Entrepreneurs Need To Beware Of These Pitfalls, Once They've Raised Funding
Question: What is the number one mistake most entrepreneurs make after closing a big round of funding?
They Don’t Make A Funding Game Plan With Their Investor
“The time immediately after you close your round is the best time to build a plan with your VC or investor how they can be helpful as you move forward. While this was likely discussed, the best time to actually define the plan with deadlines is right after the deal. That’s when the optimism and excitement are up.”
ANDREW THOMAS, SkyBell Doorbell
They Don’t See the Big Picture
“If you’re an entrepreneur who has bootstrapped and used every penny to get the business off the ground, it’s hard to change your mind-set to see the big picture. For a while, you’ve been focussed on small tasks that get you to the next step. The luxury of funding is that you can now focus on the big picture of your company — the one that’s going to take it global, not local. Don’t let this slip your mind when you close a round of funding. “
BROOKE BERGMAN, Allied Business Network Inc.
They Don’t Get Back to Work Soon Enough After Raising Funding
“Too much money gives entrepreneurs an unrealistic idea of how well their company is doing. Whether the work is taking the new funds and going into customer acquisition mode or leveraging funds to move to the next round, it’s critical that an entrepreneur get over the big rush of closing a fundraising round and get back to business. Build the business you’ve promised investors you would with their money.”
CHARLIE GILKEY, Productive Flourishing
They Forget Investor Communications
“I hear from investors that, post-funding, many entrepreneurs forget about maintaining investor relations and communications. Leaving investor relations as an afterthought post-funding is a rookie error. It is critical after successful fundraising to keep your investors in the loop regularly, so they can support your strategic and tactical goals in revenue growth, team expansion and subsequent funding.”
They Don’t Build A Public Relations Campaign
“You’ll need to advertise your success in securing funding. This will help you in your recruiting efforts, and may assist with attracting new investors in the future. When applicable, partner the PR campaign for your funding with the launch of your product for added effect.”
ANDREW SCHRAGE, Money Crashers Personal Finance
They Take A Larger Salary After Raising Funding
“One of the quickest ways to dilute VC money is to start paying yourself and others a lot more. The reality is that there should not be a big pay day until you sell your company, not before. Do not allow a round of venture capital tempt you to act as if you’ve sold your business and are all of a sudden liquidated. Pay yourself only enough to be comfortable and no more.”
They Over-Celebrate
“Celebrating is important to do for many milestones, such as obtaining new clients or finishing a new development, but celebrating after you get funding can be dangerous to your success. Funds are typically meant to accelerate things or reach goals, which does not leave time to relax. The moment you receive funds you need to take action to execute plans that use the money efficiently.”
They Expend Funding On the Wrong Things
“It’s easy to want to go out and get the nicest office etc. However, you should view money like you’ll never see it again. While it’s important to use the money you have as a tool, you should also guard it, because you really don’t know if you’ll see it again. Use your investor’s money wisely.”
[This post first appeared on the Business Collective – an initiative of Young Entrepreneur Council, which is a free virtual mentorship programme that helps millions of entrepreneurs start and grow businesses.]
