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5 Essentials for Raising Your Growth Round of Funding A startup needs a good story to secure initial funding and good numbers to get a second round.

By Matt Straz Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

While there are many thousands of people and firms that can provide money to get a startup going, far fewer entities, perhaps just a couple dozen depending on the business, can fund a Series B or C.

Recently, I raised my Series B round and here is what I learned:

1. Kiss a lot of frogs.

Finding the right venture firm requires meeting many of them, since most will pass on the investment no matter how well the company is doing. When I realize there isn't a fit, I often break up with the firm quickly, sometimes emailing a nice "no thanks" note as I leave their office. This makes founders feel more in control of a process that is riddled with rejection.

Related: 4 Tips for Building a Company That Attracts the Best Investors

2. Define growth.

Many venture firms claim to be "growth" stage investors, but that term can mean a lot of things to different people. When receiving a call from a VC firm, establish up front if they have an established minimum revenue or annual "run rate" in order to make an investment. Some investors will want to see a $5-$10 million run rate before they invest. Others won't care and will base their decision on how fast the company is growing and if they like the market.

3. Be quantitative.

Once a B round is received, things become less about the founder and more about the business and its metrics.

For example, if the company is a SaaS (Software as a Service), deliver highly detailed reports on things like monthly recurring revenue (MRR), annual contract value (ACV), and customer churn. If the company is a B2C, show high levels of user growth and engagement.

Whatever the metrics for the company's particular industry, have them at the ready when the fundraising process begins.

4. Show it.

At this stage, investors expect significant growth in the months and years following their investment. For example, if the company is a SaaS company, show how it will grow at least 3X annually in the years following the investment.

Ultimately, investors want to know how fast the company can get to $100 million in revenue so the company can IPO or be acquired. If this is not achievable, then think twice about raising a Series B.

Related: 5 Essentials for Winning Over the Best Investors

5. It ain't over until it's over.

Even if a VC firm is interested in funding the company next round, there are things to tend to once a term sheet is received.

Due diligence is typically a formality involving a lot of paperwork being sent back and forth, so have good financial records in place. Also, the public announcement of a U.S. fundraising must happen within 30 days of the closing as it needs to be filed with the federal government.

Be sure to work with a good PR firm or have a solid relationship with a tech writer to tell the company's story. Don't let hard work be ruined by a poor or muddled fundraising story.

Securing a growth stage investment is rare. Most startups never get to this point. But with the right metrics and approach, it can absolutely happen!

Related: 5 Things Investors Want to Know Before Signing a Check

Matt Straz

Founder and CEO of Namely

Matt Straz is the founder and CEO of Namely, the HR and payroll platform for the world's most exciting companies.

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