- Early VC backing comes with some built-in expectations founders must be ready to do to accelerate growth: scale and do so quickly.
- Stepping up a startup’s burn rate makes sense when the ROI is clear.
- As competition among startups heats up, early funding gives you an edge — as long as you’re ready and willing to put that capital to work.
Evan Walker was no stranger to the trials and tribulations of entrepreneurship. Even though still in his 30s, he’d already built eight businesses. And yet, none had fully prepared him for Route.
Born out of his frustration with shipping a vintage trunk from Europe to the United States, Walker developed Route as an easier way for consumers to protect and track e-commerce packages. He planned to fine-tune the product, raise a seed round to find traction and then head into a Series A to accelerate growth. Route would pick up both retailers and their customers along the way.
In January 2019, Walker, who is Route’s founder and was the CEO at the time, closed a $1.3 million seed round to carry the company through mid-2020.
Within months of launch, demand for Route’s tracking platform went through the roof, upending Walker’s well-laid plans. The money Route had in the bank was meant to last 18 months, not to be spent immediately on a quick ramp-up of business operations. Walker was caught between two venture funding maxims — spend wisely to extend your startup’s runway or spend quickly to accelerate growth. In a strategic move (and out of necessity from growth), Walker decided to grow fast and deploy Route’s capital in just four months, in essence, taking on the profile of a Series A company just as it was coming off a seed round.
“It was a little bit riskier of a move, but going down to four months was very calculated,” says Walker. “It was done deliberately knowing that the shortened runway was going to create faster growth.”
Scrappy to professional
A Series A round typically marks a new phase when acceleration and scale become paramount. Walker and his team moved quickly to recruit top talent, invest in technology, codify operations and learn to manage customers better.
Walker lured a top-tech executive from Qualtrics to be Route’s CTO, allowing the company to quickly professionalize its engineering team with a focus on building out features and functionality to support growing demand. Route also hired top talent in enterprise sales and partnerships to better control the way customers were initially interacting with the company. And it began assembling a large team of account executives to support its hundreds — and soon thousands — of business customers.
“For every dollar, we were getting eight dollars back,” says Walker. As long as that continued, Route would keep pouring money into talent. “We were only deploying money where we were getting direct ROI that was very, very repeatable and measurable by data,” he says.
Some areas took longer to catch up than others. Walker says the company expected every new account executive would take about two months to get up to speed and start delivering returns. But sometimes, the business couldn’t wait. Walker and his co-founder often found themselves fielding customer support tickets longer than they expected to be doing themselves.
From fast to faster
To keep the flywheel going, Walker raised additional capital through a quick succession of convertible notes that played the role of a typical Series A funding round.
“My advice to founders and entrepreneurs is to look at the competitive landscape because there's so many businesses starting up. If you don't raise money, your competition will."
The gambit paid off: Route hit a $14.4 million annualized run rate in its first year. By the time it raised its actual Series A, a $35 million round led by Craft in December 2020, Route had already taken on a Series B company profile, Walker says. Jeff Fluhr, a general partner at Craft, called the company “One of the fastest-growing startups we’ve ever seen.” Route went on to raise a $200 million Series B round; the company had a valuation of $1.25 billion after only three years in business. Route now boasts more than 11,500 merchants on its platform and has grown to over 5 million monthly active users.
“This was my eighth business and the first VC-funded company,” says Walker. “My advice to founders and entrepreneurs is to look at the competitive landscape because there's so many businesses starting up. If you don't raise money, your competition will and they're going to have a strategic advantage.” In other words, moving fast is critical to your startup’s success.
Our team at Silicon Valley Bank has deep experience in working with companies from seed to Series A and beyond to embed financial services. Contact us today to learn more about opportunities for your business and how we can partner with you to start realizing the benefits we outline in this article.
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