This video explains what happens after a startup raises money, focusing on post-funding expectations, financial management, and planning for an exit. It advises against overspending and emphasizes the importance of refreshing budgets and understanding financial projections to ensure the company delivers on investor expectations and achieves a successful exit.
What this video covers
Raising money is not a milestone. It’s a stepping stone because after you raise the money, then you need to deliver. There are expectations, and you need to follow through. In today’s video, we’re going to be breaking it down for you and giving you guidance so that you understand what happens after you get that money in and you’ve closed your round of financing. So, with that being said, let’s get into it.
In many instances, unfortunately, you see companies that start spending, spending, spending, they lose grasp on the numbers, and they end up going out of business. They realize they’re running out of money faster than they thought. You do not want this to be your case, so that’s why it is time to refresh the budgets and to understand the numbers moving forward.
Now, you’re going to need to plan your path to the exit. The investors are giving you the money because they want the money out with returns over the course of time, whether that is three years, five years, or seven years. But they are expecting that you are going to go through a liquidity event, which is what is going to give them the money back with returns.
Then, you need to get very good at investor updates. Entrepreneurs make the mistake of raising money, and then they neglect the investor. They forget about their investor. Then, they make the mistake of going and calling that investor when they need more money. Then, it takes time to get them up to speed, to catch up with them, so that they know what’s going on, and that’s a mistake.
In many instances, those investor updates are going to help you over time because one of those investors may get excited with how you’re executing, and they may preempt a potential financing round where they say, “Look. She is executing very well on the promises that she made. So, I’m going to jump in, and I’m going to lead this round because this company and this team has potential.”
Investor updates are really fantastic, and then they’re going to also help you a lot when you need people to give you their signatures. Whether you’re going through a subsequent round of financing or whether your company is getting acquired, if you’ve done a good job with the investor updates, you’re not going to have to spend time and time on the phone with people to help them understand what’s going on with the business, which is going to slow you down where you’re trying to chase everyone for signatures and getting those very quickly. So, investor updates are a critical component.
Now that you have the money, you want to start hiring. Don’t go too crazy. You can actually use tools like Upwork, where you’re getting people where you don’t have to get the full-time engineer, or the full-time financial modeler, or whatever that is. Use tools to help you in reducing cost.
You’re also going to need to get your team refocused. Remember, every company goes through different phases in their lifecycle. Every lifecycle and every phase go in parallel, too, with the financing cycle that you just did or that you have in front of you.
For this specific reason, you’re going to have a different set of milestones to get to the next phase, to unlock that next phase. So, it is time to regroup with your team and to get aligned to understand what needs to be done in order to unlock that next phase of the journey of your business.
Get your marketing and sales team ready. You’ve obviously been doing a lot of bootstrapping before, which is basically trying not to raise any money and use customers’ money, and you’re like, “I’m moving the wrong direction,” and you die. Now, you don’t have to try to find the organic growth.
Start raising the next round because many, many times, you need to know that it could take longer than what you anticipated. It takes time to build trust. So now that you’ve disclosed the money from a specific set of investors that were interested in investing in a company at your stage, now you’re going to have to target a completely different scope or profile of investor that is going to be at your next stage.
