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Jan 19, 2023
 | AT 
10:00 am

Getting to Series A: Consumer Metrics

Lightspeed Partners, Sydney Sykes and Faraz Fatemi, and Alpaca VC General Partner, David Goldberg, discussed metrics for Series A readiness - what social, commerce, and marketplace companies typically look like when going to raise a Series A round, typical goals, and how to think about getting prepared.


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Faraz Fatemi

Partner @ Lightspeed

Sydney Sykes

Partner @ Lightspeed

Faraz Fatemi

Partner @ Lightspeed

Sydney Sykes

Partner @ Lightspeed

Event Recap & Takeaways

This roundtable discussion about Series A readiness for consumer companies covered the following:

  • What social, commerce, and marketplace companies typically look like when going to raise a series A round.
  • Tips for preparing for raising a Series A Round.

What’s different between Seed and Series A? 

The main differences between a Seed and Series A rounds include a stronger focus on PMF, the leadership team, and metrics-driven growth.

What does a Series A round look like? 

The fundraising landscape has changed in the last 5-10 years, with the most common fundraising strategy being a Series A round in the 7-15 million dollar range.

Series A Goals: Marketplaces 

Marketplaces can be challenging to raise funding for as they require evidence of a hockey-stick growth pattern and a clear strategy for continued growth. 

For these startups, it’s important to have data that supports a growth story. Evidence of flywheel growth, such as high referral and retention rates, and metrics such as GMV growth, net dollar retention, and CAC trends are crucial. The overall goal is to use data to show how the product is becoming stronger over time and has the potential to scale. 

Additionally, there needs to be improvements across cohorts. As you’re adding more value to the  marketplace, it should drive more engagement and improve cohort metrics over time.

Series A Goals: Social Platforms

Retention and engagement are critical for building a sticky initial user base that can be scaled. 

Investors will look for a strong monthly active user growth rate and bounded retention rate, which measures the percentage of users who return to the app on day 30. As the user base grows, users should get more value out of the app. 

Daily habit use is ideal; time spent on the app should be at least 5 minutes/day, trending positively.

Series A Goals: Commerce Enablement 

VCs tend to be less excited about direct-to-consumer companies without a strong hook or differentiation. As a result there’s more emphasis on SMB tools and e-commerce companies face a higher revenue bar and are expected to have higher growth rates. 

When raising a Series A round, it’s important to have clear business model distinction, unique value proposition, and be able to explain why the company is well-positioned to succeed now. 

Strong customer interviews, sales pipeline, and high-referral rates are also positive signs for investors.

Challenges and Tips for Preparing Your Series A Round

The data must tell your growth story, but what if you don't have the data? 

When assessing potential revenue for a Series A round, investors typically use 3-year LTV (lifetime value) calculations. In the absence of that data, investors will base their estimates on the retention data you provide and make rough extrapolations.

Having at least six months of solid retention data is a good starting point for investors to evaluate your company’s potential. 

Are there exceptions to the benchmarks above? 

There are several exceptions to the benchmarks noted above, and these are only some of what you want to hit. However,  you don't want to give a reason for investors to feel like this is why they don't want to invest, so it's best to hit at least the metrics above. 

How does a founder get the latest information on which firms are investing?

Look at recent investments from the investors on platforms like Crunchbase. You can also check if they’re  putting out content on Twitter, Medium, etc., and see what they're writing about and interested in. 

Another way to stay informed is to connect with institutional seed investors. They often hold regular catch-up calls which can provide insight into their investment pipeline and strategies.

I built out my target list of Series A investors. What is the best way to get connected? How do I meet and connect with investors?

While Lightspeed has a culture of responding to cold outreach, warm introductions are always stronger. 

Sending out friend/family updates and engaging with investors early on before fundraising conversations is also a great way to stay connected and test your story and informal pitch.

We recommend starting to network with potential investors at least 3 months before a planned raise. Fund raising is easier when the investor is already familiar with you and your company. There is no downside to longer-term relationship building.