With growth being such an important metric for a company post-fundraise, it is of no surprise that one of the very first questions that arises after raising money is how to spend it, both in terms of people but also in customer acquisition.
As most small companies have the founding team acting as the marketing, sales, and product development team, it can be quite tricky to ‘scale’ across any one of those functions. However, the wisdom of having founders’ lead these three things until finding product-market fit is one I believe in and also recommend, mostly because it allows the founding team to be nimble in adapting their marketing strategy, the sales strategy, and the product to match the needs of the customers as per conversations they are having with the customer directly (vs. via an intermediary, who is typically newly hired and desperate to showcase worth, even if not entirely aligned with the company’s PMF context).
In an effort to unpack each of these, we will do a mini-deep dive into these three parts and cover the key things to consider as part of how to best use your newly raised funds.
Starting with Marketing, I sat down with my colleague Natasha Lytton, who is an experienced CMO, Head’s up Seedcamp’s Marketing in addition to leading our Platform. I asked her the typical questions I see asked (or those that sometimes people are too embarrassed to ask) around Marketing.
What is the most misunderstood part of ‘the marketing function’ within a startup?
- That growth belongs exclusively within the marketing department
- That one person can cover the whole stack of ‘marketing’ — ie performance and brand
- That short-term tactics are the wholly grail and that customer acquisition costs (CAC) you achieve today will last forever
When you should be doing marketing vs. someone else?
It really depends on you; your skillset, where you feel most comfortable and what’s going to be the most impactful use of your time. If you have zero marketing experience and know this is going to be a core function in order for your business to grow, I’d be looking to bring someone on to run it asap. I think, as founders, it’s essential you take an active interest in the story of the business, which is essential when it comes to shaping your narrative. Early-stage companies are driven pretty exclusively by the founder so, while you may not necessarily be buying Facebook ads or creating content to help drive SEO, you should be inputting on the story behind the business, defining what sort of legacy you want to leave in the world and thinking about how best to bring that to life.
What should be your first hire, a junior person or a senior person?
I’ve personally always been a fan of hiring people who can grow into roles. However, I think with the market we’re currently in, that’s changing a lot. You used to hire people with relatively little experience (maybe 4–5 years) but who had loads of energy, intellectual curiosity and passion to contribute and learn and grow alongside the business, In the current market, with everyone raising so much more money and expected to grow 100x faster than before, the need for people who’ve ‘been there and done that’ tends to dominate. I’d always be asking:
Will this be a challenge that this person will be ‘excited to do?’ as that will likely determine how willing they are to stick around. I’ve found senior people are more likely to take on roles in very early companies if it’s a different sector/experience for them whereas companies always tend to want to hire people who’ve churned out from competitor businesses, Here I’d add, it’s not essential that someone has direct experience in the sector you’re in for them to be valuable.
Is this person a ‘doer’ and someone who is willing to get their hands dirty
Is this person — be it senior or more junior — someone you feel you’d be able to trust and who can help take you on a journey
As one many a founder starts wondering if the solution to their marketing problem stems from simply hiring a senior marketing person, let’s move on to the core question:
What is a CMO?
Someone who leads the entire marketing function of the organisation. This is the person who should be updating the founder on what marketing is delivering, setting the marketing strategy, working with the CFO to define budgets and reporting (as and when necessary) to key stakeholders — ie investors — on impact.
When should you hire a CMO?
Really depends on the stage of your business. If you’re hiring a CMO and it’s a marketing team of one, you’re not really hiring a CMO. I think a lot of this comes down to titles and how this sits within your organisation as a whole. People are increasingly less willing to give out C level titles pre-Series A (which I think is right). A ‘proper’ CMO should signify someone who is going to come in and own a substantial budget and run a decent sized team. I’d also be looking at bringing someone on when you have significant marketing targets you need the business to hit to help you achieve your core goals.
How should you judge a CMO?
CMOs are one of the quickest roles to churn out as everyone wants to grow, and they want to do it tomorrow. I think a lot of this comes down to setting clear expectations right at the start. With early-stage businesses, a lot will be unknown and so while goals are important, the requirements of the organisation and the individuals within them to flex as the company likely will is also important.
I would personally judge a CMO by:
- Leadership quality
- Founder trust and relationship
- Ability to quickly course correct if something isn’t working
- Ability to create a balance of short and long term strategies and tactics to drive growth while future proofing the brand in the long run
What kind of budget should you discuss with your CMO?
Traditional rule of thumb in consumer marketing is 10% of funding should be spent on marketing. This should then come down as the company scales and as next rounds get bigger.
Do you have any questions you’d like to ask about marketing hiring and creating a marketing function after having recently raised? Feel to ask those questions in the comments section below!