Motorway: How they raised Seed to Series B

Yesterday, Motorway announced their £50m (~$70m) Series B led by Index Ventures, with new investors BMW i Ventures and Unbound. We’ve had a front row seat since co-leading the Seed round in 2018 with Marchmont Ventures. I caught up with co-founder & CEO Tom Leathes to discuss how they raised their Seed, Series A & B rounds. In this Q&A, we cover views from both sides of the table — the best slides in investment decks, managing round dynamics, and advice for CEO’s about to start their fundraise.

Let’s look at the Seed deck, which you used to raise a £2.75m (~$4m) round in 2018. Which slides went down really well, which sank?

Suzanne: For me the best slide was the team slide — we’re more used to seeing founders that have worked together for 15 weeks than 15 years. The founders had three successful exits behind them, a fourth venture — a hotel comparison site backed by Accel and Balderton — shut down in 2016. The team presented honestly and transparently about what they’d learnt from both the successes and the tougher times. They had a track record of building amazing products and had experienced the need to be 10x better than the competition to win in established markets.

Suzanne: A close second favourite slide was their fast facts and high-level metrics slide. It featured early in the deck putting the rest of the presentation in context. Beyond some very promising early metrics, the discussion around this slide demonstrated the team’s focus on launching something before raising any outside capital.

Series A: Following a Seed round, you raised £11m (~$16m) in July 2019. You had inbound interest from investors, which drove the fundraising process. How did that come about?

Tom: Doing our Series A with our existing investors was ideal because the group we had was working really well, we trusted them and the process is a lot quicker.

But it’s hard to do a good internal round without talking to external investors as well. If there’s no external conversations it can be a strange dynamic as you’re negotiating with people that you’re building the company with to set the valuation. It’s also good for internal investors to have external validation from other investors.

In our case we contacted a small group of VCs we thought would be a good fit. After we started getting genuine interest from them and valuations were discussed, the existing investors approached us about doing the round fully internally on that basis.

I’m glad it worked out this way for us, but it’s probably quite hard to engineer this situation. With any fundraise you maximise your chances of getting the right result by talking to more rather than fewer people.

Series B: You’ve just announced your £50m (~$70m) Series B led by Index Ventures with support from BMW i Ventures and Unbound, alongside existing investors Marchmont and Latitude. What changes in the fundraising process between Seed, Series A & Series B?

This Series B was the first time we ran a proper ‘process’ for a fundraise. Even though our traction, team and market was strong, we knew that to get exactly the round we wanted we’d need to talk to several firms to maximise our options. Obvious point but it’s also not just the firms, but the individual people you’re going to be working with that matters, and to be sure we’re bringing on the right partners we wanted to spend a lot of time with potential investors to know the chemistry would work.

We started by building the deck and model, and practiced it with existing investors, friends etc. Then we built a shortlist of funds we liked, and met with them in a concentrated timeframe (several pitches a day over zoom — probably wouldn’t have been possible pre-pandemic). This resulted in a very fast process with lots of firm interest, so we could put the right group together quickly.

To run a process like this took me, our FD and a couple other people in the team working pretty much full time on only this for about 8 weeks including due diligence / legals etc. We tried to protect the rest of the team from the process as much as possible (only a handful even knew about it). I had to drop a lot of operational project involvement within the company through this period which I found very hard to do, but was probably a good exercise in itself!

We had built a very strong exec/leadership team in the 12m leading up to the round, which meant the business could keep moving forward while we focused entirely on the fundraise. Without a leadership team like that in place, a process like this would be dangerous for the business, and I’m not sure I’d recommend it until you have leaders in place that can take the strain of the day-to-day company building.

Suzanne: I thought this variation on a combined market and metrics slide worked really well. In Seed decks you most often see a bottom-up market slide i.e. how many users there are for the product and how much each of these users is worth, or a top-down i.e. spend on existing incumbent products. Increasingly, in Series B and beyond decks we’re seeing a variation on the market slide, which compares key metrics across the company to public companies in a sector. For those looking for more deck inspiration, there’s also a good version of this type of slide format in the Metromile Investor Presentation.

Suzanne: The deck was really strong so rather than there being a slide that sank, the biggest weakness was the omission of some key data:

∙ A cohorts slide — depending on your model you may need user, core action or dollar retention cohorts, possibly even all three in a data pack.I think the clearest way to present cohorts is with a triangular cohort table — the excellent Front Series A deck has a version for SaaS.

∙ The match rate, sometimes called the utilisation or success rate — by Series B, investors will likely expect that the product is sufficiently mature to ensure the two sides of the marketplace can successfully find a match. In Motorway’s case, this is the percentage of vehicles listed for sale that are successfully sold.

∙ The speed of inventory turnover, or the time taken for supply and demand to match — significant improvement in speed between Seed and Series B will be seen as a strong indication of product progress.