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The Post-Funding Round Dilemma: What to Do After the Big Raise

Joseph Garafalo
Joseph Garafalo
Posted on
July 22, 2021
Updated on
September 26, 2021
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You just finished raising a round of funding and it's time to celebrate. But the work doesn't stop there. After your funding rounds, you need to make sure you're focused on the right objectives and metrics to get to the next level.

The rush of raising a new round of venture capital is undeniably exciting. 

Your valuation has never looked better. You’ve got enough money in the bank to attack the market. You deserve to take some time to pop bottles of champagne with the team and ride the wave of all that press coverage that comes with new funding rounds.

But all fundraising stages from seed round to Series D and beyond have at least one thing in common—they mark the start of your work, not the end of it.

Each funding round plays a distinct role in the growth of your company. If you just completed a round of funding, here’s what you need to focus on at each stage to take your company to the next level.

Post-Series A Funding: From Product-Market Fit to a Flywheel

Everything you do after raising your Series A is to prove that your product-market fit is real. Angel investors and venture capital firms want to see that you’re going to be able to scale the early proof of concept into a true industry leader.

Looking back after raising a round from Sequoia Capital, Pilot CEO Waseem Daher said the big investor question leading up to the Series B was whether or not the flywheel was working. What exactly does that mean you have to focus on? 

According to Ross Fubini, Managing Partner at XYZ Venture Capital, there are quite a few objectives after raising money in a Series A:

“Iterate that much faster to plan out your go-to-market...Track how long an upsell really takes and who is getting the comp check...Staff engineers to get to enterprise quality. Spend on marketing for qualified leads, but not too much. Do all the hard work and do it with hard data.”


The average Series A funding round in 2021 has given startups $22.9 million to pursue all of these objectives. The majority of that money will go toward hiring. You need to build out the engineering team to scale product development and invest in the right leadership. And beyond hiring, you’ll start to invest in sales and marketing for the first time to continue growing.

But as you put the infrastructure in place to support the company’s growth flywheel, it’s important not to leave finance behind. Investing in finance at this early stage is crucial to building out your first real plan and forecast. It’s what enables you to nail down the science behind scaling product-market fit and ensure you have the infrastructure in place to properly measure it.

Metrics That Matter After Raising a Series A Round

Following a Series A, the finance team’s job is to keep the business aligned on metrics that prove a track record of early success is sustainable long-term. Investors want to know that the money you raise will help you continue growing the customer base.

Two of the most critical metrics following a Series A are:

  • ARR Growth: Your revenue growth rates will always be the most basic indicator of success leading up to the next round of funding. Are you on the T2D3 (triple-triple-double-double-double) path to $100 million in revenue? In the run-up to a Series B, you have to be able to dig deeper into the “why” behind ARR growth to show you’re trending in the right direction. Having a clear revenue model as well as visibility into your organic growth, bookings, and renewals is critical to winning over investors for a Series B. 
  • Runway: In the startup world, cash is the fuel that gets you from one milemarker to the next. Most startups don’t intentionally stop short at a Series A. That’s why it’s so important to maintain a clear view of your runway and cash burn rates until you make it to the next milestone. In pre-seed or seed rounds, a 12-month runway should be enough. But post-Series A, you should aim to maintain a 24-month runway.
  • Net Retention Rate: Prove that your customers love your product. A net retention rate over 100% means your customers love your product so much that they are willing to pay more in future periods (something you’ll need hard evidence of to get to Series B). Getting deep insight into your customer base with granular cohort analysis will help you identify which segments are reaching the 120%+ retention rate benchmark and which are falling short.

If you have models that measure customers with this level of detail, you’ll be in a good position to prove to investors that you’re ready for a Series B. 

Post-Series B Funding: Scaling the Business Model Efficiently

After you raise your Series B, you’re making the jump from early-stage startup to growth-stage startup. You have a solid customer base and it’s time to pour fuel on the fire you started with the Series A. 

The average Series B from venture capitalists gives startups an additional $33 million to drive growth. But while pure revenue growth is still crucial, new investors and earlier ones want to see that you can scale the economics of your business efficiently.

Since headcount can account for as much as 70% of your overall expenses, it’s no surprise that a large chunk of your Series B will go toward scaling your teams. However, hiring isn’t the focal point of Series B spending the way it is after raising a Series A. According to John Luttig, a Principal at Founders Fund, you should be using Series B funds to scale the business model with a focus on efficiency:

“Series B is all about expanding market reach. You’ll need to invest heavily into sales and marketing engines. And it’s vital to have the financial infrastructure in place to measure and track returns on capital invested in go-to-market efforts. Metrics like CAC, lifetime value, payback, rep ramp, and magic number are key for efficient growth.”


