Ryan Caldbeck's site

For most technology startups, raising capital from investors is part of life. There is a lot of information about how to raise a round- enough that I’m not convinced I will add to it here. But I have found little about what to do immediately after the round. The first 10 days of a new employee’s time at a company is vital for ensuring retention. Similarly, a new tone is set when a round is closed. The CEO, investors, teammates, and stakeholders have natural questions when a round is closed. I won’t tackle them all here but will try to touch on those that have come up repeatedly in my career as both a CEO and investor. 

What and how to communicate internally

Companies have different cultures and CEOs have different styles. I’ve found transparency helps empower leaders across the organization while giving teammates a sense of having a “seat at the table”. Employees typically turn down more lucrative offers from large tech companies to work at startups for a few reasons- a key one being the opportunity to be close to the action. To feel like they are really a part of building something together. Funding rounds are milestones, and not being transparent about them often leads employees to feel like they aren’t a part of the journey.  I’ve found that leads to disenchantment. I’ve also found that if you’re transparent about fundraising, employees appreciate it greatly. 

Initial Announcement- I recommend scheduling an all-hands meeting to discuss the fundraise, preferably earlier in the process with periodic check-ins and an announcement and group discussion upon closing. The actual fundraising deck can be a really effective tool to help align the team. Walking through it with the full company, almost as a mini-pitch that you would give investors, helps the team understand what is being communicated about the company and why. What do you highlight? How do you tell the story? Is that consistent with what you say internally, with new employees and the press? (Hopefully). Expect questions about why certain parts of the story were highlighted over others. During the discussion after the closing, communicate exactly how much was raised and at what valuation. If you have a General Counsel or CFO prepare them to be able to talk through what this means for option holders and what it doesn’t mean (likely not liquid yet). Questions may include “how much are my options worth”, “can I sell any options/shares” and “when will we have liquidity.”  More global questions I’ve encountered in almost every raise are: “what did the investors like and not like about the company?” “What is their expectation for an exit?” “What does this mean for hiring?” “What does this mean for our/my role?” Consistency and integrity in your answers is critical. You should expect any close-door conversations to be shared with other teammates. Think about creating an FAQ doc that you can talk to during the All-Hands announcement of the round, and then later share the FAQ with the team.  

Budget & Milestones- plan to spend meaningful time on the budget that you presented to investors. What does that budget mean for the company and OKRs- for the next year and the next quarter? Are employees surprised or reassured by seeing the line items related to revenue, specific spending items and total burn? How do those OKRs (as always) filter down to individual teams and people? Typically I haven’t seen people ask those questions directly when the round is announced, but proactively laying it out helps quiet any questions and ensure alignment. As the company gets to pre-IPO stage some of this visibility may become less realistic, but early on it builds trust.

Communicate Authentically- When we closed our Series A round with Union Square Ventures and GV, we decided to celebrate by buying beers- 24 ounce PBRs -for the entire team. It was awkward and forced, and our VP of Engineering helped to save the moment by redirecting the attention away from the setting and more towards the substance- the fact that we brought in great investors. The reason that celebration didn’t work is that it wasn’t authentically us. We never drank beer, I almost never drink beer, and drinking wasn’t a part of our culture. We bought them because that’s what I thought we were supposed to do. I wasn’t being authentic and it showed. 

Think about communicating that you closed the round in a way thats authentic to your and your culture. After the series A we communicated future raises in an all-hands- sans alcohol- and walked through the decks unedited.

Roles and Teams- Often after a round a company will increase hiring. Sometimes a company will change compensation (I recommend pegging to a comp survey- like Options Impact or equivalent). Expect questions about these things. Soon after the hiring starts you’ll also get questions about how existing roles and reporting lines are changing.  Some employees will be frustrated, sometimes without clearly naming it, that their roles are shrinking in scope as the company grows. More specialized roles are required as the company gets larger. Roles are more narrow in scope as the company goes from 10 to 100 to 1,000 people – some people can adjust and some people won’t be able to. Encourage teammates to see the opportunity to build something bigger and to go deeper on specific skills in a more narrow role at a larger company. But be prepared that not all will be able to make this transition and thrive in the changing environment. 

Put Yourself in Their Shoes- There will be teammates that have meaningful emotions about a funding round. Some will be overly excited- thinking that the company has made it. Some may feel anxiety or fear that they will be replaced by higher-priced, shinier talent. Expect everyone to first think of “what does this mean for me?” Then try to address those feelings as a team and with key employees individually. 

What and how to communicate externally

Five years ago, TechCrunch funding announcements used to mean a lot more than they do today. Potential and current employees cared, other press cared and (although they won’t admit it) some investors cared (they definitely won’t admit it). The importance of funding announcements is much lower today, but I think it’s still appropriate to think through whether and how to announce your funding round. In today’s environment think through what a funding announcement gives you *beyond* an ego bump.

Morale- I’ve found funding announcements are a bit of a sugar high for teams. They will give a bump for a few days, but not weeks. 

Recruitment- Public announcements can matter for inbound recruitment, but you can get a similar effect on end-conversion by just telling recruits who the investors are in your outbound efforts. 

Potential Partners- in some industries, including Fintech, partnerships can matter more than others. In those cases, funding announcements bring a credibility stamp. They won’t be the deciding factor, but they help get in the door. 

Credibility with customers- This is a similar point to the one made above about partnerships. This is more relevant for B2B businesses than B2C.

New Competitors- attention brings competition. I’ve never cared much about competition and I like to focus more on what we’re building, but just be aware.

If you decide to announce it through the press, make sure you think through timing, key points and soundbites you want included (think in short sentences, expect only 1-2 to make it into an article but hope for 3-4), whether you want to give an exclusive vs. go wide, what information to share (I always stayed away from talking about valuation publicly, though some journalists will press for that).  Consider your own blog and whether you want to tell the story exactly as you want so you have more detail to send out to future stakeholders that want to dig in. If you’re trying to create buzz you’ll probably think of asking investors or others to tweet the funding announcement out. I’ve *never* seen this be a particularly effective way of building buzz and often comes across as forced.