Want to raise two funding rounds in quick succession? Stream CEO Thierry Schellenbach shares ways to smartly handle your first big investment to set your company up for its second. By Thierry Schellenbach, CEO of Stream (Techstars New York)
Last August, my startup Stream, which provides activity feed and chat APIs, reached a significant milestone. After five years in operation, we succeeded in raising a $15 million Series A round led by GGV Capital, which brought the company’s total funding to $20.25 million.Stream started from humble origins, with my cofounder and CTO Tommaso Barbugli and me writing code in coffee shops. Closing a Series A was exciting, and we wanted to make sure the funds would provide essential resources to bolster our product, expand our customer base, and continue to power communications for over a billion people.
Six months later, we were approached by Felicis Ventures, a VC firm with a history of backing global software companies. We weren’t seeking to raise a Series B so soon after our Series A, but it felt right to have Felicis’ investment and deep expertise on our side. We announced our $38 million Series B investment in March 2021.
To raise funds in quick succession, use these tried-and-true tips to handle your first investment round smartly.
Companies are only as strong as the people who work at them, and once you do close your first funding round, the first thing you should do is celebrate the milestone with your employees. Chances are, you couldn’t have reached your Series A without your team’s expertise, professionalism, positive attitude, and, let’s be honest, funny Slack GIFs.
You can still make your employees feel appreciated even if they are working remotely. Try shipping a bottle of champagne to each member of your team, and host a Zoom toast. A simple appreciative email also goes a long way. Make sure each person knows they play a crucial role in propelling your company forward.
Following your Series A, it’s a good idea to grow your team with best-in-class talent. At Stream, we added headcounts to nearly every department, including dev, product, marketing, sales, and design, and hired recruiters to help us find colleagues with the unique skill sets we required to improve our product, grow our market share, and earn new customers. Take a close look at where your company is lagging behind competitors, and add resources to these areas. For example, if you are acquiring new customers rapidly, you may need to add employees to your customer success teams to ensure the onboarding process goes smoothly.
However, maintain a strong preference for promoting internally first whenever possible. Many employees who started at Stream single-handedly executing their work are now managing teams. Of course, this doesn’t always work out. But it’s important to help your existing team grow in their roles. Room for professional growth is an essential factor in maintaining happy employees.
With your expanding team, it’s now more important to ensure your employees and organization are prepared for success. With more team members, it will be harder to keep everyone aligned.
Try hiring a Head of People to lead your HR team, help each department properly set up their quarterly goals, and establish practices to discuss progress. Using goal-tracking software such as Lattice can be particularly helpful in accomplishing this.
Emphasize and over-communicate your larger department and company goals. Repeat them during your monthly “all hands” meetings and within weekly update emails. Doing so keeps goals top of mind and fosters a sense of working together to accomplish shared objectives.
If you had minimal funding before your Series A, initially it may be uncomfortable for you to ramp up spending after being conservative with cash. But for you to be competitive in the marketplace, you need to shift your mindset. Following Stream’s Series A, we increased our monthly spend (especially for marketing purposes and sophisticated software tools) to expand our customer base while also monitoring our efficiency metrics to keep them stable. Still, we had to spend mindfully so we didn’t burn too quickly. Pumping funds into certain activities doesn’t necessarily translate into success.
With additional funding, you may feel a responsibility to support tech entrepreneurs who are just starting. It’s always challenging to launch a company, and just as a rising tide lifts all boats, supporting innovative startups will help the entire SaaS industry achieve long-term success. Volunteering your time via founder mentorship is an impactful way to give back. If you have the bandwidth, consider opening up a low-cost or free version of your product for small startups or founders, too. Recently, Stream launched a Maker Account, which enables small companies with less than five team members, under $10K in monthly revenue, and less than $100K in funding to use Stream’s activity feed and chat APIs for free. We can’t wait to see the types of products and projects emerging innovators develop to improve communication and engagement with their apps or websites.