Prove that you can expand into new markets, invest efficiently in sales and marketing to win those new markets, and improve the maturity of your reporting and you’ll be well on your way to reaching the next level. 

Metrics That Matter After Raising a Series B Round

One of the main reasons a startup company doesn’t reach the next level after Series B is that revenue growth isn’t efficient, scaleable, or exciting enough to justify the larger valuations in later rounds. As a finance team, it’s not only your job to track the right metrics to show that the company is hitting its numbers. You also have to identify ways to improve them in a way that’s compelling to late-stage investors.

This is why Luttig says the focus should largely be on various go-to-market metrics and unit economics. As you ramp up to a Series C, help your business optimize for:

  • Customer Acquisition Cost (CAC): The basic building block of unit economics, which you can overlay with other metrics to show when to invest more in sales and marketing.
  • Customer Lifetime Value (LTV): A crucial metric for getting investors excited about your startup’s growth, showing exactly how much money you expect to receive across a customer’s relationship with you.
  • CAC Payback: Make sure the payback period is shorter than LTV to show investors you can recover acquisition costs when a subscription ends.
  • Sales Rep Ramp: Instill confidence in investors by showing you have a deep understanding of when new sales reps will reach full productivity.
  • Magic Number: One main indicator of how efficient your sales and marketing engine really is. Maintain investor interest by keeping your magic number over 0.75.

Deep insight into these kinds of metrics helps finance collaborate with others across the business to ensure the company is elevating its business plan to scale efficiently. They’re the foundation for the kind of strategic decision-making that drives successful funding rounds through Series C and beyond.

Post-Series C Funding (and Beyond): Are You on a Path to IPO?

Once you’ve raised a Series C, you aren’t necessarily looking at a new set of metrics or shifting focus to new objectives. For the most part, your job is building on the growth trajectory and continuing to prove that your unit economics are strong and that your business is predictable.

Ultimately, investors are wondering whether or not you’ll be able to generate the kind of financial results necessary for a successful initial public offering (IPO). Has all that private equity been worth the investment?

Every startup’s path to IPO could look a bit different. But no matter what the specific path looks like, there are two things you should be focusing on—building a narrative around your numbers and establishing the infrastructure to operate as a public company.

Dropbox is a perfect example of how both can lead to a successful IPO process. In the run-up to IPO, former CFO of Dropbox Ajay Vashee and his team worked with the engineering department on a massive migration project that helped the company scale gross margin from 40% to nearly 80%. He said:

“Financial trajectory-wise, it was great to show a path to doubling margins because it made investors more curious about our business model and operations. But walking them through the story of how we developed the conviction to make a decision like that became an important way to build investor confidence as we prepared for IPO.”


With that kind of momentum behind the company, Vashee was able to bring on a number of new hires. Alongside a new Chief of Accounting, VP of FP&A, and VP of Corporate Finance and Strategy, Vashee and his team put new systems and processes in place to help Dropbox operate at the cadence of a public company. 

Metrics That Matter After a Series C Round or Series D

As you get further along in funding rounds, your ability to show profitability becomes increasingly important—both to investors and to your chances at a successful IPO. 

Maintaining deep insight into your unit economics and efficiency metrics is table stakes. But after a Series C, Series D, or even Series E, you should also be focusing on:

  • Free Cash Flow: Generating significant cash flow is critical to any successful public company. Strong cash flow forecasting in the run-up to IPO can improve investor confidence.
  • Gross Margin: Strong gross margins early on give you the money to invest more in product, sales, and marketing. But as you approach an IPO, they show that you’ll be profitable even as you aren’t doubling or tripling revenue year-over-year.
  • SaaS Rule of 40: Balancing growth and profitability is crucial after raising a Series C or Series D. Rule of 40 isn’t a perfect efficiency metric, but it can give you a decent benchmark for the health of your startup in late funding rounds.

If you’ve been investing in the finance function throughout your previous rounds of funding, you should be in a good position to be the strategic partner your business needs at these late stages. Providing forward-looking insights into the numbers and help transition from hypergrowth to predictability and profitability.

Make the Most of All Your Startup Funding Rounds

Raising new rounds of funding is rarely about the short term. Rather, it’s about giving you the resources necessary to take the business to the next level and achieve the vision you pitched to potential investors.

But at the core of that mission is an ability to build up a track record of disciplined financial operations. Can you consistently deliver board decks that maximize investor confidence? Can you build reports quickly and accurately so you always have a finger on the pulse of the business? And can you maintain real-time visibility into your numbers so your team can focus more on strategic collaboration and less on data collection? 

Working purely in Excel, trying to pull actuals from all kinds of disconnected business systems won’t help you meet these objectives. Get a personalized demo of Mosaic to see how a Strategic Finance Platform can transform your finance operations to help your business make the most of your latest round of funding.

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