“Details matter, it is worth waiting to get it right.”
There is wisdom in knowing when to accelerate forward and when to operate a little restraint. After securing Series A funding, there is a temptation to charge full steam ahead; to treat it like a steroid injection and behave as if the cash will burn a hole in the business’ pocket.
It’s easy to understand why we might fall into this trap. Suddenly there are the means to implement long-awaited developments and many tech entrepreneurs are the sort of people who want it done now, right now, or yesterday even.
Patience is most definitely a virtue here. Change is a crucial component needed for true evolution, but it shouldn’t be forced.
Whether thinking about recruitment and salespeople, target audience and marketing activity, leads and prospects, or making operational changes, there are potential pitfalls of not taking action a step at a time, using the company’s natural momentum.
It’s important to stay grounded, consider each action carefully and do the leg-work. Sadly we’ve seen tech start-ups fall victim to their own success and undo their hard work by being too over-zealous after they’ve secured Series A funding.
For a breakdown of the most commonly made mistakes made by tech startups who have secured Series A funding, take a look at our latest eBook ‘7 Mistakes Tech Companies Make After Securing Series A Funding’
Hiring can be a significant trip hazard after securing Series A funding.
Maybe you’ve been fantasizing about what you can do once you have a bigger team in place? Or dreaming of the customers you’ll win with a team of high-achieving sales executives?
Once your business gets its essential cash injection, the temptation is to go into recruitment over-drive. Triple your sales team overnight and employ people who will relieve all the tasks unsuited to your current skills-base.Many tech start ups, at this point, don’t have the infrastructure or onboarding processes to make best use of a rapidly expanding team.
If you’re hiring before you’ve thoroughly understood your target audience, or are taking on a VP of Sales when two major clients make up 90% of revenue, you may need to rethink your approach. Recruitment is just one theme in a whole host of common mistakes made by tech startups when they secure Series A funding.
If this is applicable to your business, download our latest eBook ‘7 Mistakes Tech Companies Make After Securing Series A Funding’
Securing Series A funding is an indisputable cause for celebration. It’s a big win, a milestone, full of optimism and the potential for success.
However, there have been many tech entrepreneurs who tripped up while riding the wave of Series A funding. As with lots of big breaks in life, it’s easy to become over-inflated, believe the hype and make considerable mistakes. There are potential pitfalls that are easily overlooked when you’re flying high.
It’s vital to stay grounded and not get over zealous. Be composed, think things through and make changes gradually.
After watching this cycle unfold countless times, Sales for Startups has identified common errors made in the aftermath of securing significant funding.
Addressing topics like recruitment, market profiling, realism and perspective, marketing continuity and alternative planning, our eBook 7 Mistakes Tech Companies Make After Securing Series A Funding’ offers important practical considerations to future-proof your business and not fall victim to your own success.
Be prepared for the long haul. Success is not a destination, it’s a journey.
The term ‘fail forward’ was popularised by Will Smith a couple of years ago. In business, however, it’s long been used by entrepreneurs during motivational speeches. While there is definitely credibility to the idea of failing then quickly learning from your mistakes in business, there are areas where ‘getting it right’ on the first try is essential.
One of those areas where you can’t afford to go wrong relates to hiring a VP of Sales.
Yet, in the tech world, 70 percent of SaaS sales leaders don’t make it to the 12-month mark. It turns out that hiring a VP of Sales is one of the most frequent mistakes and mis-hires companies make.
But what are those mistakes?
In this article, we take a look at 9 mistakes (plus some inside knowledge from experienced CEOs) tech companies make when hiring a VP of Sales, and what they can do to avoid these pitfalls.
Mistake 1: Hiring for who you want to be. Not who you are now
When it comes to hiring a VP of Sales, the types of skills needed vary depending on the stage of your company. Below is an example of skill sets for different VP of Sales in relation to the current revenue of a tech company.
