What Would Your Startup Do With $100 Million?
Every startup believes more money is the answer, but it’s what you do with the money that matters
You just raised $100 million for your startup. Now what?
I constantly preach to entrepreneurs that before they even begin the process of raising outside capital, every penny of that money should be accounted for in plan that will result in a sizable return on spending that money.
All that preaching raises a fair question, and one I get a lot: As an entrepreneur myself, what would I do with that funding?
There are a (hundred) million different answers to this question, because every startup is different. But I’m going to break the answer down into what you should be buying with that money at various points in your startup’s growth.
Early Stage: You’re Buying Customers and Revenue
If I’m just starting out and in the early stages of my startup, I’m never trying to raise a ton of money. So let’s make the number reasonable and start with $1 million.
I know. I have trouble putting “reasonable” and “$1 million” into the same sentence too.
That also ties into the top misconception entrepreneurs have before they embark on their first fundraise — that they’re raising money to spend on the business at their discretion. While those words are technically true, thinking that way usually either results in not raising any money or burning through it quickly.
When you raise money, you’re essentially asking to borrow money to buy something more valuable. In the early stages of a startup, nothing is more valuable than customers. When you raise money during this stage, think of the money as a means to buy those customers.
The second most popular misconception at this stage: Buying customers is easy. Again, those words are technically true. If you spend more money than you should to acquire customers to whom you will give more than you should for a price less than they should pay, maybe even for free — that’s super easy.
Investor money always makes that strategy seem like a viable option. The funny thing is, that’s true…