Knowing what to do after raising startup capital—and what not to do—can mean the difference between building a great company and running out of cash.
This essential list of post-funding “do’s” and “don’ts” will help you focus on what’s truly mission-critical so you can reach profitability as quickly as possible.
What to do after raising startup capital
DO focus on proving product-market fit
Doing your due diligence to prove you’re targeting the right audience after you’ve raised funding can keep you from wasting money on product features users don’t want or need, and marketing activities aimed at the wrong people.
Look for these signs to help confirm product-market fit.
Exponential organic growth. Your main growth metric should be doubling over equal time intervals (monthly, for example).
Net promoter score (NPS). Favourable NPS results indicate you’ve reached customers who are likely to stay with (and promote) your company.
VIP adoption. Having big or recognizable companies using your software demonstrates product-user fit, which is an excellent indication of product-market fit.
Customer retention. When coupled with metrics showing meaningful usage and growth, retention can be a valuable indicator of fit.
DO use OKRs to set goals
OKRs (objectives and key results) help SaaS startups focus on goals by breaking them down into measurable criteria that track achievement.
Using OKRs to align goals and targets across your company is important for:
- Boosting brand awareness
- Increasing customer subscriptions
- Establishing or expanding a funding network
Once you’ve defined your OKRs, don’t forget to create specific tasks for moving toward them and assign those initiatives to team members.
DO hire the right roles early on
While early-stage founders commonly wear multiple hats, your plan for what to do after raising startup capital should include hiring multi-talented team members to fill talent gaps—and free you to focus on other priorities.
Key roles to hire include:
- A marketing expert to ensure your vision reaches a wide audience
- A talented salesperson to help grow your revenue
- A technical hire who specializes in technology and development
If you lack sufficient funds to support the hiring process, outsourcing non-core functions like HR and accounting will help you access proven third-party expertise while keeping costs down.
DO create a budget to allocate spending
Creating a quarterly or annual budget that breaks down expected revenue and expenses by month is essential for optimizing venture capital spend, improving cash flow, and keeping your startup afloat long enough to reach profitability.
Make sure you:
- Identify top priorities and create your budget around them
- Include some padding for initiatives that cost more than expected
- Funnel excess funds from other initiatives into spending areas that are paying off quantifiably
Using your budget as a financial model to monitor performance will help you meet financial commitments, manage long term costs effectively, and plan adequately for revenue fluctuations.
DO keep your bookkeeping up to date
Keeping your books up to date is essential for making smarter business and budget decisions. By investing in a cloud-based bookkeeping solution or part-time bookkeeper, you can:
- Gain clear visibility into your revenue and expenses
- See where money in the bank is going daily, weekly, monthly, and quarterly
- Use historical financial data to build cash flow forecasts
Outsourcing your bookkeeping is a great way to save time and money while eliminating the worry of having to build your own processes or manage your day-to-day numbers. Plus, by ensuring your books are reliable, you’ll inspire greater investor confidence when you need future funding.
What not to do after raising startup capital
DON’T utilize funds too quickly or slowly
After raising money, venture capitalists and other investors will want to know how you’re spending their funds.
- If you deplete funds too quickly, you may have to raise an emergency round. This can erode your success prospects and lead to unfavourable investor, partner, and employee relations.
- If you’re too conservative with funds, you may struggle to achieve the growth needed to impress lead investors. This can ruin your chances of securing future funding.
Your best course of action when determining what to do after raising startup capital is to realistically align goals with spending, track expenses as they occur, and aim to spend less than 10% of your capital raise monthly.
DON’T overspend or underspend
There’s a fine line between overspending and underspending.
- Your startup could be overspending—and on a fast track to running out of funds—simply by purchasing Salesforce when you only need HubSpot, or hiring a CFO when all you need is a solid bookkeeper.
- Being overly frugal on the other hand—by refusing to make a critical hire, or consistently adopting cheaper processes—can consume valuable time and damage your product or company image.
Since both overspending and underspending can undermine critical growth, it’s best to create a detailed spending plan, complete with milestones and workback schedules.
DON’T spend without structure
The last thing your startup should do is spend money on initiatives that are likely to yield only marginal returns.
Here are some examples of oversights that could cost you:
- Running campaigns without being able to measure customer response through A/B testing
- Investing in sales before proving product-market fit
- Spending on ads or pitch decks without the infrastructure to nurture prospects
- Recruiting team members without any real plan for their daily work or training
The best way to avoid pitfalls like these is with a structured planning process that ensures you and your team are thinking holistically before spending valuable dollars.
With the future of your startup riding on how effectively you manage, spend, and save the funding you’ve raised, establishing the right priorities and processes as soon as possible is critical.
That said, solidifying your SaaS bookkeeping is one of the most important investments your startup can make.
If you’re looking for proper financial management—without shelling out the big bucks for a full-time employee—Enkel can help!