Top Silicon Valley Startups and Ways They raise Capital

Regardless of your field or industry, it’s difficult to get investors interested in your startup. Raising capital from angel investors and venture capitalists is hard because there are many other startups trying the same thing.

Even when you succeed in getting investors to look at your company, they are looking for ways to make a profit. Succeeding at a time when venture capital funding for startups is more competitive than ever before, and afterwards as well — that’s another story.

In this blog post we will cover several secrets of successful silicon valley startups (now unicorns mostly) that raise capital from venture capitalists.

We will also share details about how these startups approach investors in Silicon Valley, how they invest their money, and a few key takeaways of their fundraising process.

What makes a successful startup?

Successful startups can be identified by the quality of their teams, the traction they have achieved, the stage they are in, the amount they have raised and similar factors.

But there are other things that can help you identify silicon valley startups, and it all comes down to the founder and their drive and obsession. Successful founders of silicon valley startups are obsessed with starting and building a successful business.

They focus on customer needs and don’t let anything get in the way of reaching their goal. Founders who don’t have this obsession can negatively impact the success of the company.

So, what does it take to make a successful startup? Let’s look into a few success examples within the Silicon Valley as the leading startup ecosystem in the world.

1. Dropbox

Dropbox, as one of the most successful silicon valley startups, was founded in 2007 by Arash Ferdowsi, Drew Houston and Paul Buchheit. At the time, there was no cloud storage, and the primary way to store files was to upload them to a server somewhere.

The $500,000 seed round was achieved through angel investors who were interested in the product and saw potential in the startup. The Dropbox team also received an early round of angel funding.

In November 2009, Dropbox raised $2 million in Series A funding led by Andreessen Horowitz. Then they raised an additional $6 million led by Sequoia Capital with the valuation of $30 million. Lastly they had a massive Series B round where they raised $250 million led by Index Ventures in 2011.

The problem with Dropbox, as Drew saw it, was that people were unable to grasp the value of the service at first. To help people get on board, he made a simple and enjoyable demonstration video in which he spoke to the audience in an authentic and humorous manner.

This demo video was indeed their Minimum Viable Product (MVP) and attracted more than 100,000 people to sign-up for their service which was a massive traction for a startup at the time.

2. Netskope

Netskope, as one of the most successful silicon valley startups, is a management software company that helps enterprise marketing teams manage their digital marketing activities. The founders, John Malarchar, Paul Lee and Brandon Cooley, saw the need for a better tool for managing digital marketing efforts.

So in 2014, they built one — Netskope. The $500,000 seed round was achieved through angel investors who were interested in the product and saw potential in the startup. The Netskope team also received an early round of angel funding.

Netskope has had several fundraising rounds starting from Series A with $5.5 million led by Social Capital in 2013 until Series G with $340 million led by Sequoia Capital in 2020.

Netskope has relentlessly worked with its clients on their digital transformation journey to make it a success and has incorporated their feedback and data received from their surveys successfully in their services (source).

3. TripActions

TripActions, as one of the most successful silicon valley startups, is a travel technology company that offers an online vacation marketplace. The founders, Martin Huseby, John Svendsen, and Anders Svendsen, saw an industry plagued with high costs, high customer service issues and a lack of transparency.

TripActions used to merge merged many aspects of corporation trips booking with expense tracking prior to the pandemic. TripActions was one of the startups that was severely impacted by the COVID-19 epidemic forcing them to layoff nearly 300 employees.

At this point, TripActions had to accelerate its fintech expense product, TripAction Liquid, that was just launched a month before the pandemic. As a result of the worldwide pandemic, employees became increasingly digitized, making spend decisions outside of the office, and more merchants began accepting digital payments.

Reportedly, the company has raised $275 million in a Series F “growth” funding round at a $7.25 billion valuation in 2021 thanks to its pivot broadening the type of expenses employees could submit.

What do we learn from these three journeys to raise capital? Let’s summarize key takeaways.

Key takeaway 1: Don’t be afraid to pivot

Pivoting is a critical part of any startup’s growth strategy. In fact, the best-performing startups in the world are the ones that are most nimble and flexible.

As we learned from TripActions case study, you need to be willing to try new things and even change your direction if you see an opportunity to grow your business. The data or information you have collected until that point from the market, customers, competitors and investors can be a great source of the future direction of the company.

If you have an idea for a certain type of business, but then find that the market is not yet ready for it, you can still pivot by creating a product or service that fits the market need.

Key takeaway 2: Be obsessed with data and user feedback

It’s important to stay focused on your customer needs and what is currently missing in the market. No matter what topic you’re researching, there will always be a key factor missing and data from the market and customer could point you to the right direction.

Keep an eye out for that, and also look for ways to improve your product and make it better for your customers. As in the case of Netskope, it is very important to relentlessly focus on customer need and even go an extra mile to “impress” your customer.

We very much agree with this quote:

“Customer service shouldn’t just be a department, it should be the entire company.”

Tony Hsieh

It’s also important to listen to customer feedback. If there is anything your customers dislike about your product or service, you should try to fix it as soon as possible.

Key takeaway 3: Demonstrate business progress and traction

You can’t just tell investors that your company has traction, you need to show them how effective your marketing strategies are. Actions and results speak much louder than words particularly when facing high uncertainty of startup investment.

As we learned in the case of Dropbox, a clear message targeted to solve customers’ problems and simple MVP can go a long way to attract customers. customer traction is an early yet strong proof for investors and to build much-needed legitimacy for startups.

In addition, strong traction can help to build a customer-base for the future that is crucial in the growth phase of a startup.

You should measure your marketing strategy using specific metrics and track them using analytics software. This will show you exactly where you need to improve your marketing to reach your target audience.

Conclusion: Silicon Valley Startups are obsessed with improving their user experience

If you’re struggling to raise money, it’s easy to fall into the trap of believing you’re doing everything right and just need a little bit of luck.

But usually that’s not the case. You need to make a series of calculated decisions before you’ll have any chance of raising money from investors.

These decisions won’t always be straightforward — but they will always be worth making. We summarize three important takeaways (pivot, feedback, and traction) that we draw from three successful startups (Dropbox, Netskope, and TripActions).

These are important lessons that we believe could help your startup to successful raise capital and grow.