- The Visionary: <£1m
- The Organiser: £1-10m
- The Driver: £10-50m
- The Analyst: £50m+
Tech CEOs often feel the need to hire a ‘driver’ VP of Sales, someone who has experience with larger companies and has been there, done that and worn the t-shirt. It’s understandable, too – someone with a track record of doing business at the highest level is instantly appealing.
Going down the ‘top-level experience’ route is a common mistake, however. VPs at this level typically don’t have the knowledge needed to successfully navigate the stage where your business sits. Too often, hiring a ‘driver’ instead of a ‘visionary’ ends up being the wrong way to go about things, as CEOs think about what they want to be rather than who they actually are.
Before even deciding on the type of VP you want to install, think carefully about where you are and whether that prospective VP of Sales has the required experience and success for the level of your organisation.
Mistake 2: Not hiring for your market
The market you operate in will go a long way to deciding the type of VP of Sales you bring on board. If your market is particularly competitive and commoditized, the VP of Sales needs to be someone with a vicarious appetite for selling highly-charged environments.
Alternatively, if you function in a new market or one that is yet to be defined, you need to hire someone who can sell a vision – a hire with who can bring value to your clients by selling an intangible concept.
It is essential to ask yourself about the type of selling the VP will be tasked with. Are they selling change, or will margin and speed be more vital to your set up? Will they be required to tap into previous relationships with clients to sell in more competitive markets, or will they engage new stakeholders – e.g. Chief Digital Officers, Chief Customer Success Offices and Head of Global Trends?
Mistake 3: Not allowing enough time for the hiring process
Unfortunately, you can’t just swipe right on a high-level VP of Sales. We might live in a world where everyone expects instant gratification, but getting the correct VP hire takes time and patience. There are so many different layers that go into the hire, with many components happening in the background.
You are likely evaluating current profit and loss, working out budgets, waiting on news as to whether that next mega-deal comes in for the current quarter – all the while trying to find the right VP of Sales to take your company to the next level.
Finding a good fit can take six to 12 months, so it’s best to start early and not rush into the process. Spending too little time during the research and hiring stage could see you hire the wrong fit, with it taking a further six to nine months to decipher whether they are suitable for your company. That’s potentially six to nine months’ wages down the drain!
Take a bit more time with your hiring process, and what might seem painful in the short term is more likely to lead to long-term gains and profitability. Get the hire right, and they could make an impact from the moment they walk through the door.
Mistake 4. You are not prepared for growth
Too many CEOs expect the VP of Sales to be a strategist as well as a dealmaker. Yet their main job is to drive results and help the company scale and grow the business. If there isn’t already a solid foundation in place for your hire to succeed, problems will ensue as you’ll see a misguided and ambitious leader take you down the wrong path.
If you don’t have the required structure in place, your VP of Sales will likely deviate back towards old habits, create processes that work solely for them and act upon experiences that worked for one organisation but might not be in line with yours. The result could see an increase in business, but it will also create more confusion than clarity.
Look to hire with a scalable and predictable process in place, one that can be quickly adopted by any new employee. If you don’t have one, but want to get somebody through the door, think about bringing in an interim, part-time VP of Sales or a consultancy who can create something from scratch and are comfortable operating in times where you are uncertain and everything is not clearly defined and documented at your organisation.
Mistake 5: Not enough trust
Letting go can be one of the hardest things to do for anyone – especially a CEO who has been highly involved with every facet of the company for the last two to three years. But learning to relinquish an element of control is necessary for success.
Of course, doing so is much easier said than done. It is likely that you’re now a Series A company, or are about to become one, and that means every aspect of your business is tightly linked to you as a CEO and any initial investors who have all done the hard yards thus far.
All of that hard work was to get to the point where you can pay someone a good salary to further push things forward – but working with new people requires an element of trust. The VP of Sales will often have a differing viewpoint to you concerning the interpretation of the problem, the direction or the go-to-market strategy.
As a CEO, it’s now vital that you sense-check with other members of the team and the different departments. Your company is a democracy now, and the days where it was just you and your band of brothers are over.
