We recently raised US$20 million in our Series C funding round. After I announced the round to our team, one of our relatively new joiners told me his last company would celebrate each funding round by, “taking the whole business out for champagne shots.”
At Culture Amp, I’m proud that we aren’t caught up in the cycle of treating fundraising as if it’s a prize or competition. We’ve never had a sugar high after fundraising, unless you count replacing imitation maple syrup with actual maple syrup after our Series B. That’s because we’re not here to raise money, we’re here to build a great product and put that product in the hands of our customers. Raising money is a necessary part of the process, but it's what we do with the money that really counts.
But at the same time, it’s also important to recognize that fundraising can create uncertainties and expectations and these need to be managed.
The Culture Crunch research helps us see how fundraising impacts companies
The Culture Crunch is a piece of research we did that looks at the cultural challenges companies have at each stage of their growth. It looks at how engagement evolves as a startup progresses from initial seed funding all the way through to going public. We look at a variety of factors from how innovative the company is to how well it holds its people accountable for their results. While the fundraising in and of itself doesn’t impact the experiences an organization has, each stage of funding is generally indicative of the level of organizational maturity.
Culture Amp has just reached Series C. This is typically when a business is beginning to scale up. You've got market traction, product market fit, good unit economics and a great team in place. Series C implies that you’re at a certain size, have achieved a level of maturity and have processes and procedures in place. Now it's about putting your foot on the accelerator and executing your full vision. At Series C you’re a sophisticated company, but you’re not more sophisticated the day after you raise the money than you were the day before.
The challenge at Series C is that people, just like the company, are seeking more stability and maturity. But it’s also the point where the company is set to scale rapidly, which can make it more challenging for leaders to make sure their people are always in the loop about what’s going on.
Being open helps our people learn about the process
At Culture Amp, we're committed to open and honest communication so it wasn’t a secret that we were looking to raise money. Fundraising takes time and it took me out of the office for long periods, so we wanted to keep our people on the journey with us throughout the process. This meant keeping the lines of communication open at a high-level; as a leader it’s also important to spare people all of the slings and arrows of outrageous fortune that tend to happen when you're fundraising.
Now that the fundraising is done and dusted we still talk about it internally. We teach people in the company about the process; what it involved, why we chose one firm over another and what we negotiated in our term sheet. It’s a learning process because we know some CAmpers are looking to start their own companies and they can take this knowledge and use it to be more successful.
Closing fundraising is actually quite underwhelming
A really important lesson for our people to understand is that locking down tens of millions of dollars doesn’t change a thing, it’s actually quite underwhelming. We put a lot of work into the process, so it’s a huge relief when it’s done and dusted, but it’s not an event worthy of cigars and champagne.
At our recent All Hands meeting, JD Peterson, our Chief Growth Officer, raised a question about how the money would be spent. It’s not a gobsmacking amount of money so it’s important that people understand that this doesn’t mean we’re all going to fly first-class or get new chairs. That’s not what we got the money for - it’s to grow our business.
Many businesses choose to splurge on a large celebration when they raise funds but that’s not what we’re about at Culture Amp. We want to build a successful and viable business, so we care about every dollar and our people are on board with this. After all we don't want to raise money forever, we want to get to the point where the business supports itself.
Expectations do need to be managed through the fundraising process
Initially, raising money allows you to invest and place some bets that you may have been holding off on. You know you have time for those bets to take 6, 12 or even 18 months to pay off because you have money in the bank.
But as you get closer to the next stage of fundraising you can’t place speculative new bets because you just don’t have the runway. At this time, the psychology of the organization shifts. You’re less focused on expansionary ideas before you raise funds than you are immediately after closing new money. This also impacts the expectations of your people; it’s only natural for people to feel more comfortable when there’s money in the bank.
We’re fairly open about how much money we have, what our burn rate is, and the runway that we have. The challenge in managing expectations this way is to make sure you raise money well before you need it. You never want to be in a situation where you have to take whatever you’re offered to avoid putting everyone out of a job.
As we talk with our people about raising money, we are often asked whether we need to fundraise at all. We explain that we raise money so we can continue our growth and double or even triple our size each year. To achieve this we currently hire ahead of the curve to keep the momentum going. But if we chose not to raise money and just grow organically then we would have to adjust our hiring and perhaps plan for slower growth rates. These are the choices that we make and it’s important that our people understand them.
We’re not building a company that celebrates fundraising, we’re building a company that celebrates our customers. Money is just a means to an end. It helps us grow a fantastic product and put it in the hands of our customers. That’s what we convey to our people and it’s what we’re here for.
Now is the time to put our plans into action, and that’s what gets me really excited.