As the experience of one B2B startup demonstrates, raising a Series A is as much about the founders and their prep work, as it is about the idea.
When it comes to securing early stage venture capital finance, there is no magic formula. That said, there’s plenty to learn from startups that have been there and done exactly that.
Ordermentum, a B2B ordering and payments system, is one such Australian success story. Launched in 2014 and custom built for the food and beverage industry, the two-sided network promises to remove the administrative burden for both retailers and suppliers. To date, the business has successfully completed three funding rounds, pulling together prominent names including tech investment fund Capital Markets Technologies, as well as Lion Beer.
Here, co-founder Andrew Low shares some of the key elements of Ordermentum’s approach, which he believes made the biggest impact on winning over investors.
Proving product/market fit
A major contributor to their success, says Low, was getting a product to market as early as possible. Having raised $500,000 in seed money, Low and co-founder Adam Theobald focused on developing a prototype and getting it in customers’ hands well before approaching investors to raise a series A.
“Unless you have customers paying for your product you’re not getting the feedback you need. You also need to prove there’s a product/market fit and show you’ve got a growing customer base and growing revenue streams on those customers,” says Low.
For Ordermentum, a key factor in all this was the way they took their product to market. “We wanted to talk to the food service industry as someone with empathy for the problems they’re facing,” says Low. “If you get the brand positioning and values right from day one this comes through in the UI of the product, the language and tone of your website and in the way you sell,” he says.
“When we got to the point where the feedback was resoundingly positive and we had month on month growth of at least 10 per cent, we knew we had a story we could sell.”
Selling yourselves
Of course, great ideas are the cornerstone of the startup scene, but according to Low they’re not the most critical aspect when securing finance. “Ideas play second fiddle to founders – VCs have to believe that you’re the best people to take the idea to market.”
Working in Low and Theobald’s favour was their mix of complimentary skills and expertise. On the one hand Low has spent years in senior F&B roles, including as managing director of Toby’s Estate Coffee. “I’ve lived the problems and wanted to get out and solve them,” he says. Theobald, meanwhile, has launched three startups, including consumer ordering app, Hey You.
To maximise their chances of success, the pair also brought Channel 10 chairman David Gordon on board as chair. “We looked for a chairman first and our Series A second – this gave us a balanced perspective in an emotional period and a strong foundation to build on when we went on to form the board.”
“It’s not only important who the founders are but that they have people around them who are going to make them successful,” says Low.
More than a cheque
While the VCs will be vetting you, Low says it’s vital that you do your own due diligence, and that you don’t just jump on the first offer.
“We were fortunate to have our chairman sit with us and say it’s not just about the money it’s about the partner who can have the greatest impact on your business,” says Low.
His advice when meeting investors is to ask yourself whether they’re aligned with your vision, values and objectives. When raising their Series A in 2016, Low recalls speaking to the majority of top VCs around, “ultimately we went with a smaller private fund as the best fit.”
Clearly taking steps to lay a strong foundation on which to build their startup has paid off for Low and Theobald. Last year they followed their $2.5m Series A raise with a successful $5m series B round and, at the time of writing, Ordermentum is servicing 12,000 venues and 230 suppliers, transacting $210m worth of supplier invoices per year.
* For more information or advice on general finance options for your small business, always speak with your financial institution for specific loan application requirements and conditions.
This article was first published on the Optus Yes Business hub in June, 2018.
