Dear SaaStr: If You Just Received a $10m-$15m Funding Round, What Should You Actually Use it For?
If you’ve raised $10m-$15m, I’m assuming you are somewhere between $2m and $10m in ARR (revenue).
The most important thing you can do at a high level is to go hire Great VPs.
- A great VP of Sales to keep the engine scaling
- A great VP of Marketing to keep the leads coming in
- A great VP of Customer Success to make all those hard won customers happy
After $5m-$6m in ARR or so, it’s really hard to scale without a strong VP heading most core functions. With $10m+ in the bank, you can start making those hires now.
The most important thing you can do at a tactical level is almost always the same: use the capital at this stage to double down on what is working.
You’ll be tempted to use the capital to enter new markets, to expand into new segments, to try out new verticals.
Tiny experiments are OK, and investing in segments that are just starting to take off is good. But almost always, the fastest and easiest way to go from $1m to $10m is to double down on what is working:
- Sell more to the types of customers you already have.
- Upgrade the management team.
- Hire more sales reps, to sell to the same basic segments that you already have customers in.
- Spend more on demand gen — to any customer segment that makes up more than 10% of your revenue.
- Give the biggest customers more attention.
- Hire more engineers to close the feature gaps the existing customers and prospects are already complaining about.
- Have a customer conference.
- Do more top tier events, if events work for you.
- Drive your deal sizes up, by providing more value.
You just won’t have a big enough team, enough redundancy, enough “extra” to spend much of that now on areas where you have no revenue traction yet. Even if you really want to enter those areas. Even if your competition is killing it there. You have to be patient.
Brand new initiatives take a while to build up to even $1m in ARR. Once you are past $8m-$10m in ARR, you can make an investment in something new that takes material resources.
But before then — don’t chase the shiny penny. Put more resources, time, attention and money into what’s already performing.
A related post here:
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Jason Lemkin, Khareem Sudlow
