We’ve all seen the headlines before: tech company raises a huge round and celebrates with Dom Perignon. Soon after, they go through a crisis. People quit because it wasn’t what they expected. The company may even lay people off because they grew too quickly. People heard “millions” and got dollar signs in their eyes. They thought about bonuses and corporate retreats before they thought about company investments and growth. However, you can’t really blame employees for thinking about luxury – it was the founder who bought the Dom, after all.
But it doesn’t need to be this way. Founders, CEOs, and all business leaders just need to properly set expectations. Corey Gross, co-founder, and CEO of Toronto-based fintech startup Sensibill knows this lesson well. Sensibill recently announced a $41 million CAD fundraising round, and everyone – from aspiring founders to fellow members of his Peerscale peergroup – is asking him how he manages team expectations.
Speaking to Peerscale, he shared his growth journey and what he does to make sure no one has false ideals about what fundraising means for them.
Knowing when it’s time to fundraise
Sensibill was founded in 2013 when Gross and his co-founder saw an opportunity to use technology to manage receipts. Whether submitting expense reports, tracking for taxes, or simply for personal budgeting, receipt management was a messy game. To this day, people still use shoeboxes in the closet to ‘manage’ receipts, and Sensibill was one of the first companies to bring technology into the space.
But Sensibill didn’t fundraise immediately. The company didn’t raise a seed round until 2015. Two years later, it raised a Series A round. Another two years later, it’s a mega $41 million round that was recently announced. This is because Gross wanted to make sure it was the right time to raise, advice he shares with any business leader thinking about fundraising.
“A lot of founders think they need to raise money because that’s what they see other people doing,” said Gross.
There is no magic “time” that makes fundraising the right move, so Gross recommends ensuring you know exactly what you’re trying to build. A venture-backed company looks and acts very differently from a bootstrapped company, and founders need to know what they want.
Knowing what you want out of the business is the first thing. You also need to know what you want from an investor.
“Do your research,” said Gross. “What amount of money do you need to raise in order to achieve your milestones? What are the natural markers to indicate business growth? Then go into researching the investors themselves – what would make a good fit for you.”
Balancing multiple jobs
Founders already have many jobs on their plate, especially at earlier stages. But fundraising is a full-time job on top of leading the business. For Gross, balancing everything is a matter of compartmentalization and trade-offs, advice he wished he had at the start of Sensibill’s fundraising journey.
“You have to find a way to live one day at a time,” said Gross. And you have to find a way to focus on what the most important thing you can accomplish in that specific day is. If you go back to first principles about making sure you don’t get burnt out so that you can be the most effective leader you can be, you’ll be best served by that.”
The one thing he does not advocate for is trying to do it all. He added the founders face immense pressure – often from themselves – to work all the time and not let anyone down. But it can be detrimental in the long run.
“Something that is very natural for founders to want to do is burn the candle at both ends,” said Gross. “I’m speaking to customers, I’m selling, I’m hiring team members, I’m operating the business – then from 6 pm to 2 am I’m going to be fundraising and doing preparation… That’s a very quick way of not being effective at [anything].”
Depending on the size of your organization when you fundraise, this could mean delegating as many tasks downward as possible. But if you’re small, Gross said you will have to choose which priorities slip in order to focus on what’s most important that day. On top of that, you have to make sure the team knows what they can and can’t expect from you.
“You have to set healthy boundaries between you, what your job is, and what people are expecting you to do for them constantly,” said Gross. “Otherwise, you’re going to be inundated with requests on a daily basis … and you’re going to let people down or burn yourself out trying to do everything, even though you think you’ve delegated.”
Communicating with the team
“One of the things I wasn’t prepared for around the time we raised our Series A was how the culture can change when you raise money,” said Gross. “People will interpret fundraising success as business success, and they’re not the same thing. Fundraising is a milestone. It’s a time to acknowledge the team for all their hard work… but [fundraising] is not the end. It’s the means.”
When a company raises millions, some employees may think the money is going directly to their salaries or bonuses. Others may take it as a moment to get lax because money is coming in the door. Gross said both of these issues are avoidable if leaders set the right expectations, starting with the CEO.
“Whenever we’re in the process of raising money, we explain to the team that this is a milestone but this isn’t an indicator that we’ve arrived anywhere,” Gross continued. “This is fuel to get our rocket to space. If you don’t manage that [expectation], some employees will think that you just won the lottery.”
Ensuring expectations are set properly, though, has to come from all of the leadership teams. Otherwise, the CEO is left to be the bad guy or girl and employees are left without context or set expectations.
“It’s very natural for a workforce to see a company raise a bunch of money and say we’re rich,” said Gross. “It’s a human reaction – and you have to actively work to curtail that. Otherwise, it’s going to…look cheap and selfish. You have to explain what the purpose of fundraising is to your team and what you hope to accomplish with it.”
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