At Series A stage, the key to success is the transfer of knowledge from the CEO’s mindshare to that of the VP of Sales, and you have to partake in this knowledge-sharing exercise fully. This is a feat that is often not achieved by many CEOs, as they struggle for power, ego and visibility as their role changes.
Mistake 6: Too much trust
Getting your VP of Sales hire right really does come down to fine margins. A lack of trust can see them becoming frustrated in their role and not producing. However, too much faith brings about its own set of problems.
Be wary of a VP of Sales who says ‘trust me’ all too frequently. When they start bandying about phrases like this, it often indicates that results aren’t visible, they aren’t good communicators, or they are fearful of the consequences of not succeeding. Maybe they’re even looking for an exit.
Trust is, of course, vital. However, there needs to be a reason for that trust, and being asked to trust someone blindly will only lead to poor results. Finding a balancing act between having trust and knowing when you need to step in is hard to achieve but also vital.
Mistake 7: Hiring someone who isn’t used to selling your way
On the surface, selling is reasonably straightforward, yet many layers funnel into its art. Some different types of selling involve:
- Selling through partners
- Selling to 10,000+ employee enterprises
- High-volume and low-value deals
- Low-volume and high-value deals
Just because a VP of Sales is good at selling doesn’t mean they’re able to sell your product or service. If you hire someone who knows how to close £7,000 deals, but you want them to do £75,000+ deals – you might have a problem.
Similarly, they might have experience managing inbound teams or work for an established brand that is well known in the marketplace, but now you’re asking them to go out into the unknown with an outbound team based on lead generation. It might turn out that they’re a natural and take to it like a duck to water, but expecting them to succeed in unknown territory is a risky strategy.
Mistake 8: They aren’t well rounded enough
Many CEOs make the mistake of thinking there are a few default types of VP of Sales.
- The high-volume people manager: Often seen as an equivalent to an Operations Manager, this type of VP enjoys allocating people and time to small tasks.
- The coach and mentor: Loves talking to sales reps, mentoring them on key sales methodologies and helps them close deals.
- The dealmaker/driver: Is used to being the top performer and had always aspired to move into management and reach their goal through consistent performance.
All three traits are commendable, but a top-level VP of Sales will display all of these attributes in some capacity. They will have the necessary skills to sell your product or service, strategically review your sales process and identify bottlenecks and common themes. Finally, they can be a coach and mentor to the sales team so they can help them progress to the next level of their careers.
Mistake 9: Lack of knowledge when it comes to data
Ideally, you want a VP of Sales who can act on their own instincts when the time calls but also places a significant emphasis on data. Many VPs still back their methods and aren’t trained on how to read data correctly.
They shy away from a CRM system – or they don’t implement it properly, which causes their sales team to misuse it, with the CRM becoming an expensive time and resource that yields little results. These VPs are often left sidestepping processes to close a last-minute ‘rescue deal’.
A modern-day VP of Sales is forward-thinking and utilises data analytics while building processes that work across the board – for themselves, their team and, ultimately, your company.
Getting it right at the first attempt
Sales hiring is no easy task, especially when it comes to the VP of Sales – who has the ability to lay the foundation for future success at your company. There might be times where the road seems a little rocky, and an element of risk is involved. But you can avoid many of the risks that tech companies make by following our steps to help you bring in a VP of Sales who adds to what is already a winning culture.
Agree with our tips for avoiding VP of Sales hiring mistakes? Perhaps you have your own to add? Let us know in the comments below.
Early funding for your startup is ultimately a reason to feel joyous. It shows that your efforts are being acknowledged and people believe you have a viable product or service on your hands. However, it’s the next steps that are the most vital.
How you use your newly acquired capital will not only help shape your business for the foreseeable future; it also sets you up nicely for further funding rounds, such as Series A funding. Yet, there are common pitfalls companies make after securing early funding.
In this article, we look at 7 mistakes tech companies make after seed funding. These tips are designed to help you avoid falling into any traps, leaving you to focus on maximising your bottom line.
