A local angel investor or two just wrote you a check(s) for $50,000. Woohoo!! You can now take your idea to the next step. The ball is rolling. The train has left the station. Watch out world--here we come.
Regardless of whether this is $50k, a $150k or $500k, your next set of actions will say a lot about how you think, what you value, and ultimately what kind of entrepreneur you are.
Some will advise to swing big and swing hard. Seize the moment and go for it they will whisper. There is some real strong support for this attitude. Building a business is not for the feint of heart. There are no 3rd place winners in Jack Welch land so strive for the top slot and leave no prisoners.
The alternative view is to go slow and use your assets (cash) wisely. At this point in your business there are more questions than answers unless you are a savant and have everything figured out. (Good luck with that.) My drumbeat of advice has always been to captain a course of discovery; testing and validating business assumptions so that you can then execute on the known as opposed to the dream.
Here are 3 things NOT to spend money on:
- New furniture or office space. Looking good in the eyes of potential customers, investors or new hires is old-school thinking. Build your business first.
- A Super Bowl Ad. What I really mean is do not put all of your marketing eggs in one basket. This is a hail-Mary attempt at success. You may feel like you are a bold, risk-taker but I think you look like a fool.
- You. Studies have shown a higher percentage of success when the founders don't pay themselves in the first year. Set yourself up prior to your launch so that you can invest in the business first.
Here are 3 things to target your initial funding on:
- Customer Acquisition. IF you have validated a product/market fit, then and only then should you ramp up your marketing. In almost every startup I have worked with there is no one silver bullet tactic that drives long-term success. To that end, you must build a methodology that embraces a multi-tactic approach.
- Critical Talent. Hiring for hiring sake is a classic rookie mistake. You will regret staffing up before you need to. However, there are critical key talent needs that can make or break you. Figure out how to bring those on board.
- Needle-Moving Infrastructure. Upgraded servers, faster bandwidth, software tools are all items when deployed correctly could make a serious impact on how others view you. Invest when the time is right and the impact is measurable.
Remember, that everything takes 2-3x longer than you think and is always more expensive. Use your cash wisely and you earn the right to live another day.