolution.
It’s better to use some of the funding to test ideas out now, when the costs are relatively limited if things don’t work out perfectly.
We know from experience that a scaling journey may not be linear and not everything will go to plan – but each idea you trial will result in valuable learning and has the potential to unlock a massive opportunity.
It’s definitely preferable to being left looking back and thinking, ‘if only I’d explored that idea – have I missed out on something big?’
Sales
Let’s take sales operations as an example. Come Series A, businesses will have developed a sales playbook that sets out a framework for approach each potential new customer.
I’ll often suggest that teams use this time to think how this could be further refined: could they build in new interactions or touch points with customers to build better relationships as they’re progressed through the sales funnel? Or are other touch points one too many? Now is the time to explore.
Of course, you’ll have plans that you’ve known are right for your business from the beginning but, so far, they’ve remained firmly on the distant horizon.
Series A investment provides the perfect opportunity to bring those forward. Focus on what’s really important – is there an extra feature that you want to add to a software product, but you’ve not had the funds to hire the right person to do it? Do you want to grow your sales team, to take your product to a wider market – or new markets?
Perhaps you have national or international expansion as a long-term goal? This is one of the most common journeys post-Series A that we see at YFM.
Expanding into US
In recent years, we’ve helped numerous founders to nurture a strong presence in the US.
Where they might have been running US operations out of a UK office previously, or relying on a couple of key personnel to travel back and forth between the two locations, Series A funding has gifted them the financial clout to set up offices and teams on their US customers’ doorsteps.
Take one of YFM’s portfolio businesses, text analytics company Relative Insight. Series A funding, backed by our support, enabled the Lancaster-headquartered firm to establish a Philadelphia office and be better equipped to tap into a significant US market opportunity.
There’s no one-size-fits-all approach, though, and our experience with the different ingredients to a recipe for success means we’re well placed to advise on how best to execute this in the most informed way possible.
In the early stages of a business’ evolution, founders are often stretched to the max, multi-tasking and wearing the CEO hat, sales director hat and finance hat simultaneously – not to mention a few others.
New capital means being able to bring in new people – experts with experience at your stage of development and who can deliver each important role fully.
Invested in the right way, it can provide vital headspace and breathing room, leaving you to focus on the strategic running of the business.
Choose the correct advisors
At YFM, we already know that the founders we’re backing are doing a great job with the day-to-day running of their businesses.
We focus instead on adding value at a strategic level, both through taking a seat on the board and often introducing a non-executive director or chairperson who can provide an extra level of expertise and experience.
They’re a source of highly relevant guidance, offering expert insight into specific sectors or situations relevant to your specific scaling journey ahead – developing a certain sales strategy or expanding internationally, for example.
A good chair or non-executive director (NED) equips founders with the knowledge they need
Having the right Series A investors on board, who bring truly valuable insights and stand by you as trusted advisors, will pay dividends time and again.
I’ve seen some incredible success stories where businesses have optimised this as part of their growth story, one such success being Matillion – a leading cloud data integration platform and the North West’s latest ‘unicorn’.
Matillion received Series A backing from us in 2016, to fund the opening of its first US office and expansion of its product range.
From a team of 18 people in 2015 and turnover of £1m, the company has grown to almost 600, and is now co-headquartered in Denver and Manchester.
It has since raised more than $300m through multiple funding rounds, but the strength of our relationship means we’ve remained a trusted board member throughout.
Ambition
Harnessing the potential of Series A investment in the most effective way can unlock doors and help your business achieve its objectives faster.
The key then is to keep driving forward. For some businesses, Series A funding is just the beginning of an extraordinary journey, so use the process to expand your horizons, raise your ambitions and find the right investors, bringing with them sound advice, to join you on the road.