Got Funding? 7 Things to Do Now
Sometimes growth is impossible without a significant chunk of funding to fuel that growth.
But say you do manage to beat the odds and attract capital--then what?
Check out the following advice from Ashish Rangnekar, the co-founder of BenchPrep, creators of test-prep and subject-based interactive courses for computers, mobile phones, and tablets. BenchPrep raised more than $2 million in 2010 and an additional $6 million last year.
Here are Rangnekar's tips, in his own words, for what to do right away--and just as important, what not to do:
1. Don't hire anyone for the first month.
We raised $6 million. That puts a lot of pressure on you to grow, and grow fast. After all, the story you tell investors is one of growth and how money will allow you to grow. But expanding the company doesn't always mean expanding the team. Growth is not just hiring more people.
2. When you do hire, start hiring differently.
There can be a big difference in the kind of people you want to hire when you are a small, underfunded company and the kind you want to hire when you're well funded and squarely in the growth phase.
When you're smaller, you typically want people who are generalists, because you can't afford to hire specialists. Once you have money in the bank, you should hire specialists who can put their heads down and focus on one aspect of the business.
That's why you should wait before you start hiring. It will take time for your hiring practices to adapt.
Our prospective employee pipeline was filled with generalists who could do multiple jobs. Now we need to create a new pipeline of candidates.
If you hire just in the first four weeks, you might not be hiring for the next stage of your company. Use the first four weeks to start socializing, start putting the word out there, and then build a new pipeline. We started getting a lot of inbound interest from talented candidates.
Give yourself time.
3. Don't hire talented people and assume you'll figure out their job later.
It's tempting to hire good people thinking you'll figure out later how to deploy them. In a way, that does make sense, because smart people will often create opportunities for you, but you have to realize that just because you now have money in the bank doesn't mean the scale you operate on has changed.
For example, you can't hire an online marketing expert and expect him or her to perform well if you haven't built the infrastructure for his or her role and his or her talents.
That's another reason to wait at least a month; that gives you time to shift your perspective, think about your organization, and figure out how you need to change to take on talented people so they can truly benefit your company.
Plus, when you hire talented people and assume they'll create work for themselves, that can lead to another issue...
4. Help the team maintain a true sense of goal and vision.
Raising money is an overwhelming task. A massive amount of activity, prefunding, is focused on achieving that milestone.
Once you do raise capital, there can be a vacuum of direction. It was a very exciting time, everyone was working really hard, the product was doing really well, we landed a number of new customers, and then there was this big feeling of validation because the investment community believed in us.
That's exciting--and that can create confusion as to what is next.
For the first four weeks, we had team meetings every Tuesday, recommunicating the implications of raising money, talking about immediate next steps, discussing how we would use the funds. It's important to enjoy the influx of capital, but it's equally important to bring it back into context and keep the vision straight.
5. Don't forget your investors.
During prefunding, you spend a lot of time talking to investors. Once you close, it's tempting to want to get back to work and focus on customers and building products, etc.
Although you have been talking to them for months, the conversations were more about long-term positioning and midterm execution. You rarely talk about the next three months and the next decision. Essentially you talk numbers, you talk vision, you talk about where you want to go.
Make your investors part of your tactical decision-making process. We scheduled the first official meeting four months after closing. That was too late. In those four months, we lost at least two months of valuable time where they could have helped make decisions and make a positive impact. Call an all-hands, follow-on in one room, within the first four weeks.
6. Hire an accountant.
Don't mess around with one-off spreadsheets or financial models you've created on your own. It's time to hire an accountant.
One, now you have real money and the obligations of managing financials, cash flow, etc. Two, now you have investors who want to know financial performance in various ways.
One may want a cash-flow analysis, another an income statement, another the tax implications of a new product. For a company that is not finance driven, those analyses may be distracting. Not doing them is not an option, and doing them on your own is not efficient. Once you're funded, the value a professional accountant provides is very, very high.
7. Create open dashboards.
Pick four or five key indicators of business performance and start sharing them with investors and employees.
In our case, with our subscription model, three key metrics are how many courses a single user takes, how long a user takes a course, and the rate of conversion from free trials to paid subscriptions. We look at revenue, marketing spending, etc., but those are numbers that make or break our company.
We looked at a lot of great tech companies, and the common theme for all was that their customers love their products. That's our goal, and our open dashboards tell everyone in the company exactly how we're doing.