How Startups Can Make the Most Out of Their Investment Funds
If you’re a CEO of a startup or you’re involved in strategy and planning for one, you probably know what it feels like to find out that an investor is confident in the profitability of your business model and wants to invest a sizable amount of money into your vision. It’s exciting, but it can also be very nerve-wracking.
Often, the joy that comes with receiving an investment can be hampered by worrying thoughts: maybe you’re left hoping that you don’t spend all that investment money on the wrong things, or you’re concerned that you’ll blow through it too fast. If you’re in this predicament right now, don’t worry - we’ve been there before. Below are some suggestions on how to make the most of your investment money.
Step 1: Don’t Panic
Now that your company has received this investment, how do you ensure it’s being spent wisely? The very first step is also the most important: don’t panic. Yes, really! It’s interesting sometimes to see how a large chunk of money, which is supposed to open doors and be a gateway to new possibilities, can lead to stress, confusion and even a total breakdown of what was once a cohesive, long-term growth strategy within a company. At this exciting moment in the startup timeline, it’s absolutely crucial for you to stick to the strategic plan that was set in place beforehand.
Step 2: Stick to the Basics
What does that mean in more concrete terms? Don’t be too quick to increase your own salary or those of other C-levels within the company. Don’t move to a bigger, stylish office building unless it’s a part of your brand positioning strategy or due to capacity issues. If your existing products still have room for improvement, don’t spend money on any high-tech, conceptual “nice-to-haves” like that new product idea you always wanted to test out someday.
"DON’T TRY TO CUT CORNERS."
Although it may seem a bit counterintuitive, don’t go the other way and try to cut corners, either, because you definitely won’t maximize your investment to its full potential. Which brings us to our next point:
Step 3: Don’t Assume You Can Do It All Yourself
Accept that your business can’t do everything by itself. In other words, don’t assume that now that you’ve received funding, you’ll be able to manage everything without some serious delegation. It’s a classic rookie mistake: a company receives X amount of funding, the company decides to stretch out the funds as much as possible by stretching valuable resources (like employee time and energy) to its very limit, the company ends up in ruins because c-levels didn’t know how or what they should have been delegating.
Don’t be that rookie: learn to outsource. Managing in-house software teams, for example, can be a massive financial burden, and not nearly as cost-effective as you might think. Consider an app that you’d like to build in-house: not only do you need an entire team of developers on your side to help design and launch the app, you’d also need a team to fix and maintain bugs and other issues as they arrive in the future. Maintenance alone is a long-term commitment that can be very costly, but it’s also a question of quality.
"OUTSOURCE AND LET YOUR INVESTMENT FUNDS TAKE IT FROM THERE."
It’s impossible to match the standards of other large startups if your software’s quality isn’t up to par, whether that means the design, the functionality or both. Don’t assume you always understand all the costs and requirements that are necessary to make excellent software. Outsource and let your investment funds and the agency or partner you work with take it from there.
Take a hint from other companies, like the e-bike startup Bond Mobility, who recently received 20M in funding and decided to outsource their software. Besides, that way you have more time to focus on actually running your startup and creating a long-term strategy for growth - which is the whole reason you were hoping on receiving that investment money anyway.
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