5 Steps to Take After You Raise Startup Capital

Read the headlines and you'll come to realize that a lot is written about a startup's fundraising process, but what about post-funding? Once you have the money, what...

Read the headlines and you’ll come to realize that a lot is written about the early-stage fundraising process, but what about post-funding? Once you have the money, what do you do?

In late 2011, we raised $1M from Crosslink Capital, and spent most of 2012 deploying the capital to hit major milestones. Thanks to solid advisors, we’ve put together a real plan to hit profitability and grow the company.

While I have not raised funding a bunch of times, my advice is gathered from people I trust who have raised various stages of capital. If you just raised VC funding (or are preparing to start), here are 5 critical fundraising steps that should be on your radar:


1. Ramp up your hiring process.

If you did not run your hiring process in parallel to your fundraising efforts, hurry up — you are already behind. However, running your fundraising process in parallel to hiring efforts is one of the most nerve-wracking things you’ll do.

You have to have the confidence that you can close the hiring process, and convey 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, except the product.

I’m not a human resources expert, and I haven’t done extensive studies on intrinsic versus extrinsic employee 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 not likely sustainable to begin with. For example, we were able to use Craigslist to find three 20″+ monitors and three external keyboards and peripherals for roughly $300 (i.e. from a company that was winding down). Our office rent is $800 per 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 the success of an early-stage business.


3. Spend a lot on product – the one area where you can’t be cheap.

For example, 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 our location (i.e. San Francisco, CA), we have to spend money on product – there are no two ways around it. The average engineer at Twitter makes $114k annually 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 (e.g. which is all we run at the moment).

Remember that every customer acquisition initiative has some sort of cost – paid advertising or not. The bottom line is this: 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.


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. This article was adapted from the author’s blog on Quora.


© YFS Magazine. All Rights Reserved. Copying prohibited. All material is protected by U.S. and international copyright laws. Unauthorized reproduction or distribution of this material is prohibited. Sharing of this material under Attribution-NonCommercial-NoDerivatives 4.0 International terms, listed here, is permitted.


In this article