What is needed to get from Seed to A round — learnings from Pleo
We are incredibly excited to announce that Pleo, a company that Creandum backed in February 2017, has now raised a $16m A round led by Kinnevik, with participation by Creandum, Founders, Seedcamp and Vækstfonden. All credit goes to the amazing Pleo team, led by CEO Jeppe Rindom, for having executed so well.
Pleo is a simple business spending solution. It combines a Pleo payment card (that can be easily assigned to employees with individually set limits) with software and mobile apps that automates expense reports and bookkeeping. On top of giving your employees and CFO more power, it tracks all company spending in real-time with advanced analytics.
Already when Creandum backed Pleo in the seed round we were incredibly impressed by the super smart and experienced Pleo founders, by Pleo’s powerful business model, the obvious market need (who doesn’t hate expense reports?), and by the sophisticated yet beautifully simple product that they had built.
At the same time, we knew that it was still early: At the time, Pleo had few customers, most of which were small, we were not yet sure how well go-to-market channels would work. The team was still only the two founders plus a handful of people.
Pleo today is a completely different company: thousands of customers who are exceptionally happy, a team of 50, and real revenue that’s growing extremely fast.
How did they get there? Here are the key learnings from working with the Pleo team these past 15 months on what to focus on when going from seed to A round stage.
Hire exceptional people
The quality of the early people you hire sets the bar for the rest of the life of your company, which means you need to balance scaling the organisation quickly with only hiring the best. This applies across roles. There are three key challenges:
- You need to attract the best people — those that could get a job anywhere — to work at your little company. This is ultimately a sales job, and the Pleo founders are exceptional at laying out the vision for what they’re building.
- You need to be able to assess whether people are really great. This is especially hard for roles that are different from yours. Jeppe and Nicco have been really good at using their network here: for instance, since neither of them are online marketing experts, they’ve been great at talking to CMOs and online marketers at more advanced companies, to learn what to look for in the right candidate.
- No matter how well you do, some hires will not work out. These situations are some of the hardest ones as a founder. Nonetheless, there’s only one solution: assess people as quickly as possible, and if you believe that they are not the right fit, let them go immediately.
Become feature complete
Startup common wisdom tells us that you should launch so quickly that you should be embarrassed about your MVP. The time between the seed and A round is when you need to build out your product so that not only the most enthusiastic customers will want to use it. In Pleo’s case, a lot of this had to do with onboarding. Fintech companies, especially in the B2B space, have much higher requirements on knowing their customers than other companies, and while Pleo has always adhered to all the rules, in the beginning that process was still largely manual. Which, we know, doesn’t scale. In other words, a lot of Pleo’s product development efforts these past 15 months have been on making onboarding automated and super smooth.
Delight your customers
Your happy customers are your best salespeople. And something that Pleo has been remarkable at has been to delight their customers. They have a close-to-unheard-of NPS of around 80, tons of new customers come from word of mouth, and within each customer, we see Pleo being used more heavily. Put simply, this customer love helps Pleo grow faster. It is driven by product development, particularly Pleo’s exceptionally smooth onboarding, but very much also by investing in an exceptional customer success team. And it is ultimately driven by spending time with the customers, to make sure that they succeed.
Nail scalable go-to-market channels
This was definitely a risk when Creandum backed Pleo in the seed round. The team had done some promising experiments with online ads, and we had a strong hypothesis that the simple and beautiful product would be easy for customers to love. But we didn’t know. This is almost always the case in seed rounds. When raising the A round, you need to have a strong hypothesis, backed by data, about what works and what doesn’t. Key here is to run continuous experiments, both testing new channels and iterating on existing ones, combined with rigorous measurement of what works and what doesn’t. The Pleo team has tested Adwords, partnerships with accounting firms, Facebook ads, outbound sales and several other channels. Some of these work, some don’t, and the team is still iterating across all of them.
Get traction
This should be a result of the initiatives above: Unless you’re building something extremely hard, like a rocket or an autonomous car, then you need to have real traction to raise an A round. Most of the time, this means revenue, although for some businesses, a large, fast growing and very engaged free user base is just as attractive.
We are incredibly excited to start working with Kinnevik, which is one of Europe’s leading investors in fast growing technology businesses with experience from companies like Zalando and Betterment. We’re also excited to welcome Andreas Bernström from Kinnevik, who has previously run successful technology businesses like Rebtel and Sinch, and who was the chairman of Trustly, to Pleo’s board.
More than anything, we are excited to be part of this next step in the Pleo journey.