Mistake 1: Rapid expansion
Whether it’s in our professional or personal lives, upgrading is usually the first thing we do after coming into a little pot of gold. So it’s easy to fall into the trap of thinking you need to make sweeping upgrades across the business after you’ve secured funding.
Too often, startups have their eyes on a shiny new office, something they acquire to accommodate their new team hires – especially in the sales department. Both a new office and employees might be necessary for your next steps, but don’t jump into anything before you have a product/market fit.
Excelling in business means that you need to take some calculated risks. Don’t run before you can walk, though. It might look good having a plush new office filled with a team of salespeople. But at this stage in your business, it’s unlikely that you’ll need to transform the look and feel of your company.
Mistake 2: Marketing overload
Extra funding opens up opportunities to have more of a presence in front of your target market. It’s only natural to generate more leads with a marketing push – but it’s important to avoid going overboard and splashing the cash on a full-on marketing assault.
You should budget accordingly and focus on a key area of growth, rather than lavish spending on multiple marketing methods like big PR campaigns, trade show booths, getting a new website, SEO research, PPC, and re-branding.
Ask yourself what’s more important – is it physical presence at trade shows? Could you do with some more visibility amongst industry press? Does your website really need an upgrade? By creating a plan for one particular element, you are likely to grow and be successful in that specific area.
Mistake 3: Partnership building
Your go-to-market strategy needs to provide a blueprint for delivering your product or service to the customer. Partnership building is one way that some tech companies identify opportunities to get their product/service out to the masses.
Unless you have an indirect go-to-market strategy, it’s probably not worth spending the time focusing on partnerships at this stage. Ask yourself what you currently have to offer them? What will you be trading with these potential partners?
The answer is most likely no more than a vision. Therefore, it’s best to wait until you’re further down the line with the business before spending time and energy on partnerships. A partnership needs to be equally beneficial, and if you’ve only just raised seed funding, you might not be at that stage just yet.
Mistake 4: Looking for trophy deals
It’s understandable that securing funding provides you with a confidence boost. However, you must explore any deals thoroughly. Having the extra capital might convince you that it’s time to go for the ‘big deals’ and secure the company’s future, but is it the right strategy?
Game-changing deals are great and do what they say on the tin. But they’re also unlikely to happen so quickly. You might hit the jackpot and pull a rabbit out of the hat, but having a more realistic strategy that is nuanced will help with steady and sustainable growth.
Mistake 5: Changing things too quickly
Undertaking a complete analysis of the business and changing everything based on “bare matrics” is something many startups do after receiving funding. However, it often proves to be in vain – you didn’t get to this point by changing everything radically. Why do it now?
You’ve likely read the motivational “how to succeed in business” books – the ones that say you need to look at specific KPIs. Suddenly, you’re convinced that the business needs to change part of the product or that your market has a new demand.
Or maybe you think pricing needs to change – either up or down. But how many people have you spoken with for clarification about new market fits and pricing? Many CEOs throw out the old line, “it worked for Apple, Google, Facebook etc”. Aiming high is great, but it’s also vital to stay grounded in reality – especially after the high of securing funding.
Mistake 6: Getting carried away with experimentation
Change is necessary for progress, but it needs to be organic. There’s a common theme in this article, and it’s the idea of getting carried away too quickly. Many companies like to experiment after securing funding, testing the waters and seeing what works.
However, successful experiments often take time. Startups aren’t set up – nor do they have the staff – to see them through before getting itchy feet and reverting back to the norm. You shouldn’t be afraid to try new things and be innovative, but make sure you have everything in place to carry ideas forward.
Mistake 7: Recruiting the wrong people for your stage of growth
Recruitment is necessary for expansion, so it makes sense to look at increasing team numbers after securing seed funding. However, you need to make sure that you’re in the right stage of your recruitment growth.
It’s easy to get carried away with hiring people – perhaps there were two outstanding candidates for the role, so you hired them both. Or maybe your sales hire doesn’t have a sales background but demonstrated a great attitude, has an analytical mind and used to be a consultant or operations manager.
