Graduating from Series A: How to get to $10M ARR

Ideas / B2BaCEO / Graduating from Series A: How to get to $10M ARR

06.01.2024 | By: Ashu Garg

I unpack the second phase of startup growth: scaling from $1M to $10M ARR. I break down its two main steps: evolving from founder to founder-CEO and transforming GTM into a well-oiled machine.

In recent editions of B2BaCEO, I’ve been exploring what I believe is the ultimate benchmark for startup success: reaching $100M ARR. While achieving “unicorn” status (a $1B valuation) has long been a holy grail in the tech world, I argue that hitting $100M ARR is a more meaningful milestone—one that signals a startup is truly on the path to becoming an enduring, industry-defining business.

To make this ambitious goal more tangible, I like to think about this journey in three phases: finding early product-market fit ($0 to $1M ARR), demonstrating repeatability and therefore true PMF ($1M to $10M ARR), and hitting the accelerator ($10M to $100M ARR). 

Each phase presents its own set of challenges and requires a tailored approach. The good news for B2B startups, particularly those with a sales-led GTM strategy, is that growth through each of these stages can be approached more as a science than an art.

Phase 1: Finding early PMF ($0 to $1M ARR)

In my March newsletter, I focused on the first stage: the push from $0 to $1M ARR. Here, a founder’s singular focus should be on finding early PMF. Put simply, the goal is to identify a burning problem that a specific subset of customers is desperate to solve, then create a product that alleviates that pain point more effectively than any existing solution.

Accomplishing this involves three high-level steps:

1. Crisply define your problem through extensive customer discovery. Actively seek out evidence that challenges your assumptions and pressure-tests your hypotheses.

2. Hone in on your ideal customer profile (ICP). Resist the urge to be all things to all people. Instead, pinpoint the specific customer segment that stands to benefit most from your product. Then tailor every aspect of your offering, from your messaging to your feature set, to resonate with their needs and preferences.

3. Develop a minimum sellable product (MSP) that solves your ICP’s most acute pain points. Ruthlessly prioritize your product’s core value prop, even if that means leaving aside edge cases or nice-to-have features. At the same time, work to minimize the friction that customers must overcome to adopt and derive value from your product.

Reaching $1M ARR is an impressive achievement. It confirms there’s real demand for what you’ve built and that your product can successfully meet that demand. By this point, you’re starting to see hints of a repeatable sales motion. You’ve likely raised a Series A and have 10-100 customers, depending on your business model and price point. These initial customers, though small in number, are immensely valuable and often make for ideal design partners. Seek feedback from them regularly, and engage them to shape your product roadmap.

Phase 2: Creating repeatability ($1M to $10M ARR)

At $1M ARR, much of the real work of business building is just beginning. While you can hustle your way to $2-3M ARR through sheer grit and founder-led sales, scaling to $10M ARR demands a more intentional, systematic approach. Attempting to brute-force growth at this stage simply won’t work anymore. Founders need to shift their focus from doing things that don’t scale to building repeatable processes and assembling a top-tier team to execute them.

To better understand how to navigate this transition, I sought the wisdom of three founder-CEOs on my B2BaCEO podcast: Doug Winter of Seismic, Mohit Aron of Cohesity, and Sanjit Biswas of Samsara. Each has steered their startups to $100M ARR, in some cases multiple times.

While the exact tactics look different for every startup, two overarching priorities emerged from our conversations: assembling a high-performing team (and, with it, an intentional culture that can scale) and transforming your GTM efforts into a well-oiled machine. Let’s explore each of these priorities in greater depth.

Priority #1: Evolve from founder to founder-CEO

As a technical founder, one of the biggest challenges you’ll face as you scale from $1M to $10M ARR is learning to balance two very different, often conflicting, mindsets. On one hand, the same creativity, passion, and technical skill that enabled you to build an incredible product are essential for continuing to innovate and maintaining your competitive edge. On the other hand, scaling to $10M ARR and beyond requires a level of operational discipline and GTM savvy that feels foreign to many technical founders.

