Three lessons from raising Anrok’s Series B

Balancing long-term priorities while navigating short-term market uncertainty in 2024

The past 12 months have been tumultuous for the public markets, and almost every finance leader at a tech company has been affected. The Federal Reserve’s decision to abandon the notion of transitory inflation and consistently raise interest rates has sent shockwaves through the economy, particularly in the technology sector. 

The end to the zero interest rate environment hit technology companies the hardest. SaaS—with its growth potential and recurring revenue base—was once seen as an attractive alternative for investors hungry for yield. With the rise in interest rates, public software valuations have gone through a roller coaster ride.

As we enter the second quarter of 2024, the economic landscape for technology has improved but remains uncertain. The three-month annualized CPI still hovers at 5%, and the Fed Fund Rate has been at 5+% for nearly a year, suggesting that the higher interest rate environment is here to stay. This market dynamic trickles down to private software companies. For many months, it seemed that only startups with “AI” in their name could successfully raise an up-round.

Earlier this year, Anrok raised a $30M Series B from some of the top investors in Silicon Valley: Khosla Ventures, Sequoia Capital, and Index Ventures. 

Anrok is not an AI company in the traditional sense. So, how did we do it?

Here are three lessons from our recent fundraise:

1. Business fundamentals still matter, a lot

In a challenging market, it’s crucial to know what metrics make your business stand out. Whether it’s efficient revenue growth, net dollar retention, or consistent execution quarter over quarter, be prepared to dive deep into the numbers and tell a compelling customer story. A two-page memo is an effective way to provide a story to introduce the metrics and link to the underlying spreadsheets in the data room.

The other big question investors will likely have is customer segmentation. Can you demonstrate that you’re consistently moving upmarket and winning enterprise clients? How do you know your product is ready for prime time?

2. You don’t have to be an AI company, but you have to have an AI strategy 

In a world where the step functions between AI models are truly exponential, it’s essential for founders and their finance leaders to have a clear point of view on why their business not only survives but thrives in an AI world. 

For Anrok, we see our business as the unexpected infrastructure of this growing digital economy. As software continues to eat the world, and AI accelerates this trend, every revenue-generating software company will need to figure out sales tax, and Anrok is here to help.

Beyond market positioning, it’s also important to communicate how AI fits into your operations and product roadmap. At Anrok, the goal is to create an environment where everyone is comfortable using AI assistants to augment operational workflows and build intuition to embed LLMs into the product.

3. Focus on the right partner at the right fund

There are two inputs into a promising long-term partnership: the person and the fund. Focus your time on the people you can see yourself working with in the long run. These relationships matter, whether you’re planning for a raise or find yourself in a pre-emptive situation.

For us at Anrok, it was important to have a partner where we felt like we learned something new every time we met. On the fund, we made sure that every fund we spent time with saw the near future clearly, and was prepared to make contrarian bold bets.

Your fundraise is too important to compromise on either. 

The biggest takeaway from Anrok’s recent fundraising process is that business fundamentals matter more than ever, but so does understanding why your business should thrive in an AI world. Investors are right to focus on this. A lot is about to change. ⊞