5 Things to Do After You Raise Startup Capital

office. view on the desktop and monitorA lot is made of and written about the fundraising process, but what about post-funding? Once you have the money, what do you do?

We raised $1M from Crosslink Capital in late 2011, and spent most of 2012 deploying the capital to hit major milestones.  Thanks to some solid advisors, we’ve put together a real plan to hit profitability and grow the company at a terrific rate. Huge tip of the hat to Crosslink Capital, our lead investors, for being very involved in this process.

This post covers some of that advice, and I’ll probably periodically refer back to it to remind myself what everyone told me along the way (so I don’t forget what I have to do).
While I have not yet done this a bunch of times, my advice comes from people I trust who have. If you've just raised funding (or are preparing to), here are 5 next steps to put on your radar now:

  1. If you did not run your hiring process in parallel, hurry up -- you are already behind. Running a fundraising process in parallel of a hiring process is one of the most nerve-wracking things you’ll do. You have to have the confidence in yourself that you can close the process, and convey that confidence to prospective candidates. It takes at least one month to hire qualified non-technical hires, and two months to bring on technical hires. We were able to add a Ruby engineer and two account managers while the fundraising process was coming to a close.  It’s a fine line to walk, but now we have a team ready to go, and we can keep advancing toward our milestones.
  2. Be cheap (on everything but product). I’m not an HR guy, and I haven’t done extensive studies on intrinsic versus extrinsic motivation, but if your employees need fancy desks, chairs, and an office like Don Draper’s, you are doing it wrong.  The work itself should be motivating and interesting enough to keep employees engaged – if it’s not, the company is likely not sustainable to begin with. We were able to use Craigslist to find three 20"+ monitors and 3 external keyboards/mice for roughly $300 bucks (from a company that was winding down). Our rent is $800/month and can house four people in prime real estate in San Francisco's Financial District (also thanks to Craigslist). Saving on the unimportant stuff means so much to success of an early-stage business.
  3. Spend a lot on product – the one area where you can’t be cheap. We are re-building our product from the ground up, and that’s where most of the investment capital will go. We are rebuilding for scale, and have a couple of great folks working on it at the moment. Because of where we are (San Francisco), you HAVE to spend money on product – there are no two ways around it. The average engineer at Twitter makes $114k/year and even more at Facebook. To get the best product talent, you need to spend.
  4. Don’t blindly throw money at advertising. Unless a marketing initiative is measurable, you should not be spending money on it, period. For example, before you run a pay-per-click ad campaign, have Google Website Optimizer code ready to go, thorough keyword research complete, and a clear sales funnel to acquire customers. Rinse and repeat for any type of marketing campaign, including email campaigns (which is all we run at the moment). Remember that every customer acquisition initiative has some sort of cost – paid advertising or not. Bottom line: Unless you can clearly measure customer acquisition cost, you’re not ready to run paid marketing campaigns.
  5. Time is money, so spend it wisely. Time is the most valuable commodity you have in a startup, so focus your time and energy on high-ROI activities. For example, don't get caught up in sales calls with third-party vendors who are just trying to get a piece of your money (and there will be a lot of those). And don't take every meeting.

This post was adapted from the author's blog on Quora.

Sunil Rajaraman is the founder and CEO of Scripted.com, a marketplace for businesses to hire freelance writers. Scripted.com has a pool of 80,000 freelance writers, and ranks as one of the top five largest writer communities on the Internet. Scripted.com currently provides hundreds of businesses with thousands of blog posts, tweets, press releases and articles each month.

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.

About Sunil Rajaraman

Sunil Rajaraman is the founder and CEO of Scripted.com, a marketplace for businesses to hire freelance writers. Scripted.com has a pool of 80,000 freelance writers, and ranks as one of the top five largest writer communities on the Internet. Scripted.com currently provides hundreds of businesses with thousands of blog posts, tweets, press releases and articles each month.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>