However, as Sanjit points out, individual efforts, no matter how heroic, can only take a startup so far. “You could be a 10x or 50x engineer or whatever you want to classify it as, but you can’t get enough leverage unless you go and have a team of 50 engineers or 100 engineers. At that point, it becomes way more effective to explain to people what you’re trying to build and the vision, and then do the product management.”

Rather than pull all-nighters coding, founders at this stage need to evolve from ICs into force multipliers for their entire organization. Doug describes this realization: “I started to do less: I stopped taking out the trash, I stopped doing expense reports, I stopped doing customer demos or actually writing code or anything like that. Instead, I focused on making sure we had the right team on the field at all times in all places and looking for where there might be smoke coming out of the organization.”

To successfully shift into this new role—not just founder, but founder-CEO—I advise technical founders to focus on three key areas:

Focus area 1: Establish a hiring playbook

To build an exceptional team, founders need to develop a structured, repeatable hiring process that assesses candidates based on the competencies required for the role, rather than relying on personal chemistry. Mohit recommends using three different scorecards, each graded on a scale of 1-10, to evaluate candidates: the resume scorecard, the interview scorecard, and the reference check scorecard.

  • The resume scorecard determines if a candidate meets the basic qualifications for the position based on their prior experience and track record. For example, a VP of Sales candidate might be expected to have at least a decade of experience leading enterprise sales teams at companies of a similar size and growth stage.
  • The interview scorecard examines the specific skills needed to excel in the role.  Interviewers should divide up these skills based on their individual areas of expertise. For instance, when evaluating a VP of Sales candidate, the CEO may focus on assessing their strategic vision, while a senior sales leader could drill into their mastery of the sales process. I recommend adopting a “show vs. tell” approach, using techniques such as case studies, role-playing, and live portfolio reviews to test candidates’ skills in action.
  • When conducting reference checks, rather than ask generic questions like “Are they a good person?”, Mohit recommends posing specific questions graded on a 1-10 scale, such as: “How strong are they at hiring and developing high-performers?”, “Did the most talented people in the organization respect and want to work with them?”, and “Would you hire this person again?” If the answer is a 7 or 8, it’s essential to probe further to understand why it’s not a 9 or 10. A 6 is effectively a failing grade, as most references will be reluctant to give anything lower. 

The power of the 1-10 scale is that it allows references to more easily offer negative feedback by masking it as faint praise. Mohit also strongly advises founders to go beyond the references provided by the candidate and conduct outreach on LinkedIn to gain a more unfiltered perspective.

Focus area 2: Delegate to your team, but stay hands-on

With a strong team in place, founders must strike the right balance between empowering their executives and staying close to the day-to-day realities of the business. Granting too much autonomy too quickly can be risky, as the incentives for founders often differ from those of executives, who can more easily move on if things go south.

To achieve this balance, founders must actively seek out the “ground truth” of their business, not just the rose-colored version presented by their direct reports. This means being on the front lines: joining customer calls, having skip-level conversations with ICs, and interviewing key candidates personally.

Technical founders often don’t understand the ins and outs of the jobs their executives do and sometimes back off as a result. Faced with specialists in fields like marketing, sales, and finance, it’s tempting for founders to take a step back and defer to their expertise. Instead, they should do the opposite: lean in and take the time to understand the details of each executive’s role. Only by digging into the specifics can founders learn enough to set expectations and evaluate the performance of their team.

Remember, every problem in the company is ultimately the CEO’s responsibility, and it’s crucial for founders to remain engaged and knowledgeable across all functions. Recall Doug’s advice: founders should always be on the lookout for any whiffs of “smoke” that could signal a fire kindling within their startup.

Focus area 3: Define and reinforce a culture that’s built to scale

Another critical aspect of the founder’s evolving role is establishing a strong culture that can scale. While “culture” can feel like a fuzzy concept, especially for founders with an engineering background, Sanjit compares it to the “shared operating system” that allows a large, distributed organization to function as a cohesive whole. While culture tends to develop organically in the early days based on the founders’ way of working, it’s crucial to be proactive about defining its core tenets as headcount grows.

To this end, founders should approach designing and communicating their culture with the same rigor and customer-centricity they bring to building products. As Sanjit explains: “I think of it as almost like product management. You want to make sure that you’ve been thoughtful about what the business needs and make sure that the culture supports that.” By clearly articulating what the culture is (and what it isn’t), founders can attract candidates who will thrive in their environment and filter out those who would be a poor fit.