Unfortunately, below par talent in a small company is always destined to fail – and will only drain more resources as you spend time trying to make the hire a success.
Avoiding seed pitfalls
With the right plan, seed funding has the ability to properly your startup to new heights. These tips are designed to stop you going down the wrong route after you’ve secured seed funding so that you can be on the right track for unprecedented success.
Do you agree with our tips? Perhaps you have some to add from your own experiences. Let us know in the comments below.
Securing Series A funding is a big step for many tech companies. You have likely had some experience with seed funding and maybe even angel investment. But Series A represents that first power move, one that will hopefully see the ascension of your company with no looking back.
Series A is the optimisation stage where companies look to take things to the next level after securing a substantial windfall. The goal is to go bigger and go harder. Yet, sometimes tech companies can go too big and too hard, undoing all the hard work that initially got them to this phase.
It doesn’t need to be that way, however. If navigated correctly, Series A funding is another step on the growth train – with Series B and Series C on the horizon.
In this article, we look at 7 mistakes tech companies make after securing Series A funding. With these tips, you will avoid any perils and position your company in a healthy place that’s ready to win.
Mistake 1: Hiring too aggressively
Increasing the employee count is often the first order of business after securing Series A funding. Whether it’s sales, marketing, product, operations, or a combination of every department, one of the first stages of growth entails more team members.
Yet, too often, companies bring in new hires without having a proper onboarding strategy and therefore aren’t prepared for a significant increase in team numbers. How will you communicate effectively to the team if its size suddenly doubles?
It’s not a case of merely hiring talent and expecting instant results that include increased sales, a more aggressive marketing output, and improved products. Three new sales hires won’t automatically equate to doubling your sales in the next quarter.
Instead, you need to grow at a pace that fits with your model. You’ve already made it this far – there’s no need to rock the boat to the point where the company suddenly looks like a different set up. Focus on quality over quantity – are there existing employees that need replacing before the headcount increases?
More doesn’t equal better. Quality should always come first.
Mistake 2: Hiring salespeople before having a market/product fit
A common theme with B2B tech startups sees them hiring salespeople and onboarding with hope and ambition but with no real understanding of their target audience. It creates unrealistic expectations and often leaves the sales rep unsure about the target market, essentially leaving them throwing enough mud at a wall in the hope that something will stick.
Hiring a VP of Sales too early ties into this mindset, and is often something we see with US big “tech influencers” who talk about hiring a VP of Sales after your first 10 customers. This is not a wholesome metric, however – you may have two customers that contribute 90% of the revenue, with the rest being pilots and short-term engagements. It will be hard for a VP of Sales to thrive in such an environment, and most likely end up being a costly mistake.
Mistake 3: Not being honest to yourself about your sales cycle
Impatience can lead to a quick unravelling after securing Series A funding. Your first significant deals took nine months to close, but now you want them done in three. Expand the team, be more aggressive and, voila, shiny new sales deals secured in record time.
Such a method is eminently understandably but, more often than not, it won’t hold up. Nor should you base your strategy around changing everything too soon. By all means look at your sales cycle and refine, but don’t change the landscape overnight.
It makes sense that you aim to improve your metrics when it comes to closing deals. However, ambitious targets – along with lying to yourself about where the company is in the sales cycle – won’t help.
Mistake 4: Thinking you can switch marketing on and off like a light switch
Many startups think of marketing like pouring petrol on a bonfire: it creates a huge flame that attracts plenty of attention. Once that attention has come your way in the form of leads, you then dial-down on marketing, safe in the knowledge that you have more potential clients than you can handle. No more SEO, PPC, trade shows, Social Ads Spend, networking events or PR agencies.
In reality, marketing isn’t an ‘on/off’ solution – it’s part of the long game and helps build your brand awareness over time. There may be an uptick in leads at the start of a campaign, but that doesn’t mean the job is done.
