Series A to Series D: Enticing Investors and Nailing Your Investor Pitch at Different Stages of Fundraising

By Kenton Chow

One of the greatest benefits of years of experience is the perspective you gain having many fundraising data points and the perspective of been there, done that.   I believe that one of FLG’s most important value-added services to our clients is our partners’ impressive domain sector expertise and depth of fundraising experience across industry sectors and company stages of development.  FLG has a very strong track record and extensive experience raising capital for our clients. Because of this, we’re able to help our clients more effectively tailor their presentations, financial models and supporting documentation to investors.

In general, when you are building a case for investment in your company you need to follow best practices around the “case method,” as they say in business school.  Develop an executive summary or brief. Provide sound logic regarding solving the problem (e.g., how your company will build value and ultimately return for your investors). Address key questions and issues. Be prepared for different market scenarios, a tough competitive landscape, and have a plan for contingencies.

Your investor presentation evolves as your company grows.  How does your company story need to change from Series A to Series D?

Many venture investors  have an investment thesis and a target stage of company they prefer to invest in, such as early vs. later stage companies.   Investors are experts at picking apart investor presentations, or pitches, for their particular sweet-spot stage of investing. Therefore, CEOs should be aware of this and customize their investor presentations for their company’s specific stage of investment.  There is never any substitute for a high quality, thoughtful investor presentation to get investors excited about the company’s value proposition.

For technology companies, the fundraising journey often times follows a pattern similar to this…

The Series A Pitch

Companies who are fundraising at Series A are early-stage enterprises and are often at the idea stage.  These companies are typically focused on proof-of-concept and developing a prototype.  Many of these companies have been self-funded or relied on angel investors and friends and family for capital to this point. A CEO, who may be the a Founder at this stage, often leverages personal credibility and prior track record  along with their vision and product roadmap to entice a Series A investor to make a smaller investment in exchange for significant future upside. Being able to clearly articulate the concepts of their proposed idea and business model for reaching the next technical or product development milestone, including risks and contingencies, lays the groundwork for trust and value, which are critical to CEO-investor relationships at this stage of fundraising. Series A raises tend to be smaller since dilution is a large concern of both the management team, founders and angel investors.  It’s similar to landing a dream job, which begins with landing the interview, or getting married which begins with a first date. A successful Series A is all about just getting to the next milestone on your company’s journey.

The Series B Pitch

Series B companies are typically either finishing product development and are in early go-to-market launch stage or are already in-market and getting early traction with their customer base. These companies need capital for product trials and proof of concepts, demos and to support the hiring and systems necessary to start generating revenues and meet working capital needs. Series B investor presentations are much more dependent on a well-thought through business plans and cash flow projections, establishing cash burn rates, current vs. future sales growth, and cash flow requirements over time.  This may be the first professionally led investor round.   Since company valuation can now be benchmarked by market dynamics, customer reactions and competitor comps, CEOs need to have evidence-based scenarios ready for their pitch to investors.

The Series C Pitch

Series C companies are in the high-growth stage with clear inflection points in their growth cycles. These companies need much more capital than Series B investments in order to go to market in a way that accelerates growth and scale. Therefore, CEOs need to be prepared for detailed due diligence by prospective investors delving into the management team’s assumptions about product and market risks and their executional and operational ability to scale rapidly. Detailing the source of competitive differentiation and advantage in the pitch is critical as is being clear about how marketing and sales will efficiently drive customer acquisition and retention and how you will create barriers to entry by competitors. Investors will be asking lots of detailed questions and your presentation should proactively address these go-to-market factors.  CEOs are often asked “if you had an extra X million dollars, how much faster can you grow?”

The Series D Pitch 

Series D companies are often characterized as being close to being cash flow positive and are in a “drive to profitability” stage of development. These companies often are well on their way toward cash flow positive operations with a short horizon to profitability.  These companies’ valuations are driven by growth rate and cash flow with investment dollars typically being directed at necessary scale and cost structure optimization to improve productivity and operational efficiency. Investors want to know “how fast can you grow” and “how profitable can you get?”  Later stage investors want to understand what the repeatable sales cycle looks like and how much leverage is in the business model that will generate a flow of profitability over different time horizons. CEOs may be pitching to private equity and strategic investors as well as their existing investors.  Late stage investors also want to know the liquidity options at this stage of investing and “what’s next” because they will be looking at their ROI based on an exit strategy.  CEOs need to begin framing different liquidity scenarios together with upsides and downsides to start to paint a clear picture of when and how an investor will see returns on their investment.

Beyond Series D

Companies engaged in Series D+ rounds often have taken longer to make the level of progress they had originally expected.  This stage of investor presentation needs to be clear about why your company is still an attractive investment given cumulative prior invested capital.  CEOs need to be honest and data-driven regarding the company progress to date, the challenges and why they’re still going to win.  CEOs must address these issues head on in conversations with potential investors, along with the impact of new investment on existing investors’ ownership position.

In summary, whether your company is looking for early stage funding, such as  Series A or late stage funding, such as Series D, make sure you are well prepared with a concise, clear investor presentation that is appropriate for the stage of your company and the financial projections that support your value proposition.  You should vet your pitch with a wide range of trusted advisors from Board members to colleagues, ensuring you are fully prepared to anticipate prospective investors’ questions, concerns and skepticism.   A well prepared, compelling investor presentation will address investor objections and get them excited about investing in your company.