It is quite the known fact In the world of startups, it’s always survival of the fittest. It is more about smart-work than hard work.
Today what we are going to talk about is how to put this smart work when it comes to Fundraising.
Startups are run by money, yes ideas pay an interesting part of it but without money, none of those ideas could be put to execution, here is where the idea of fundraising comes into play
Securing new funding round is a significant turning point for startups. Without funds in place, even the saviest startup founders have difficulty developing product prototypes, testing market assumptions, and generating enough investor interest needed for future financing.
But for the Newbies, let’s break it down to basics.
So, What is fundraising?
For any startup to even start coming into reality from dream there is a need for Startup capital. Startup capital is the seed money that’s raised through investments or bank loans to start a business. This cash can be used for anything business-related, from product development and manufacturing to marketing campaigns and office equipment.
This raising of capital is called Fundraising for a startup.
Now fundraising takes place in rounds, for better understanding we are going to break these rounds for you,
- Seed stage funding: This occurs at the very beginning of a startup.
Pre-seed funding occurs at the very beginning of a startup when the founders usually invest their own money. Family and friends can also contribute during the pre-seed round when the startup creators are trying to get their idea off the ground. This is followed by a seed funding round.
The seed funding round is when investors, usually angel investors, provide funds before a startup becomes operational.
- Early-stage funding: Next comes funding rounds A through C (or in some cases, A through D). Round A is focused more on startups that have an actual business model that will elicit an immediate profit.
- Late-stage funding: When startups move on to Funding Round C and/or D, it’s to continue expansion at a higher level. These startups are now highly successful, hold a value of at least $100 million and receive upward of $50 million in funding.
Need help fundraising yourself, you can contact us.
Now since se have acquainted you with the basics of fundraising let’s jump to our actual question.
How much money should you spend after your seed round?
Fundraising is an extremely tedious task, it takes a founder’s total dedication and sweats to acquire whatever money they have for the seed round as the startup is not yet established, the people that trust with you their money at this point is very very few.
This becomes very crucial at this point about how you spend your money.
One of the major reasons why startups fail is that people spend way too much money, way too fast. Making running out of money one of the top two reasons for a startup shutting down.
Here are three ways using which you can put your hard-acquired money to great using and make sure you do not run out of it midway
Hacks for effective fund management:
- Milestones are your key to success:
Give yourself a set number of milestones that you need to achieve with the money that you have at hand.
Also set a time frame that you would take to achieve these goals, say 24 months.
Now since you can’t acquire next round of funding immediately after this start early. Say if you had taken 24 months as your time frame, start after month eight itself.
- Before helping others help yourself: when we say this, se is talking about taking employees into your firm. Every startup needs a set if skilled labours however if you do not have enough money or run out of it midway, what are you going to pay them? Peanuts?
One way to avoid this is to take in these skilled labourers only when your company starts making a revenue, until and unless it’s a matter of utmost need.
- A quick money management hack:
Is your problem that you just cannot keep money without spending when at hand? A classic case of itchy hands, huh?
Don’t worry we got you covered.
What you can do is put this money in another bank account, this way it is out of your sight and out if your mind, and consequently out of the risk of expenditure
- Use every penny like it’s you’re last:
remember Tumblr quite where they ask you to live every moment like it’s your last, the same kind of allies to money in a startup.
After pulling one round of fundraising, tgere is a chance that you might never be able to raise another. Keeping that in mind, but every single rupee to its optimum use.
After this quick crash course of how to use your raised money to optimum use, hope you are now well versed with the idea of expenditure in startups.
Still, have some questions?
Let us help you.