Priority #2: Construct a well-oiled GTM machine

Next comes the second priority: constructing a GTM machine. Building this “machine” involves creating repeatable processes for all aspects of going to market: lead generation, sales, onboarding, customer success, etc. The goal is to be able to input $X into GTM efforts and reliably generate $Y of revenue. As Mohit puts it: “Eventually repeatability comes from processes, right? If you build the right systems in your company, the desirable outcomes happen by themselves.”

A scalable GTM machine consists of four main building blocks:

Building block 1: Fuel your demand generation engine

Defining your demand generation strategy starts with deeply understanding your ICP. This is something you should be working on from day one, as you’re making your initial push from $0 to $1M ARR. By working closely with early adopters to find PMF, you’ll gain valuable insights into your ICP’s pain points, priorities, and decision-making processes. This knowledge serves as the foundation for all your GTM efforts moving forward.

Instead of trying to appeal to everyone from day one, I advise startups to focus on becoming the go-to solution for their specific ICP. This targeted approach allows you to build a strong brand and referral network within that highly engaged and loyal segment of your market. When executed well, this focused strategy creates a flywheel effect where satisfied early customers become advocates, organically spreading the word about your product and driving further adoption.

To really hit your stride with GTM, you’ll need to foster a culture of continuous experimentation and optimization—similar to the iterative approach you’d take when building a product. This means constantly testing new channels, tactics, and approaches, from content marketing and SEO to event sponsorships and strategic partnerships. The key is to closely track metrics like lead volume, conversion rates, and CAC and observe the patterns that emerge. Double down on what’s working and quickly pivot away from what’s not.

To fuel this kind of GTM innovation, I advise startups at this stage to allocate a significant portion of their resources to demand gen experiments. While it may be tempting to prioritize product development above all else, the reality is that even the most groundbreaking product won’t sell itself.  As one of Mohit’s board members wisely observed: “You can talk about all sorts of innovation. There’s product innovation, this and that, but there’s one innovation that drowns every other kind of innovation, and that is GTM innovation.”

Building block 2: Turn sales into science

In the early days, founder-led sales can be incredibly powerful. However, as the company grows, this high-touch approach quickly becomes unsustainable. To reach the next level of growth, you need to develop a repeatable sales process that a dedicated team can execute consistently.

This is where an engineering mindset can be a huge advantage. As Sanjit explains: “Being engineers, we were able to turn it into a scientific process where we said, if we make 70 calls, we get this many demos, which turns into this many appointments and trials, which then turns into this many transactions. So we realized this is pretty simple. We just need to do it.”

By breaking down the sales funnel into a series of measurable, repeatable steps—from prospecting and discovery calls to demos, negotiations, and closing—you can identify the key levers of revenue growth and optimize accordingly. This data-driven approach requires significant investments in tools and processes to track each stage of the buyer’s journey, measure rep productivity, and forecast pipeline.

I advise founders to start laying this groundwork as early as possible, even if the true “science of sales” only fully kicks in from $10M to $100M ARR. Well before you hit that inflection point, be deliberate about building out your sales infrastructure and hiring a team of effective sellers. Look for reps who have succeeded at companies at similar stages of growth, and balance recruiting experienced talent with developing junior reps from within.

Equally important is investing in sales enablement. Doug describes it this way: “Think of the good ideas for a sales play or strategy that emerge in the boardroom. The executives decide ‘We’re going to launch this new product. Here’s what we need to do, we’re going to run this play,’ and they map it out on the whiteboard. How do you get those ideas from that whiteboard into the keyboards, fingers, hands, and voices of your sellers? Sales enablement is everything that needs to happen between that concept, that idea, and your sellers actually taking action.” 

This includes comprehensive training on the product, target personas, competitive landscape, and sales methodology, as well as a library of customer case studies, ROI calculators, objection handling scripts, and other collateral to help the sales team effectively engage prospects and close deals. 

