Road to Series A: Simon Schmincke on Fundraising Setup, Hiring and Product-Market-Fit

About this episode

Simon Schmincke began his career at Rocket Internet and found his way into the VC world from there. Today, he's a General Partner at early-stage investor Creandum, sharing his insights on the critical success factors on the road to Series A.

From Corporate Venture to the VC World

Simon's career path illustrates the evolution of the German startup ecosystem. His time at Rocket Internet gave him deep insights into scaling processes and international expansion - experiences that now shape his investment decisions at Creandum.

Rocket Internet played a pivotal role in the German startup ecosystem by rapidly scaling proven business models internationally while training a generation of entrepreneurs and investors.

Series A Ready: The Decisive Criteria

Investors look for specific indicators in a Series A that determine the success of the funding round. Not every startup is ready for this crucial growth phase at the right time.

The central evaluation criteria include:

• –Traction and growth metrics: Demonstrable progress in key performance indicators
• –Market size and potential: An addressable market that enables significant growth
• –Team strength: A founding team capable of handling scaling challenges
• –Business model validation: Initial proof that the revenue model works

The Equity Story and the Signalling Problem

A critical aspect of Series A fundraising is the equity story. It becomes particularly problematic when existing investors don't exercise their pro rata investment rights - a strong negative signal for potential new investors.

This "bad signalling" can jeopardize the entire fundraising process by raising doubts about the company's future viability.

The Perfect Fundraising Process

A structured fundraising process is crucial for success. It's not just about presenting the numbers, but about strategically orchestrating the entire workflow.

Valuation development across different company stages follows comprehensible patterns that founders should understand to set realistic expectations.

Burn Rate Management as Survival Strategy

Effective burn rate management becomes a survival question in uncertain market times. Startups must learn to strategically control their spending without severely impacting growth.

Product-Market-Fit: Necessity or Nice-to-Have?

The question of whether product-market-fit is mandatory for a Series A concerns many founders. The answer is more nuanced than often assumed and depends heavily on the respective market and business model.

Experience vs. Drive: The Right Hiring Strategy

When selecting employees, founders often face the decision between experienced candidates and highly motivated talents with less experience. Simon explains how this decision should be made depending on the company stage.

Different profiles are optimal for various growth phases:

• –Early Stage: Drive and willingness to learn often more important than experience
• –Scale-up Phase: Experience becomes increasingly critical for more complex challenges
• –Mature Stage: Specialized expertise and proven leadership qualities required

Founder Coaching: Investment in Leadership Skills

Developing the leadership skills of the founding team is an often underestimated success factor. Simon illuminates when an investment in professional coaching becomes worthwhile and which areas should be the focus.

The development of leadership competencies should occur parallel to company growth - a reactive approach often comes too late.

Conclusion: Preparation is Everything

The road to Series A requires strategic preparation across multiple dimensions. From developing compelling metrics to building the right team to personal development of the founders - successful Series A fundraising is the result of systematic work, not fortunate circumstances.