In 2012, early stage companies, investors and analysts began to take note of a slowdown in Series A financing for companies in the technology space, particularly for early stage companies with a consumer internet focus. With less A-round dealflow continuing throughout 2013, speculation continues about this pattern being due to shifting preferences by investors. More conservative opinions suggest that, because seed capital is so much more accessible, the volume of seed funded companies is on the rise, while the number of firms providing Series A funding remains constant, resulting in the number of Series A funded companies remaining fairly static. And with the emergence of newer options for seed funding like Kickstarter, the recent loosening of fundraising laws and the soon to be legal crowdfunding options, the number of seed funded companies is sure to increase. But like all situations, the cause of the crunch is most likely a mixture of many aspects, both known and unknown.
Regardless, the data tends to point towards a sustainable level of seed fundings but a flat level of Series A dealflow for today’s high-tech startups. The impact on these companies is felt in many ways, and most certainly impacts their ability to acquire talent. Seed round funding typically goes towards product development, early customer/user acquisition, marketing, and compensation for the initial startup crew. Series A funding tends to become a possibility when the concept is proven, revenue or traction is established, and the company appears to not only be sustainable, but presents the opportunity for growth with the right resources. Once these companies acquire their Series A, they go into expansion mode, which equates to startup hiring. Thus there is a huge impact that a decreased availability of Series A funding has on a startup’s ability to hire, let alone attract and acquire the top talent they desperately need. In turn, this hampers their ability to begin scaling the organization and take growth to the next level.
What should early stage startups do to wade through the tightening Series A funnel? Amish Shah, CEO of Millenium Search and Managing Partner at Sierra Maya Ventures, weighs in with some advice for these companies:
1) Focus on Revenue: “Today’s early stage technology startup needs to develop a strong revenue model early on. The freemium model sounds great, but to move towards the next level, you need to begin earning, grow your customer or user base, and create a strong proof of concept for revenue and profitability. Furthermore, the early generation of revenue can help prolong your need for the next level of funding, which can give you more time to wait, along with more leverage in negotiations.” That is not to say that companies, such as Twitter, can’t become successful despite this advice, but then again, most companies are not Twitter.
2) Run Your Company Lean: “Nothing new here, but it’s a good reminder. Prioritize your needs, and solidify the basics to launch and operate. And don’t pay for premium when you can get it for free or little to nothing, unless it’s really important. And no, not everything you want is important. You wage wars with the army you have, and not with the one you want.”
3) Unify Your Current Staff: “Make sure that your current team falls in line behind you (the founder), your vision and your passion. Conversation and debate is important during development, but at this stage, every person and every resource must be working towards a singular objective. There must be cooperation and singularity.”
4) Get to Know Your Future Funders: “You may not be looking for funding now, but for most companies, the need to pursue Series A is inevitable. And naturally, the people who can give you the best advice and criticism on getting successfully funded are in fact the people who will be potentially funding you. So go network, find ways to meet these investors, get to know them and get solid advice directly from the source.”
Millennium Search is an executive search partner to emerging startups and high growth technology companies. We help our clients achieve growth and success by creating relationships between the right companies and the right talent. To learn more about how we can help your startup, contact us today!
The business world as we know it has been evolving and changing over time. Since the boom of startups such as Google, Facebook, Twitter and Tumbler, startup companies around the world have been on the rise. People are moving away from the traditional 9 to 5 job for the excitement of entreprenuership, the pursuit of their dreams and the creation of their own companies. And who can blame them? After watching the continued success of startup companies in the United States, the startup trend is spreading globally, with other countries looking to Silicon Valley as their model and direct competition.
Some places are going to extremes in order to lure startups away from Silicon Valley and into their own cities. Most notably in recent news, Canada has put up a billboard on a Northern California freeway that reads; “Pivot to Canada.” They have also implemented their own startup visa that allots permanent residency to entrepreneurs who can raise enough venture capital to begin a Canadian business. Canada’s startup visa is easier to acquire and retain than visa options in the United States. This tactic makes it simpler for foreigners to launch their startup in Canada versus Silicon Valley. Canada can also boast a more affordable location.
Startup scenes are growing out of Accelerators/Incubators in Chili to other major cities throughout South America, Europe, Asia and beyond, making it a global game. Places such as London, Tel Aviv, New York, Beijing, and Berlin are quickly becoming serious competition for Silicon Valley. Even smaller cities within the United States are striving to make their mark on the map. St. Louis, Missouri just revealed a $100 million dollar plan to make their city the next startup hub. Like many other cities they have all the space and means to support startups; they just need the right talent.
