Mark Cuban’s advice for startups is that co-founders “should do everything possible not to raise funds. Sweat equity is the best equity.” While I agree with Cuban that nothing compares to sweat equity, growing a technology startup requires capital (and here’s a great overview on how startup funding really works).
After going through a successful acquisition, and now as a startup co-founder, I can tell you there’s a lot to be learned about working with angel investors and venture capital (VC) firms. Whether it’s your startup’s Seed round or your Series A, once the money is in the bank then the pressure is really on.
Taking on millions of dollars from investors comes with an insanely hefty responsibility. The good news is the funding is a good thing because it’s meant to help your company become insanely successful.
For startup leaders and entrepreneurs everywhere, here are five ways to not waste a $5 million investment from your venture capital partners.
1. Make strategic hiring decisions
This seems like a no-brainer, but one of the fastest ways to burn through your cash burn rate is paying salaries and benefits for your employees. Growing your startup from the founding team to bring on top talent requires developing a hiring strategy and sticking to it.
Consider your revenue goals you committed to your board, and the people you’ll need to hit that number. There’s a good balance that needs to exist between bringing on top talent for your C-level executive team, and the individual contributors who will help drive new revenue for your organization.
Look to hire more business or sales development representatives (BDR/SDRs), account executives, marketing contributors, and even an administrative assistant who can help your company to grow from the bottom up. Following these rules of thumb for startup hiring will come in handy.
2. Trying to do everything
With money in the bank, it’s easy for your marketing team to think they can be anywhere and everywhere: attending every conference, marketing to companies of all sizes from SMB all the way up through enterprise accounts… but you can’t do it all.
Your startup’s marketing team must be laser-focused on the most effective tactics and activities for engaging your prospects and customers alike. All your time, energy, and resources should be dedicated to marketing only to the best-fit prospects and companies who will purchase from your startup.
Think about the big moves your company can make to go “10X” or take “massive action” instead of behaving like everybody else and settling for average results.
3. Keeping customers top-of-mind
One of the key performance indicators (KPIs) for your startup is the cost of customer acquisition (CAC), or the amount of money invested in marketing and sales resources to bring on new customers. If your customers are churning before you have time to recoup the CAC expense, you’ve got a big problem.
You’ve got to nail the customer experience from day one. In every action your company takes, you have to remember your commitment to your customers as a top priority. Scaling your company to provide the same white-glove service you gave to your first customer as your 100th customer is hard to do at scale, but it is possible.
4. Selecting the right tools
There are thousands of technology solutions for solving any-and-every business pain, especially for marketing technology. When you have money in the bank, it’s easy to think purchasing software will help fix your business problem, but it won’t replace a lack of strategy.
For startups and early-stage companies, every purchase and small move matters. There are also tons of free software solutions that will also provide indicators if your startup is growing or not.
5. Setting expectations and sticking to them
There are certain traits which investors look for in entrepreneurs, and a big one is to set realistic expectations then meet or exceed those goals. The money you’ve accepted
There are lots of benefits to having a board or advisors who can provide strategic guidance for growing and scaling your business as quickly as possible. You simply can’t afford for your startup to waste millions of dollars in capital.