The Rise of the Seed II Round (and Why It’s Great for Enterprise Founders)

Enterprise Hustle FTW

Jessica Lin
6 min readApr 17, 2019

If there’s one thing you need to know about us here at Work-Bench — beyond our backgrounds hailing from enterprise IT, being based here in NYC with 52 of the Fortune 500 HQ’d in our backyard, and investing in world-class enterprise startups — it’s that we are obsessed with enterprise go-to-market, especially early on in a company’s lifecycle.

This is further complemented by our investing sweet spot — the emerging Seed II round for enterprise startups, a round that more and more founders we speak with are considering and raising.

We thought we’d shed some light on this Seed II round, and why it’s especially great for enterprise startups given today’s macro environment of Tier I VC’s raising bigger and bigger funds chasing SoftBank.

If you’re a founder of a startup selling into Fortune 500 customers (or with long-term plans to do so), with a live product, and early customer traction, this Seed II round can give you invaluable time to hammer out your product maturity and functionality, and of course close customers too. But most importantly, this round allows you critical time to refine your go-to-market (GTM) motion, and set your startup up for success for your Series A round and beyond.

What is this New Seed II Round & Why Now?

The rise of megafunds in the past few years has meant that most Tier I VCs have raised bigger $1B+ sized funds to compete with one another (and SoftBank). For these VC funds, bigger funds implies that they need to write bigger checks in rounds in order to move the needle on their returns.

What this means for founders is that what used to be a $5M Series A is looking more like $10 — $15M Series A’s. And with those bigger rounds, of course, are increasing expectations on customers, ARR, and other company metrics. Whereas many deep infrastructure companies used to raise Series A rounds to continue building out product and then begin testing their GTM motion, that is often the goal of seed rounds today. Even for founders who have been very capital efficient with a $3M Seed I raise will likely find it challenging to make it straight to a $10–15M Series A.

Enter the new and improved Seed II round: generally an additional $2.5–3M, providing your startup an extra 12+ months of runway. While historically seed extensions were typically convertible notes with the associated “bridge round” stigmas, today this Seed II round is just another milestone on the journey to proving product-market fit, to be able to then scale hiring and GTM efforts at your Series A.

We’re not the first to take notice. You can read a few other great posts on Seed II’s here:

Benefits of a Seed II Round for an Enterprise Startup

Building an Enterprise-Grade Product

Enterprise products are more sophisticated than ever, with a greater depth of technical complexity — be it cloud infrastructure, identity and security, or AI infrastructure. A Seed II round will give you the additional, necessary time to build an enterprise-grade offering across security, compliance, data privacy, and scalability requirements:

  • For thoughts around Single Sign On, Audit Logs, Product Security, SLA and Support, check out EnterpriseReady SaaS Feature Guides.
  • For the dreaded SOC 2 audit that is required for signing almost any enterprise customer, be sure to factor at least 2–5 months in. A useful guide: SOC 2 Compliance Checklist.
  • Lastly, GDPR considerations — especially if you’re a data controller or process — may require building additional tooling and support for requests. See here for how top SaaS providers are preparing for GDPR.

Customers, Customers, Customers

Depending on the technical complexity of your product, this Seed II round will be an opportunity to begin your GTM or land a few more enterprise logos — logos that may take 6–12 months to close.

Given that most companies usually start in SMB or mid-market, being able to go upstream and close a few key lighthouse enterprise companies can help you tell a different story for your Series A fundraise, especially in gathering datapoints around your ideal customer profile (ICP): company size, industry, geography, function, buyer titles, tech stack and sophistication, and any other notable signals. Your ICP will help you better laser focus your time and runway on high-quality leads / leads that are more likely to close, understand how to best frame and position your pitch, and set up the foundation for sales repeatability.

Go-To-Market Experimentation

This part we cannot emphasize enough — a Seed II will get you additional time to test go-to-market (GTM).

GTM is not one size fits all; even within enterprise startups we’ve seen a mix of 9–12 month sales cycles for larger ACV deals paired with quicker moving, slightly smaller ACV 3–6 month deals. In today’s world, many startups use some flavor of bottoms up or high-velocity sales to build a solid base of recurring revenue. This additional time can allow you more data points, especially around sales and marketing, that can create the flywheel for a strong Series A.

Key strategies to determine:

SMB & Mid-Market Customers: Are you going after every early startup with lower ACVs, with the hope that these small SMBs will grow into large whales? While it may be easier to land these SMB and mid-sized customers, you’ll have more competition for mindshare and need more cost-efficient ARR to prove breakout success

Fortune 500 Enterprise Customers: Are you founder-selling and going after large accounts? Or are you starting to scale out an inside sales and field sales team? These potential million-dollar, multi-year contracts will move slowly and have a lot of risk to land, especially in the early days of your business, so the extra time a Seed II provides can be the difference maker in your company.

Every single additional customer proof point can make the difference between a rocketship primed for a strong Series A raise and one that struggles to breakout. Especially if your ACV is over $50K with mid-market and large accounts, our advice is to work your network and lean on your VCs (both existing and those you’re building relationships with) to make introductions to potential customers. In addition to helping with mid-market intros, where Work-Bench really shines is with enterprise customers at $100K+ deals, where we can facilitate introductions to the right prospects at the right time, giving you hyper-efficient shots on goal while your net burn clock is ticking.

Other considerations that Series A investors will want data points to validate:

  • On repeatability: you will likely need 5–10 fully-rolled out, paying, referenceable customers solving similar problems and be in a place to pour gas on the GTM fire.
  • On competitors: How are you going after larger incumbents and legacy players currently in your category?
  • On pricing: How do you think about pricing for proof-of-concepts (POCs) and pilots? How do you price for different tiers of customers? How do you think about New ARR vs Renewals ARR?
  • On marketing: How is your marketing team opening up top of funnel pipeline with demand gen and qualifying leads for your sales team? How is that handoff? How do you think about category design against existing leaders?
  • On POCs and deployments: how is your team set up to handle implementations and roll-outs, and post-sales customer success to support accounts and proactively reduce churn?

So is a Seed II Round Right for You?

With the fundraising climate changing and favoring a $2.5–3M Seed II round before a bigger Series A, the time has never been better for an enterprise startup to use this round as a way to close more customers, refine product, and test more GTM motions. There is more room to prove out your enterprise business and boost traction metrics for a big Series A (and offset some of the Seed II dilution).

Lastly, find a VC partner who can catapult you past competitors. We pride ourselves here at Work-Bench in focusing on two key parts of the hustle:

(i) strategic and critical customer introductions (as we like to say, customers are oxygen to enterprise startups at this stage)

(ii) and leveraging our GTM network of operators, advisors, and founders who can share the real talk around pricing, category creation, top of funnel marketing, and more. Find a VC partner who looks at your accounts list like you do 💪

Best of luck!

Thinking about raising a Seed II round? Selling to enterprise customers in NYC? Curious about anything related to enterprise GTM? We’re always happy to chat here at Work-Bench and share our experiences as an enterprise-focused VC fund.



Jessica Lin

co-founder & VC @Work_Bench | GED educator | rethinking work