So how do these business-friendly, lower cost alternative locations for startups impact Silicon Valley? Although running a business in Silicon Valley can be more challenging, the networking opportunities are unrivaled. This is where the Venture Capitalists are looking to invest, and where the greatest of innovators can be found. Silicon Valley is to the high-tech community as Hollywood is to the movie industry. With all of that talent and opportunity in one spot, it becomes much easier to connect with the people that can turn your pitch into reality. While there may be more affordable places to do business, it can hard to beat the face-to-face interaction at the coffee shop for getting your next big break.
As time moves on, we will certainly see a rise in startup hubs outside of the Bay Area. We may see an even tighter market for talent in Silicon Valley. But can the rest of the world replace the networks of venture capitalists, advisors, former founders, incubators and accelorators that make the Bay Area so reknowned for today’s startup?
Value of a Recruiter
Executive Recruiters are a valuable resource for today’s startup. With the level of startup competition and the demand for today’s top performers, getting the right recruiter on your side can make a huge impact. But many startups do not leverage all that they can from their recruiting partners. Because of the nature of their work, a recruiter’s value goes much further than acquiring talent, as important as that is. In fact, working with the right recruiter can open the door to a wealth of information, years of experience and observation, and a vast network that reaches beyond potential employees.
So what can recruiters do? You know, I mean besides recruiting?
Recruiters Are A Source of Market Intelligence
Every month, executive recruiters speak with hundreds of professionals, from prospects and candidates, to founders, managers and HR professionals. Recruiters are constantly collecting data, adjusting their search parameters, and analyzing conditions in an effort to find the right people for clients. They are at the front lines, keeping an ear out for the word on the street. The resulting information is extremely valuable for effective recruiters, and helps them advise clients, manage expectations, and present realistic options. But its value also extends beyond talent acquisition.
So what kind of data can a recruiter provide? Salary data, of course, but we also collect data points around the market supply and demand for talent. Along with this information, recruiters keep their fingers on the pulse of the industry, and keep a close eye on the emergence of new sectors and the decline of established ones. They stay up to date on new technologies and innovations in an effort to determine their impact on their clients. And let’s not forget the information collected around fund raising and investing. Top talent will demonstrate an interest in this type of information when considering opportunities, making it necessary information for recruiters to collect. The application of this data can be broad, impactful and valuable to today’s startups.
Recruiters Can Advise on Business Planning and Scaling
Along with the collection of this data, startup focused recruiters have worked with companies from their very beginnings, and have seen them grow from conception to profitability. They have also seen them make mistakes, fail to act, and ultimately fizzle out and die. Some companies have tried to scale too fast, and others did not try fast enough. There are hundreds of factors that come into play when building and growing an emerging company, and a thousand mistakes that can cause that company to fail. Startup focused recruiters have been integrated into the strategies of these companies, and have a unique perspective to offer these organizations on what works, what doesn’t and what can make or break a startup.
What can recruiters advise your company on? They can help you organize your team efficiently. They can help you create and define new roles within your company, and give you realistic expectations. They can advise you on scaling your company, and help you determine what you really need at a given time. And beyond building your team, recruiters can offer experience-backed advice on product development, attracting funding, branding your startup, and so on. Search professionals can do this because the acquisition of top talent so often requires significant integration with companies with which they partner, and have been privy to the actions, successes and challenges across multiple organizations.
Recruiters Maintain a Vast Network Beyond Top Talent
Recruiters connect the right people with the right people for a living. Yes, they have an extensive network of top talent across several industries, sectors and geographies, and they utilize this network to get clients the right person for the job. But their conversations are far from limited to just potential candidates. When recruiting top talent, you talk to people to find people. You speak with founders, investors, advisors, analysts, managers, HR pros, and the list goes on. These relationships are a valuable asset to search firms, and are essential to keeping their candidate network up to date.
I don’t think I need to explain the value of these relationships. For starters, I have never met a startup who wasn’t concerned about funding early on. So any VC or investor relationship is of high value. Startups also spend a great deal of time locating advisors with the right backgrounds, expertise and experience. And of course, they have a great network of top talent. You know, just in case you are hiring and were curious about the value of a recruiter.
The Millennium Search team is a diverse group of seasoned executive recruiters. With a focus on technology recruiting, our team has worked with hundreds of successful startups, and has witnessed both successes and failures in the technology industry. We help top startups with VC backing find the talent they need, serving them as a trusted partner in both recruiting and growth. Speak with us today about your needs, whether recruiting or otherwise!