What You Need to Do After Receiving Funding
For a business to scale, it often necessitates external capital investments. Finding the right partner can be a herculean task—they must believe in your long-term strategy, have the funds to justify the investment, and align with your business vision.
But let us say that you have conducted a successful seed round and now there are funds burning a hole in your business bank account.
Do not pop the champagne quite yet. Yes, it is a milestone worth celebrating. But, you have not reached the finish line yet—it is just one of many monumental steps on the path towards startup success.
Today, we’ll discuss what to do after funding.
What type of funding did you receive?
Raising money occurs at several stages in a business’ lifecycle. Where you are in the process will very likely impact your decisions going forward. Seed capital typically comes in one of three stages:
- Series A – In the development stage, there may be a buzz around the business, but the company is still identifying how to monetize. It usually involves funds ranging between $2 to $15 million, which is often provided by VCs or angel investors.
- Series B – For companies past the development stage, Series B is used to scale the company to meet increased levels of demand. Typically this is between $30 to $60 million in investment.
- Series C – This is for successful companies that need further capital to develop new products, acquire new companies, or move into new markets. This usually involves funds in the hundreds of millions of dollars.
For the sake of brevity, let us assume that you have recently received your Series A. If you are past that point, you should already have a detailed plan for how and where to direct the funds.
Press Pause on Hiring at First
Your first inclination after receiving funds may be to immediately go out and hire new talent. Having the funds to bring on a new round of hires is one of the primary reasons businesses seek outside capital investment, after all.
So, it may be a natural response—it may even be the right one.
However, before you start interviewing candidates, breathe. Wait for at least a few weeks. During this time period, you can properly evaluate what growth looks like for the business. That could mean more workers. Or, those funds may be better directed toward infrastructure.
Naturally, the answer to this depends on your business and its specific needs. Some companies want to be able to hit the ground running. Thus, they begin adding new members as the fundraising process comes to a close. But, for others, that may not be the best course of action.
By taking a moment before you make a decision, you can help alleviate some of the pressure to grow, and do so rapidly. This will also ensure that you do not hire the wrong person for the job simply because you are in a rush to fill a spot.
Assess Your Situation
Receiving your Series A is not the end goal—it is a stepping stone. And to acquire that money in the first place, you typically have to demonstrate that your business plan and current structures are worth believing in.
That said, now that you can take a moment to breathe, your first task should be to evaluate where to prioritize funding.
While this self-analysis may have already been conducted in some capacity, it is important to take the following actions:
- Determine your industry standing by benchmarking your good or service against competitors within the market
- Evaluate your business practices and identify strengths and weaknesses
- Take stock of your marketing and sales processes
- Project future growth
- Assess your management team
Performing this due diligence empowers your team to act purposefully and intelligently. It makes it easier to direct funds where they are most needed.
In the early stages of a company’s growth, people wear many hats. Typically, the focus of the company (and its employees) orbit what the immediate demands.
In the beginning, it is paramount to hire a “jack of all trades.” But as the company matures, it necessitates dedicated specialists.
One of the most beneficial aspects of funding is it allows you to hire specialists to man the business gaps and take the burdensome, time-consuming tasks otherwise taxing your “ace” employees. By freeing up current team members to focus on fewer tasks, you optimize the company and allow everyone to focus on where they can provide the most value.
For instance, oftentimes the CEO will play the role of accountant, controller, and CFO—all in one. While this may be manageable in the beginning, the larger the business grows the more complex the books become.
Eventually, you will need to hire an account, or a CPA who is trained specifically to keep and maintain financial records. And as you grow, one accountant will become two, then three, and so on.
After a certain stage, you will require a controller to oversee the accounting department. And as you keep scaling, you will inevitably need a CFO to drive the company’s financial performance onwards. As your business grows, your departments evolve in tandem.
Keep Your Investors Involved
In the run up to funding, you spend a significant amount of time and effort talking and gameplanning with investors. Whether it is phone calls, messages, Zoom meetings, or in-person collaborations, there are scores of conversations talking strategy and long-term plans.
But then, after the money is acquired, they might receive radio silence—that collaborative time tends to reach a natural lull once the deal is done. Do not let that happen! As Inc.com notes:
Make your investors part of your tactical decision-making process. We scheduled the first official meeting four months after closing. That was too late. In those four months, we lost at least two months of valuable time where they could have helped make decisions and make a positive impact.
If you have partnered with the right team, you are not simply benefiting from their money. Rather, they are also offering their expertise.
CFO Hub—Helping You Hire the Best
When it comes time to direct your newly acquired funds to the next round of hiring, it is important that every hire is perfectly positioned, compatible, and showcases the dexterity your business needs to thrive in this next era.
And whether you need part-time services or long-term employees, CFO Hub has you covered.
By working with us, you gain access to a team that’s built specifically for your company’s needs. No matter where you are in your business lifecycle, we have the resources you need to keep the company in balance or scale it into the future.
As for all the action points above, our CFOs can help you create an allocation strategy so you’re utilizing every cent of your fundraising round for growth and stability.