You finally have an investor. Congratulations, now the tough part of spending the cash begins. It’s time to sit down, plan the next couple of years and allocate that cash in the right places to help your startup grow. But where should your priorities be?
Before we look at the options we need to make an important point – ideally, the spending plan will have been thrashed out long before you secured funding. In fact, knowing where you plan to spend the cash is an essential part of your business plan and key part of securing an investor. Few investors will be willing to hand over capital without a discussion about where it will be spent and approving a provisional budget.
So what should you tell them? This varies depending on your own business priorities. But pretty much all entrepreneurs, despite investment, still have to walk the line between being frugal and being efficient. A deep understanding of your funding requirement is essential. Here are some key areas that are essential to almost all business development:
Product development – You may well have received funding off the back of a prototype. It’s time to take that to the next level. This could be through extensive testing, adding features or broader deployment of your product. Ultimately, having the next iteration ready to show the investor is likely a top priority.
Marketing and branding – If your product is in good shape, it may be that the money can be spent on making it attractive to your key market. This may mean engaging in extensive market research to strategically position your brand, or building a PR campaign to launch your product or new features. In the UAE 56% of consumers expect to feel like the brands knows them personally – how can your brand build this kind of relationship?
Sales – One of the most important things for investors is your traction, so dedicating some of the funding to increasing your sales funnel makes a lot of sense. This requires being customer-centric, to create a feedback loop to understand what works and what doesn’t, hiring the right people, investing in the right tools to reach your target audience and convert them into customers.
Staff – An expanding company needs an expanding workforce. But where will the priorities be? Often startups recruit with the three points above in mind. This means hiring in product development to enhance your offering, or in sales and marketing to increase ROI. Despite funding, you’ll still be hiring on a budget. So to attract and retain the top talent you’ll need to think about what perks you can offer, such as stock options, flexible working and career progression.
Financial and legal services – Sometimes the boring stuff is the right stuff. Accountants and lawyers can be expensive but often vital to making sure your business is secure. You may need to invest in the right accountancy software, securing your IP, and writing up contracts.
Whatever you choose to do, always double-check your business plan and determine if it fits the budget. Also try to stay away from things that are not priorities, like fancy office space or furniture. If in doubt, ask your investors for their advice.
And that wraps up our third blog in our four-part series on startup funding. To stay up to date on all our content, do check out our blog at www.dtec.ae/blog.