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.