At V1, we have had the privilege to sit on many of our portfolio companies’ boards from (pre-)seed to Series B (and beyond). We have seen these companies grow and go through the different stages in the start-up journey. And over the years, we have observed common patterns emerge at every phase.
We actively help each portfolio company manage their changing priorities as they grow. Now, we want to share some general advice to the broader community. In a three-part series, we’ll outline the core priorities and strategies for each stage in the journey – starting with what happens once you raise your seed round. We hope this helps, since we all know that setting proper priorities at each stage is the most important thing a entrepreneur can do.
What should you focus on (and not focus on) right after raising your seed round:
1. Priority = product-market fit
The seed round is all about finding product-market fit. In fact, this is typically the only thing that matters between seed and Series A. Be myopically focused on product-market fit and don’t waste your time on things that won’t contribute to achieving this goal.
2. Start to be data driven
By fostering a metrics mindset in your organization from the start, you can run experiments more effectively and efficiently as you work on product-market fit. These metrics will become your business’ North Star for everyone to rally around. And of course, a solid data foundation will come in handy in the future when you need to understand which levers to pull in order to really scale.
3. How to hire
At this stage, you should be hiring smart, hungry generalists, rather than specialists. Specialists are great when you have a playbook, but very few start-ups have a playbook at the seed stage. What you need now are smart and ambitious people who can figure out whatever needs to be figured out at any given moment. This means you need to design a hiring process to find generalists. Instead of posting ads for a specific position (where you’ll naturally get applications from people that fit the job description), try to identify the smartest people in your network and go after them.
4. Should you outsource?
Outsourcing is a great option when you have limited resources and not necessarily a deep talent bench in certain areas…so one would think it should be a great option for the seed stage. However, we never recommend outsourcing unless it’s for an ancillary area or a one-time task. You never, ever want to outsource your core… by doing so, you fail to build the expertise in your own company. And you can’t build a great company on an outside agency’s stuff.
5. What about culture?
Company culture often gets created with the first 10-20 people. Be very deliberate with your hiring choices as the early employees shape company culture as much as the founding team. This doesn’t necessarily mean that you should go out and hire a bunch of people just like you. If diversity is important to you, make sure you’re thinking about building a diverse team from day one (and this may mean you need to hire outside your network)
6. Be frugal, but not too frugal
During the seed stage, it’s important to watch your burn so that you can give yourself enough time to reach the necessary milestones for the next round. To this end, you want to focus your investments on those things that will get you closer to product-market fit. There’s no point in investing in sales & marketing at this stage. However, you will need to spend in a few areas outside product development – such as legal and accounting. Not having your house in order can come back to bite you at a later date.
Let us know if you have any other thoughts or observations about a company’s core priorities at the seed stage and stay tuned for next week’s post “You just raised your Series A, now what?”