In 2023, securing funding for startups is challenging, and 2024 projects a similar landscape. Investors are more conservative with their investments. Nowadays, the focus is shifting from revenue to a closer examination of costs and profits.

What can startups do to secure the next investment round? 

Invest in Revenue Operations (RevOps).

Let’s explore how RevOps can assist in fundraising.

Forecasting

Investors are interested in accurate growth forecasts. We talked recently with a few VCs and the common theme we hear is that they look closely at the forecasting methodology. They want to make sure that they can trust the data.

RevOps helps by looking at the revenue architecture from front to end (from acquisition all the way down to churn). For example, take the Bow-Tie model by Winning by Design. This model allows us to accurately understand the growth potential of a business.

A good RevOps understands your revenue models thoroughly. This understanding provides a competitive advantage. It allows a closer connection to the business and a comprehensive view of it. Interpreting data and narrating a coherent story are also crucial.

Data foundation

A robust data foundation is essential for precise forecasting. It ensures the reliability of CRM data (this quality is crucial for investors). The data foundation includes:

• Database design

• Duplicate management

• Accuracy 

• Integration of data sources

The role of RevOps is to set up this data foundation that harmonizes data from all revenue teams and the product (especially if PLG).

Processes

Forecasting is based on your data. But most of the data that is entered into the CRM comes from your revenue teams. You need effective processes that capture accurate data in order to use them for reporting. 

Recently we talked with a CFO of a Series A company. She was working on her Series B deck and said that she had to dig out the data herself. Why? She could not trust some of the data. And there were no processes in place nor did she have a RevOps on her side.

RevOps has a holistic view on the revenue teams. This allows us to understand the customer journey from from to end and transform this journey into processes. Effective processes enable robust data. In addition, to an excellent customer experience and alignment.

Revenue opportunities

The holistic focus on data and processes provides RevOps with an edge in identifying revenue opportunities. Two examples:

Full-funnel velocity

Doing a full-funnel velocity is one way to identify gaps. It helps to identify if certain conversation rates are behind and allows us to deep dive why something is not performing and provide improvements.

Commercial and product data 

Your combined commercial data (e.g. sales call recording) and product data (e.g. usage) are a revenue gold mine. Too often these two data sources are siloed. Together they unlock revenue opportunities. This can lead to an improved product roadmap, better pricing, and better value proposition. All factors that impact revenue.

GTM cost

Investors are looking closely at the GTM costs. RevOps has multiple options to reduce costs.

1) Tech-stack optimisation

• This can include consolidating tools that have similar or the same use case (platforms like Sastrify help with this)

• Moving to new tools that are more affordable

• Increase adoption of tools to increase ROI

2) Create efficiencies 

• Processes that drive alignment across teams and give clarity 

• Less admin work for revenue teams (e.g. make it faster to log activities into the CRM)

• Automation that reduces manual work

3) Enablement

• Enablement that increases ramp up time and reduces follow up (e.g. live training, documentation and clear communication)

• Avoid information silo (enable sharing systems between sales, marketing, product & customers success)

The power of good enablement is that you can do more with less. Investors love this.

Profits  

The best a startup can do before going into the next funding round is to become profitable. This clearly will improve your negotiation power as you will have a proven business model.

Profitability is a path we have seen many bootstraps companies go but also some companies with initial funding reached profitability before taking their next investment.

Reaching profitability requires commitment from the whole business. RevOps can drive a large portion of this and be a key stakeholder on this journey.

Laser focus on becoming mainstream in one market

The previous points are still applicable to your journey to profitability: data foundation, processes, revenue opportunities, and cost reductions. 

The most important thing is to have a laser focus on your GTM execution. 

You reach profitability by doing more of what is working. It is not a time for experiments.

We noticed that companies that are not reaching profitability (or becoming efficient) try to be everywhere. This is a recipe for failure as the burn rate will skyrocket. 

Crossing the Chasm

The key is to gain an early majority in one of your markets. For example, get 30% market coverage in the mid-size market of manufacturing companies in Germany. Use this dominance to expand to other markets. 

Crossing the Chasm is a great book about this concept. It states that it is easy to get a few early adopters in a new market. However, reaching mainstream success in one market takes a lot of resources. That is what is called Crossing the Chasm. 

Having mainstream success in a market is crucial as only then will you have economies of scale that promise profitability. 

The GTM leaders and RevOps will work closely to reach this goal.

In the end, profitability is all about efficiency. That is core to the DNA of RevOps and what investors care about.