According to a recent Crunchbase report, VC funding fell by 52% in Aug’22 compared to the previous year in the global market. Late rounds carried most of the fall when breaking the report down into specific stages. Series B dropped by 55% and Series C even more dramatically by 77%.
The least affected by the tightened funding market have been early-stage Series A investments, remaining flat year over year. The data in the report proves that early-stage companies are still in a great position to begin their journey in the go-to-market phase.
Our CEO, LJ Bjørkevoll weighed in on the topic;
“The report shows that promising teams and products are still getting funded to enter the markets. At the same time, it shows there are no “wishful tickets” for late-stage rounds. You have one chance to prove you can establish sustainable revenue.”
The challenge of the go-to-market stage
It’s apparent that late-stage investors are looking for cash-efficient companies that can prove a repeatable sales model. For early-stage startups, this means there is one shot of succeeding in the go-to-market phase as a result of decreasing availability of bridge funding.
For especially first-time founders, developing a sustainable commercial engine in parallel with building a team and product can be daunting. Crossing the chasm and transitioning from a sporadic founder-led sales model to a systematic sales approach is no easy task, especially under time pressure. The growth marketing “fail fast”-mentality isn’t an option in the current capital market. You must “win fast” in order to extend your runway.
To win fast, commercial know-how and experience of succeeding in the go-to-market stage are priceless. One does not have the time to learn on the go, nor to linger on what to prioritize. In the current capital market, googling your way through commercial frameworks may end up as a costly experiment.
It is crucial to use the investment capital on people who have experienced this journey first-hand, preferably multiple times, as these people come with an invaluable toolbox to this particular stage.
“The clock starts ticking immediately after you have landed funding, and you have no time to spare when it comes to having your commercial machinery in place. The pressure to deliver repeatable revenue is higher than ever”, says LJ Bjørkevoll.
The clock starts ticking immediately after you have landed funding, and you have no time to spare when it comes to having your commercial machinery in place. The pressure to deliver repeatable revenue is higher than ever.LJ Bjørkevoll, CEO & Founder, ScaleupXQ
What should startups focus on in the go-to-market stage?
The first step is to recognize that the challenges in the GTM stages are radically different from the ones you faced before. When you’re building a product, commercial activities are very experimental by nature. In the GTM phase, a systematic approach toward revenue is needed. A goal-oriented and tactical plan should be put in motion.
The three intervals in the GTM stage
To ensure the right focus, we divide the GTM stage into three intervals of 3-5 months with a clear purpose, focus, and milestones.
The first interval aims to build momentum in the market by exploring new markets, segments, and decision-makers in a systematic way. At this interval, there is often only a hypothesis of the ideal customer profile which is why it’s important to collect a lot of relevant data from sales activities.
The focus in the first interval is to maximize sales activities and disqualify opportunities that are not ready for the product you have today. By having a disqualifying mindset, you are able to form your ICP and establish a solid foundation for the next interval.
The second interval is about iterating on your approach towards your ICP.
By using data and proof points harvested from the first interval, you will be able to optimize your activities for customers who have the highest probability of buying. Collecting data throughout the sales process will help identify patterns between leads, qualified deals, and deals that are won. In the second interval, you are searching for the first signs of a repeatable sales model.
When creating sales-qualified leads that turn to revenue begins to settle down into a repeatable process, it’s time to move on towards the third interval of the GTM stage.
The focus turns into being more efficient in sales to be able to execute as many deals as possible in parallel and prove repeatability.
Scaling through hire should only be started once there are signs of repeatability. Hiring at scale before there is a repeatable process will hurt the ability to show predictable revenue.
For most B2Bs, predictable revenue is a hard requirement for late-stage capital which makes a proven repeatable sales process invaluable in communication with investors.
Six practical tips for succeeding in the GTM phase
- Be realistic with your sales goals.
Create a plan which illustrates desired amount of deals won, the average sales cycle, and the number of people you need to talk to reach that revenue target. For example: To win 10 deals, I need to have 50 meetings. To have 50 meetings, I need to talk to 300 potential customers. To talk to 300 potential customers, I have to contact 1000 prospects.
- Establish a sales process.
Success in sales is a result of consistency with customer interactions which means you need to do sales work every day. To support consistency and be able to scale, a sales process supported by a CRM is necessary. Creating new business opportunities requires a different type of process than closing business.
- Harvest data and proof points.
With a clear objective, a realistic plan, a defined sales process, and a CRM system, everything is in place to capture sales data. Plans are based on a hypothesis while operational work in the market provides validation. Collect and harvest as much data as you can from your sales activities and customers including for example amount of emails sent, calls made, connection rates, and call outcomes. This data will give you valuable insight into your ICP. Data collected in GTM will show value beyond revenue when used well in fundraising.
- Don’t be cheap with hiring salespeople.
Securing funding in the GTM phase means this money must be used, but it must be used wisely. You will need experienced people and know-how to tackle the challenges of the GTM phase. It’s essential to spend growth capital focusing on quality over quantity when it comes to hiring. “An expensive” salesperson with a proven track record in this phase will outperform 2-3 inexperienced salespeople. Eventually, you’ll need a mix of experience and talent, but if you only bet on talent to grow your company, it tends to go south.
- Fear the “hope account”!
At the end of the day, only signed contracts and money in the bank matter. Until those are secured, you’re living on hope. Too often sales teams rely on the “hope account” to close. By ensuring adequate sales activity and deal progression, you’ll have enough processes not to rely on hopes. Winning deals is a result of consistent activities, not taking chances with just a few accounts.
- “Always be fundraising”.
Start your investor outreach before you need the capital. If you’re already connected to investors, send them regular updates and reports and make sure they are aware of your development. A proactive approach to existing and new investors will build trust and momentum ahead of the actual fundraising.
Are you ready for sustainable revenue?
Our battle-tested team is ready to share their commercial know-how in the go-to-market phase and accelerate your business for scale.