Well, here we are. The Fed has executed the fastest and most restrictive tightening policy in decades. Timing can frequently be an issue for companies with strong growth prospects but wanting to raise capital to grow. Indeed, a company may be right in the spot to raise money in its growth journey, but market conditions simply may need to cooperate. These are the times when the founder and lead team as “pitch men” for the product can make a great difference in the ultimate success of the company’s efforts to scale.
Let’s review a vanilla scenario that a founder faces when attempting to complete an A round. Let’s say valued at 6x ARR multiple. So, the company is valued at $12 million, and the founders want to raise $2.4 million and give up 20% in equity. In a frothy venture capital market, the check gets written by investors, and the story goes on. However, when markets tighten due to macroeconomic headwinds, deserving companies may not receive the money they need or would have otherwise received. So, the founder sighs and says, “Self…what is my next step?”
To be sure, for the founder to have gotten this far, he or she is probably a decent pitch person and can do a bit of selling, or at least someone on the team can do this. It is clear that the “raise and grow” is the most “plug and chug” formula. However, with some basic sales skills, the lead team can keep growing their ARR by using strong marketing and sales strategies to push revenue to a place where the ARR growth is compelling for those making selective investment decisions in the current market and deploying capital. Indeed, such a strategy could increase the valuation of the round. Alternatively, fundraising may not be necessary until higher benchmarks are achieved.
If you can do these things or work with an outsourced team that can, you can push to a 5X increase in ARR without adding the headcount and burst through the market malaise. These are the components to deploy:
A systematic, metric-based approach to these categories will yield results that the executive team can produce without raising the money and buying all of the internal talent to have a successful approach to “Rev Ops.” A founder and his or her team can drive this revenue train without necessarily having to give investors a ride simply so that they can buy the talent that will do the same thing.
If the last 25 years of technological innovation have taught us anything, the market rewards the founder, the polymath. There are eras where economic expansions are led by sales leaders, others that technological thinkers lead, and yet others by industrialists. In the middle are estuaries, where the market finds a direction. The tide is halfway out and halfway in. The water is neither fresh nor saline but brackish. The wind is still. This is when it is time to row. That is, the founder and executive team need to use muscle and reach the destination with sheer might and force of will. The multi-talented mariner gets the boat to where he wants it to go, and so must the founder seeking a welcome port for his company and the capitalists’ promised land. To those ends, if one can’t buy the growth, he must drive it himself. It may take more work by the founder and executive team. It may not only be necessary at times but also preferable and more rewarding with higher pre-dilution valuations and more control in realizing the vision.