Ask any entrepreneur, and they’ll tell you that getting funding even for the best ideas is no cakewalk. So when you actually manage to strike a deal with an investor, it is no less than a milestone in itself for the startup, since it feels like a new lease of life!
With investment coming in, one can easily feel that they have reached the finish line and have finally made it, but with all the excitement that money brings in, it also raises the bar on expectations and increases the pressure to perform.
Although you might have plans in place already as to how to use this fresh capital, there are some things you should keep in mind (apart from celebrating with your team) to make good use of the investment that has come your way.
For stable organic growth in a consumer-focused venture (linear or exponential), use investor money by investing in building assets. For eg – spend more on technology upgradation; product improvement; R&D; customer care and customer experience. Avoid burning the investors money in customer acquisition or on building volatile assets like GMV, app downloads, traffic to site etc.
OPM – Other People’s Money
Usually, it is tempting to spend any money that you can get your hands on, but just because it’s ‘Other People’s Money’ doesn’t mean that you are not judicious in spending it. Remember how hard you worked to get this money; right from building the product, tweaking business models, networking, pitches etc. to giving a share of your pie to the investor, and therefore, you need to use every penny wisely. It’s easy to go overboard without even realizing it, so make a conscious effort to track your expenses.
Create a detailed plan for your expenses. Prioritize your expenditures and avoid overspending on things that are not needed. Creating expenditure plans will make you look responsible before your investors too and if you want to ensure that your startup is in it for the long haul, try to be conservative with your finances. Don’t go on a spending spree right after you get funding. Stay lean as much as you can and spend when you have to, and no sooner.
ROI – Return on Investment
Always keep an eye on ROI. You need to calculate your ROI on any and every activity that you do, be it hiring,product development, or marketing spend. Don’t lose your focus just because you have recently been injected with cash. The primary responsibility of any entrepreneur is to ensure that they have sufficient funds and expertise to grow the startup from launch to sustainable break–even. Any investor will have a certain expectation of ROI from your startup and these expected returns are the very reason why they have funded you.
If you want to instill confidence in your investors, achieve the agreed milestones with élan. When it comes to goal setting, set goals that are sustainable and don’t bite more than you can chew. Meet or beat your near-term goals, be they in sales, development, or recruiting. Don’t let the investors wonder why they saw potential in you in the first place. Just make things happen. Be clear about what the first 100 days will look like, involve your team members inyour plan, and then deliver. This way you’ll be able to go towards the next round in time, and not get cash strapped.
Don’t forget that getting funding is the beginning of the journey and not the end. It’s time to start sweating again, quite similar to any video game where before getting funding, you were at level zero and now with funding in place, you reach level one, where you need more armor and hard work. The journey is going to be tough but you can thank your stars for the resources, so you can reach your destination.
You will need to stay focused on many things at one time. Always stick to the roadmap that you’ve agreed with investors, unless you both consent to change it. Ponder upon the business plan, the projections that you shared while pitching to your investors and stay true to every word. Delivering on expectations is what separates successful startups from the unsuccessful ones.
With funding, come expectations. It can be easy to forget the specific stipulations your investors provided when they funded your startup and that can become a huge problem if you want to get more funding in future. Maintain a good work environment where everyone, including your team and investors, work in harmony to take your star to the next level.
While you are busy in achieving the milestones, don’t forget to focus on your product, execution and your customers. Listen to your customers and your team members. Be approachable. Above all, communicate well with your investors. Be transparent and upfront, so that you don’t shy from seeking help from your investor(s), in case things don’t go as planned.