How I raised a $15m Series B in a downturn

SaaSOpen, March 2023

And almost lost it in 24 hours..

Jamie Akhtar

CEO and Co-Founder, CyberSmart

Over the next 20 minutes

I’m going to show you

• War, inflation, uncertainty

• Talking to hundreds of VCs - It's a no from us

• Finding the perfect match, the rest will follow

• One goal, three components

• Closing the deal

• Smart allocation of funds

• Your two sherpas

• Cashflow options

• Lessons learned

Let’s Start with Section 1

I’m going to show you

• War, inflation, uncertainty

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• “It’s a no from us”

• How to find it

A trio of external catastrophes

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Any of these could have been a show stopper for us

Pandemic: Remote work has become the norm

Bringing with it productivity benefits and unprecedented risk

War: In both the physical and digital space

We face an intense and rapidly shifting geopolitical landscape

Recession: The global economy is in shock

The need for affordable, digital solutions has never been greater

From challenge

to opportunity

Our revenue growth was average

But the unit economics rocked

Strong Product Led Growth

4,000+ end customers

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• 5x partner growth in 2 years driven by channel first approach
• Partner net revenue retention 104% / month
• Customer logo retention of 99% / month

Fundraising in 2022: It’s a pass

Rejection from 100+ funds

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What they say: actual comments

“sorry, we are going to have to pass on this one”

“we couldn’t quite get there”

“we needed more conviction internally”

“we would like to see a little more traction”

“we’re prioritising other investments”

“for our IC, it’s a case of show me, don’t tell me”

“we don’t see the business case for such a valuation”

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Fundraising in 2022: It’s a pass

Rejection from 100+ funds

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What they say: how I felt

- Failure

- Frustration

- Anger

- Disappointment

- Pressure

- Constrained

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Yet Another Presentation

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2022, Second Home

Q3 22, when things got tight

Facing the reality, whilst keeping a positive outlook

The last 6 months

- Hundreds of presentations, follow ups, deep dives and getting to no

- It’s taken way longer than we would have liked

- That’s less time creating value and a shift right of priorities

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How we did

- The team rose to the challenge, kept the ship on course and continues to deliver value and drive revenue

- The business is accelerating, despite the CEOs focus externally

- CFO supporting - leading to more optimal outcomes

- Cash flow positive 12 months early than we predicted (modest 2-3x growth)

Finding the perfect match

Dreams do come true, but they take time and effort

Next steps

• Our existing investors have been impressed by our performance and continue to double down on our ability to execute.
• We’ve secured £3M of the funds which gives us the time to find the right investors who believe in our mission and have the capital to support the long term
• In Q4, we are intending to close the balance
• We are confident because:
• Top line continues to grow (above plan)
• Unit economics are strong and improving (laser focus)
• International is promising (aspirational OKR)

The end result

Let’s jump into Section 2

Climbing mountains in a snowstorm

• The three things to manage when fundraising

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• Negotiating term sheets in a crunch

• Plan vs Reality

Three things

Really not just three..

The rest of the alphabet

Building a healthy business

Dealflow for plan A

Negotiation

The subtle art of keeping your proverbial clothes on

• Downturn term sheets are much less favourable
• Investor protection is standard (Anti-dilution, coupons, etc)
• Avoid liquidation preference more than 1x

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• Valuation matters, but there are ceilings now in place (typical 6-7x ARR)
• Grow your top line hard
• Price based on year end, or next quarter, instead of today

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• Don’t give up control
• You and your team are best placed to steer the ship

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Smart Allocation

How to spend it

Plan

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• Moderate-Aggressive hiring

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• Team rebuild

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• New customer profiles, new markets

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• Build in house

Reality

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• Step and see hiring

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• Team level up

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• Prioritised experiments

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• Borrow, buy, build

Let’s jump into Section 3

In conclusion…

• Your two sherpas

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• Debt vs financing

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• Easy come, easy go

• Top three lessons

People

Finance

Your Two Sherpas

Debt financing, with strings attached

The fastest, easiest capital we ever got

Re-payment was a breeze

No fees, legit

Top Three Lessons

Build a sustainable startup

Lesson 1

Tilt the odds in your favour

Lesson 2

Don’t run out of cash

Lesson 3

Over the last 20 minutes I showed you

• War, inflation, uncertainty

• Talking to hundreds of VCs - It's a no from us

• Finding the perfect match, the rest will follow

• One goal, three components

• Closing the deal

• Smart allocation of funds

• Your two sherpas

• Cashflow options

• Lessons learned

Thank you!

SaaSOpen, March 2023

Jamie Akhtar

CEO and Co-Founder, CyberSmart

jamie.akhtar@cybersmart.co.uk