Sometimes entrepreneurs are extremely focused on raising capital; however, it is at the end of this process that the process of building the startup and the real challenge begins. Having raised capital is only the first step in building the startup, the next step is to carry out the plan to deliver on everything promised in the raising process. Also, unlike capital raising which is a transactional issue, the plan requires management capacity and execution skills.
One of the first elements is to clearly define the budget and have a financial model. If the entrepreneur is not clear about the phases of building the business and the financial requirements to carry it out, it is likely that the resources of the capitalization round will be misspent. It is therefore important for every startup to have an experienced CFO with financial skills to build the business. The CFO’s responsibility is to properly manage the organization’s resources, manage the relationship with investors and foresee the need for future capital resources to continue the startup’s expansion.
The human resource is one of the main elements of the entire organization and a startup is no exception. Hence the relevance of hiring the best talent available at all levels of the organization. In fact, from the moment you are raising capital you need to keep in mind those people who could join the organization to continue to strengthen it. It is important for every startup to have an experienced CTO and to strengthen the technological development of the organization. In addition, a Chief Product Officer is required who could understand customers and convey their needs during the product build. Another important position is the Chief Growth Officer, responsible for product commercialization and economic growth of the organization.
It is important to remember that hiring talent takes time so the earlier you start looking for key people the better for the organization, some founders even start looking for talent at the same time they are raising capital. As a founder, avoid inferiority complexes and hire the best talent. It is better to have the best team in the market than to have only the best founder in the market.
Another element to develop after raising capital is building the product and technology. The product is the most important part of any startup, the difference between success and failure, so do not skimp on resources in building the product, which implies having a team that is adequate in size and financial remuneration. It is not necessary to have the entire business vision incorporated into the product, but it is important that the product is developed with the main functionalities to add value to the consumer.
The operation and management of the resources derived from the capitalization round implies not only hiring the right people, but also the execution of business strategies that allow to really generate value to the organization. It is important to have a solid and robust business plan that allows the business to expand progressively. The business plan must be accompanied by a marketing plan that allows the startup to position itself in the target market. The good performance of both should be reflected in the organization’s KPIs, which could include customer growth, increased sales, user retention, increased average purchase ticket, among others.
Having raised capital allows the organization to have sufficient resources to grow and thus expand its infrastructure such as increasing office space, increasing computing capacity and technology services, as well as investing in fixed assets, furniture, and equipment. As the startup grows, the organization’s infrastructure should grow proportionally.
Some practical tips you can consider after having raised capital are the following:
- Unless you have a startup that has reached break even, you should consider that the capital should last until the next raise. Do not spend it in the first months of operation and distribute it evenly to meet your growth plan.
- Human capital is the organization’s main resource, so invest time and money in attracting, promoting, and retaining the best talent in the organization.
- Learn to differentiate between relevant expenses that really add value to the business and those that are only superfluous and that you can do without at this stage.
- Try to stick to your budget, just because you have a large amount of money available does not mean you can change your growth plan.
- Keep in mind that you have a fiduciary responsibility to your investors. They will be the ones who will continue to support you in subsequent rounds, so spend some time and resources keeping them informed of your achievements and needs.
The goal of a startup is not to raise capital, it is only a means to reach the goal of truly building a business by capturing market share and becoming a unicorn.
“Raising venture capital is the easiest thing a startup founder is ever going to do.”- Marc Andreessen
Hector Shibata Salazar, adjunct Professor at EGADE Business School and Director of Investments and Portfolio at AC Ventures Fund
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
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