When seed-stage founders receive their first investor check, they invariably take one of several routes: 

• A) They rush to the tech press with their fundraising news. 
• B) They throw a WeWork-style party for all of their employees and stakeholders to celebrate the milestone. 
• C) They take to social media to boast of the achievements of their personal branding.

Based on my experience, the correct answer is actually D) none of the above. The founders who choose A, B, or C will inevitably fall by the wayside: Public relations, personal branding, and even company engagement should only come after what matters the most: customer retention and revenue optimisation.

The importance of retention and revenue optimisation

Upon receiving your first investment, founders should focus only on key performance indicators (KPIs) and metrics that help you understand your customers and, in turn, reduce churn while maximising revenue. This priority is built on a simple premise: You may have money now, but this will not always be the case.

For one, the investor dollars may dry up. In the past, you only needed a compelling story about your team’s growth, the product’s development, and an understanding of the market through the lens of your unique expertise. But times have changed: This narrative-driven approach to fundraising will not be enough to take a startup from seed to Series A.

Customer revenues may dry up just as fast. You may have cash in the back from users or clients, but because your startup is so young, there is little historical understanding of how soon or how fast these customers will leave you. You still only have a vague idea about your customer’s lifetime value.

In the face of these uncertainties, there is only one option that makes sense: You need to focus on driving two levers and two levers alone: reducing churn while increasing revenue. For example, a software-as-a-service (SaaS) company will need to figure out why enterprise customers are cancelling their contracts and, more importantly, determine how to thwart that. Their retention strategy may involve everything from key account management to offering automated discounts at the cancellation screen. The point is that they must understand and subsequently address the outflow of customers.

Also Read: Decoding PR: The essential tool for tech startup success

Some startups may be so early in their life cycle that customers are not yet churning, but they are not using the product. This sign is also a red flag: Your customers will soon be leaving out the door.

In addition, the business must optimise revenue. An e-commerce business, for example, can maximise revenue through cross-selling, upselling, and even greater personalisation—which can contribute to a revenue uplift of as much as 25 per cent, according to McKinsey. 

The efforts toward improved retention and revenue generation may not immediately lead to a hockey-stick graph, and that’s fine. Investors are not looking to evaluate you based on the current revenue generated by the dollar. Instead, they will evaluate you based on how well you have identified leaks and opportunities, which speaks to your startup’s aptitude and revenue for revenue growth in both the short- and long term.

Shifting the founder paradigm: Moving the goalposts for success

Retention and revenue optimisation is easier said than done because it requires such a deep paradigm shift. Founders are taught to sell, sell, and sell. They are hyper-focused on getting leads to sign across the dotted line or on getting customers to convert that there is considerably less thought on what happens afterwards.

Instead of looking at a finished sale as a “close” — of the natural endpoint of a process — founders must view it as only the first step in a much longer process of satisfying, keeping, and growing each customer. By moving the goalposts, founders stand a much greater chance of succeeding from seed to Series A: Their startup will rocket past competitors who mistakenly viewed the initial contract as the culmination of all business activity. 

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