So You’ve Raised Seed Investment For Your Startup, Now What?

So it finally paid off — all those endless sessions on strategy, countless hours of talking potential clients into getting on board with you, and numerous sleepless nights working on kickass investor pitches have finally come good. You got funded!

You’ve raked in that much-coveted initial seed round, and that should count for something because many people don’t even get that far. Slow down, relax, take it all in, breathe. If you pulled it off, it means you’re getting something right. So pat yourself on the back and bask in the euphoria.

Done drinking it all in? Now, let’s get back to reality. For a first-time founder, contrary to what you may think, closing your first funding round often spells the beginning of the struggle. While this may come across as a somewhat pessimistic and jaundiced view, it is often the case in reality. And reality hardly ever tastes like strawberry jam.

So instead of getting overly caught up in the success of your first seed round (which is no easy feat by the way), now may be a good time to return from cloud-nine and roll up your sleeves in the realisation that you’ve only gotten more work cut out for you from this point onwards.

As a first time founder who has just secured seed funding, the stakes couldn’t be higher as there is a lot at play. Fail here, and it would seem like months, if not years, of your life, go down the drain — lots of effort wasted on something that ultimately proved a fiasco. Worse still, bowing out at this stage will be tantamount to tossing into the garbage can the confidence reposed in you by the very investors to whom you pledged to come good. Now, that’s not a good look, and nobody wants to be in that position.

Many times, this post-seed stage is marred over-hiring or under-hiring and some other poor decisions on the part of many startup founders. Here’s the thing; yes, you’ve probably raised a substantial sum but it is advisable to recognize that building a great business really has nothing to do with relocating your business to a fancy new office in the chic part of town with crazy rental fees or bringing on board more hands than you can cater for. More so, while enlisting the services of a top-notch CTO sounds like a plan, it is probably not the best move if the take-home annual salary demand is hovering around USD 80 K annually and you are yet to validate your product concept adequately. A couple of poor decisions like that and you are already faltering on steadying the ship, not to mention seeing that Series-A.

It’s easy to find people talking about how to raise money, but when the discussion is centered around what to do with it after you’ve gotten it, it is hardly the same story. There is a lot of fuss about the fundraising process, but how about post-funding? Once you have obtained the money, what do you do? This ought to be given importance too as it largely determines whether the entire funding-raising process was worth it in the first place or just an effort in futility.

As a famous cliche points out; you truly do reap what you sow in seed rounds. And with that in mind, let’s walk through a few key actions that when applied correctly can slow burn rate and make sure that hard-won capital is being spent intelligently towards effectively growing the business.

Make The Most Of Your Funding Announcement

Making the most of your funding announcement entails two things; expressing gratitude to key players and leveraging the investment for publicity. It’s natural to want to grab the spotlight and dive right into the logistics of spending your investment, but take a moment to recognise the contributions of others. Be it through a thank-you-note, a happy hour, or an elaborate dinner; it pays to show appreciation with a heartfelt message as it reminds those around you of their value.

On the other hand, the successful closure of your funding round is an opportunity to draw attention to your company, and you don’t want to do a botched job or make a mess of this all-important detail. And that’s because it doesn’t come very often. That said, you need to make a splash with the announcement of your funding either by dropping it like it’s hot with an immediate announcement or by waiting a little longer to make the announcement coincide with a product launch.

Whichever you choose to go about it, work out a strategy with your team that will maximise press impact. Hiring a PR agency or consultant is not a bad idea if you don’t have a team member with some experience in publicity.

 

If You Did Not Run Your Hiring Process In Parallel, Get To It Immediately!

Juggling a fund-raising process with a hiring process is not an easy task. In fact, it is as nerve-wracking as it is mind-boggling. Somehow, you have to work yourself into a mindset where you are confident of putting pen to paper with the investor. And it doesn’t stop there. You also have to convey that confidence to prospective candidates.

On average, at least one month may be required to hire non-technical staff and for technical hires, two months is more like the case. So you have to keep this in mind and have a team ready to go even though it seems like a fine line to walk. To advance towards those milestones quickly, there should be no stalling and having your team ready could go a long way.

 

Be Cheap On Everything But Product

As has been earlier mentioned, being in successful in business does not require that you move into a plush office with fancy desks and chairs. Of course, it is essential to keep up appearances and embellish image with both customers and employees in mind, but not if it is going to run the business down. Perhaps there is still a lot to be discovered in extensive studies on intrinsic versus extrinsic motivation, but the important element is making the work itself motivating and interesting enough to keep employees engaged. Going overboard with expenses on things like rent and peripheral equipment/facilities is likely to erode the sustainability of the business. Don’t go on a mindless shopping spree, seek out bargains on this front, reach a compromise if you have to. Saving on the unimportant stuff means so much to the success of an early-stage business.

 

Spend A Lot On Product – Don’t Compromise Here

This is definitely one area where you can’t afford to be cheap. Leave no stone unturned in building a kickass product from the ground up if need be. A significant chunk of the investment may go into this but rest assured that you’re on track. You might need to rebuild for scale and get a couple of great folks on the project, but it’ll be worth it. These days, you have to spend a lot to build a great product. So don’t settle for less, go all out. As the saying goes; a good product sells itself, so strive for the best. That way, you are already on your way to building a successful startup; one that investors will be happy to have rooted for and can attract more investments in the future.

 

Don’t Blindly Throw Money Around On Advertising

Don’t put your hard-raised money into any marketing initiative that is not measurable. Period! Don’t just jump at popular ideas just because everyone is talking about it and doing it. Before running a pay-per-click ad campaign, for example, you need to first do your homework by taking care of such details as Google Website Optimizer code and keyword research. Also, you ought to have a clear sales funnel to acquire customers.

You might need to tweak the setup somewhat but maintain the overall strategy for all marketing campaigns. And always remember that some kind of cost is attached to every customer acquisition campaign, be it paid advertising or not. A premium is placed on measuring customer acquisition cost; you can’t be running paid marketing campaigns if you’re not ready to do your homework.

 

Protect Yourself And Your Company

Hiring a full-time financial officer may be a bit too much at this stage so you might need to find a third-party accountant that can help you properly manage your finances.

It is also vital that you take care of legal logistics. Ensure that the terms of service and privacy policy of your product are up-to-date. You should also see to it that employees sign reasonable non-disclosure agreements and letters of employment.

Carefully and accurately document your capitalisation table and share everything your investors need to know. Also, issues bordering on patents should be discussed with a patent attorney. That way, you will be plugging all the holes and safeguarding your business for the storm that will almost inevitably come.

 

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