According to CBInsights, the top reason startups fail is because they “ran out of cash and failed to raise new capital.” In fact, 38% of startups fail for this reason.
But you’ve successfully raised funds for your company. You’ve done what more than a third of other companies couldn’t. You’ve got money in your bank account and a new set of investors. What’s next? Here are five things you should do right away:
1. Congratulate yourself, and celebrate as a team.
The effort involved in a successful fundraise typically takes the time and energy of everyone on the team. That could be 10 people if you’re a 10-person team, or if you’re a solo person, then it’s your effort. Either way, have a party. There’s been a lot going on with due diligence requests and presentations and relationship building. It’s important just to pause and celebrate.
2. Update your one-year plan.
Update the one-year plan that supported your fundraise (read more about that plan in “Five Things to Understand About Your Business BEFORE You Start Fundraising”). It’s likely been several months since you put that plan together and now, fast forward a few months, you have the money you needed to implement it. It’s also highly likely things have changed even in that short amount of time. Be sure your short-term plan really captures up-to-the-minute spend plans, burn rate, runway and business assumptions.
3. Establish clear metrics.
4. Create a structure to comply with any reporting and compliance requirements from the funding.
Once you’ve got your funds, there may well be investors requiring an audit every year, and that would likely mean changing processes and controls in your business to ensure you will pass it. Additionally, monthly financial reports and cap tables may need to be delivered to investors. Have a clear understanding now of what is due when and to whom — and how you will put it all together.
5. Enact hiring plans and HR structure.
Hiring is typically involved once you’ve raised funds. Assuming you had a hiring plan pre-fundraise, enact it. Then there are various elements that need to be set up and managed for maintaining a bigger team, such as payroll systems, benefits providers, 401(k)s, potentially outsourcing to a PEO and more. All that will need to be put in place.
A word of caution: Now that you’ve raised money, you need to make sure your runway is long enough to get to your next round of funding. This may seem like a problem that is very far down the line, but it should still be front and center in your mind. You don’t want to run out of cash six months before you’ve actually achieved what you need to achieve to be able to raise your next round of funds.
In the startup world, you’re always working toward your next round of fundraising, and with every fundraise, you must show additional progress. If you’ve just raised funds, or you are about to raise, let’s sit down to make sure that you are set up to get to the next fundraise. Please reach out to me. I’m happy to help.