Choose flexible marketing tactics, so they can be adapted if necessary. But don’t go hot and cold on marketing, expecting to stop it for a few months and pick up where you left off. The whole medium of marketing is too nuanced for such a strategy to succeed.
Mistake 5: Not having an alternative plan for when there is a sales drop
It is easy to get carried away after Series A funding, but part of running a successful business is the ability to think of the best and worst-case scenarios – and be prepared for the latter. Doing so involves planning and budgeting accordingly.
We often set unrealistic goals based on nothing but blind ambition, then go into panic mode when those goals don’t come to fruition. As they say, failing to plan is planning to fail – and faster scaling doesn’t necessarily mean a quicker route to success in the long term.
Keep your day-one customers happy for those times when new customers aren’t pouring in at the rate you anticipated. Being prepared, correctly estimating costs and having a clear idea about how your market works will help maximise your chances for sustained success.
Mistake 6: Not thinking that you’ve already made it
When a commercial or marketing founder raises consecutive rounds of funding, they can start believing they’ve got all the answers – especially if a well-known investor has invested £1m+. The thought process goes something along the lines of, “If investor A believes in me, I must be doing everything right”.
Investors spread their bets, rather than putting all their eggs in one basket. If they invest in 20 companies, then only one of those needs to be acquired or go into IPO for them to make their money back and wipe out the losses of the other 19 companies. In other words, you’ve done a great job securing Series A, but there’s still plenty to learn.
Your company might have an inflated valuation, but does that line up with your revenue in the cold light of day? Do you have £150k-200k revenue per employee? What is your gross profit % change year on year? How much cash do you accrue in the business?
Many companies now raise Series A funding at a lower recurring revenue than ever before. What was once £80-90k monthly recurring revenue is now raising millions off just £20k MMR.
Be open to learning and apply a growth mindset as you move through the stages of expansion, especially after Series A funding. From new strategies, tactics and team members, to a new vision if necessary, having that open-mindedness and understanding that you haven’t cracked it all just yet will go a long way.
Mistake 7: General inconsistency
Change is a crucial component needed for true evolution, but it shouldn’t be forced. In fact, trying to change too much too quickly can be one of the biggest downfalls for companies that just secured Series A funding.
Talk to your employees. Most of them will likely cite unnecessary changes as disruptive and unproductive. If you go down this route, employees may start doubting your leadership as a CEO, as they have to adapt to your yo-yoing.
If they begin asking questions along the lines of “how would you like me to do it”, it could be an indication of your indecisiveness and desire to take things in a new direction without any real strategy.
Let change happen naturally, or because you’re adapting to new markets. But don’t force it because you think it should be the next step.
Thoughts from the pros
As well as our own experiences, we’ve spoken to some other professionals on what they’ve learned after securing Series A funding. Here are their thoughts:
Ben Prouty, Shepper
“Hiring from a standstill: Starting the hiring process for your post-raise team before closing your Series A funding might seem time-consuming, but it’s essential to do so. This can be a challenge for the senior management team and hiring managers who are wrapped up in closing the round and have heads that are rooted in a bootstrap mindset.
However, overnight you go from zero to being able to hire against the plan; it’s that binary. Therefore, get an in-house talent acquisition manager in (even for a couple of days a week) to start the process of lining up the people you need and aiming to align start dates with the close window. Not easy to do, but the alternative of losing a few months post-fundraise by starting from a standstill is an amount of time that a post-Series A company cannot afford to lose.”
Mike Kenedy, Downing
“Avoid overspending or adding to the operation that gears towards Series A cash burning a hole in your company’s pocket.
- Getting a big office on a 5-year lease!
- Hiring too fast, hiring the wrong people.
- Losing focus on product market fit and scaling the sales team too quickly.
- Hitting the road on international expansion too soon, and or over-committing – the US is a typical example.
- Trying too much too soon just because they have the cash.
- Very occasionally going far too slow.
Agree with our tips for avoiding mistakes after Series A funding? Perhaps you have your own thoughts to add? Let us know in the comments below.