Critically, your sales playbook shouldn’t be a static document, but a living framework that you continually refine based on data and feedback from the front lines. The best sales teams are always analyzing their metrics and looking for opportunities to optimize—whether that means tweaking messaging, adjusting talk tracks, or re-prioritizing target accounts. This iterative, data-driven approach is the hallmark of a truly scientific approach to sales.

Building block 3: Graduate from MSP to “whole product”

In parallel, startups must mature their offering from an MSP to a “whole product” solution. This means going beyond your initial, focused product and delivering an end-to-end solution that includes all the elements required for the customer to fully realize the value you’ve promised.

For enterprise software startups, this means investing in areas like security and compliance controls (SOC 2, HIPAA, GDPR), integrations with the customer’s existing IT environment, multi-channel customer support (online, phone, chat, in-person), detailed product documentation and self-service knowledge bases, data migration and implementation services, and customer success.

Still, building out the whole product is not just about checking boxes on a feature list. It requires a fundamental shift in mindset. You have to go from being hyper-focused on your core technology to understanding your customer’s entire journey with your product, end-to-end. Again, this means deeply understanding target buyers—their workflows, their pain points, how they define success—and then designing every aspect of your offering to create a seamless path to value.

As part of this product evolution, founders need to keep a close eye on the underlying economics of their business. In the early days of finding PMF, you can often afford to ignore financial metrics like gross margins and CAC in favor of driving initial traction and learning. However, as your startup scales, even small inefficiencies in unit economics can start to compound in a big way. This is especially true for generative AI-powered startups: as usage grows, if you’re not diligently tracking your compute costs, running inference for generative models can erode your margins.

Building block 4: Obsess over customer outcomes

If you want to hit  $10M ARR, landing new customers is only half the battle. Just as important, maybe even more so, is your ability to retain and grow the customers you already have. To do that, you’ll need to become a true strategic partner by demonstrating clear, measurable ROI.

This starts from the beginning of the customer’s journey with a smooth, efficient onboarding process. Think of this as a crucial piece of your “whole product.” The sooner customers can realize value from your product, the better. This may involve a mix of personalized training, implementation support, and ongoing guidance to ensure customers make full use of your offering’s capabilities. Building out a library of case studies, ROI calculators, and success stories allows you to quantify the impact you’re delivering.

One tactic that I’ve seen work consistently is to deeply embed your product into your customers’ day-to-day workflows and existing systems. If you can capture granular data on exactly how, when, and why users are engaging with your offering, you can paint a vivid, real-time picture of the value you’re creating. Instead of relying on vague assertions, you can point to concrete metrics that directly link your product to your customers’ improved outcomes.

When you can get to this level of specificity, it’s incredibly powerful in building trust and credibility with your customers. It also gives you a solid foundation to grow those relationships over time, whether through cross-selling additional products and services, increasing usage and adoption within the organization, or drawing on satisfied customers as advocates and references.

To make this work, you need to set the stage from the very first sales conversation. Before the contract is even signed, you need to be pushing to establish clear, concrete success metrics. Don’t settle for vague, lofty aspirations: push your prospects to commit to specific KPIs, like reducing customer support ticket resolution times by 25% or increasing landing page conversion rates by 10%. The more specific, the better.

By aligning on these measurable outcomes upfront, you create a clear roadmap for what needs to be done to make the engagement successful. If you’re not on track to hit those targets, you now have a built-in early warning system. You can proactively diagnose the issues and course-correct before small problems snowball into bigger ones.

Feeling overwhelmed? Just start building

If this process feels daunting, one of the best things you can do is…just start doing.

As Sanjit puts it: “You learn by doing, right? The same way that you learn by hacking on something or building it. I think a lot of times people get very intimidated by the entrepreneurial process or just all of this advice is floating around. But if you kind of return to your roots as an engineer and say, ‘Hey, I just like to build things,’ whether it’s products or companies, just give it a shot and experiment. The downside risk is not that bad, and the upside is pretty enormous.”

So if you’re feeling stuck, my advice is to just pick a place and start. Maybe it’s running a few demand gen experiments, sketching out your sales process on a whiteboard, or sitting down with your product team to map out your customer journey. Whatever it is, just dive in. Get your hands dirty. Start learning by doing.

Published on June 1, 2024
Written by Foundation Capital

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