Josh Lerner, an investment banking professor at Harvard Business School, told Entrepreneur magazine that 90 percent of new business fail because they bask too much in the glory after receiving initial funding for their new enterprise. A 2013 report by information services firm CB Insights found that startups funded by large venture capital funds in the seed stages are far more likely to get second stage (Series B) funding than those funded by angel investors.

Seed funding comes from numerous sources, and not all of these sources are primarily concerned with turning a profit. Friends and family, along with angel investors, help fund startups based on their relationship with the business owner, not necessarily on the viability of the company itself. Most state and municipal funding sources are concerned with job creation. Venture capitalists, as the title suggests, expect a return on their investments in 10 years or less. Series B funding only comes to businesses that can show long-term sustainability and have reached tangible milestones after initial funding. These three tips will help put your business in the best position for subsequent funding.

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Capillary Technologies, a Bangalore, India-based provider of cloud-based customer management solutions, recently announced it received $14 million in Series B funding mostly from VC firms Sequoia Capital and Norwest Venture. The company, which was established in 2008, has since secured several big-name customers including KFC and Marks & Spencer, the retail apparel giant.

shutterstock_167800616Bark & Co., the New York-based doggie treat delivery service, recently announced $15 million in Series B funding as well. The company credits its 200,000 customers who subscribe to monthly deliveries, as the reason several VC firms willingly contributed to their expansion.

Your company doesn't have to be a multi-million dollar enterprise with big name clients, but it must demonstrate the ability to consistently turn a profit. One way to do this is by generating reports from sales forecasting software that can simultaneously improve your company's workflow. InsightSquared, for instance, can break down revenue data by groups or individual salespeople and determine future performance based on overall close rates.

Presenting concrete data like this to VC firms will also show them your level of organization and commitment, which may be the deciding factor before signing the check.

Minimize Human Risk

When a startup gets off the ground, it is typically run by a CEO and maybe one or two others. That means angel investors who weren't as concerned about turning a profit anyway, only had to deal with one or two individuals. But after a few years of success, your company will likely expand, hire more people and subsequently, bring in more personalities.

Beth Seidenberg of VC firm Kleiner Perkins Caufield and Byers (KPCB), said in a speech at Stanford University that venture capitalists look for five specific qualities in a company before committing funds to it. Strong leadership was the first and most important characteristic. She specifically mentioned John Melo of green technology company Amyris, which KPCB initially funded. Not only is Melo passionate about what his company does, but he is also the unquestioned leader of the firm, she said.

Too many cooks in the kitchen will be looked upon as unorganized, dysfunctional and ultimately, a bad investment. One high-ranking bad apple or partner with vocal views differing from the rest of leadership can completely derail a deal. VCs will sense a lack of control at the top, which is especially commonplace in a startup environment featuring several driven, competitive personalities.

Though these types of personnel moves can be tough, its in your best interest to move on from individuals who may potentially hold the company back. Startups are already a risk in-and-of themselves for VCs. You may not get a second chance at funding once the word gets out that leadership within your company is lacking.

Timing Is Everything

A company is going to be given a monetary value by VCs before they decide to invest. Market and economic conditions will play a significant role as to what the final analysis is.

First, know what a fair value is. There are several free valuation tools, such as this one from BizEx, that you can input figures and calculate an estimated value. There are also companies you can hire to give a specific asset-based, income-based or market comparison-based value of your company.

Strong economic conditions means more investors will be lined up searching for deals. But this can also create a false market that overvalues your company. Once the correction happens, you're stuck trying to make up for the bubble value, similar to what homeowners experienced after the 2008 housing market crash.

The fact you're company survived long enough to demand a second round of funding is an accomplishment by itself. But complacency at this point can quickly change your fortunes.

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