For fledgling companies, venture capital investment can feel like the prize at the end of a long, arduous journey. Less than one percent of startups receive this coveted cash influx, and venture capital can be vital in providing new companies the funds they need to transform from a promising idea into a competitive entity.
Of course, receiving investment from venture capital doesn’t guarantee success. The entrepreneurial landscape is littered with companies that managed to receive VC funding yet failed, anyway. In other words, venture capital funding can help companies take the necessary next steps to bolster their business, but it doesn’t promise success.
As both a serial entrepreneur and a seasoned investor, I’ve been on both sides of the proverbial table and there are some things that can help startups position themselves for success after a cash infusion.
Here are four tips for accelerating growth after receiving VC funding:
Pause and Assess
Despite what you might think, VC funding isn’t the end-game. Rather, it’s a stepping stone to future development. However, companies, flush with cash after a fundraising round, frequently rush into their next steps, failing to evaluate their current position adequately. To best deploy these funds, companies need to self-assess their actual standing and develop a detailed plan that methodically gets them to a desired position.
More specifically, companies need to understand their place in the maturity cycle, which helps dictate best practices moving forward. It’s important to:
- Conduct an authentic assessment of your industry standing by benchmarking your product/solution against your primary competitors
- Honestly evaluate your business practices and decide which aspects need the most help
- Gauge your marketing and sales processes to project your future growth as there are many levers in each process that can be pulled to achieve optimization
- Assess your management team and leverage outside consultants or service providers when necessary to boost effectiveness
Note that outside resources should only be a temporary approach. As your company develops, you’ll want to bring this competency in-house.
Startup culture is famously incoherent. In the early days of Facebook, Mark Zuckerberg instituted his now infamous motto “move fast and break things,” which even now serves as a veritable banner for the startup ethos.
However, it’s wrong to inherently equate speed with growth. As the Harvard Business Review notes, the notion that speed can be the driving force of innovation is “untenable.”
To truly accelerate your company’s potential, systematically prioritize intentionality at every level of the company. This includes having a data-driven plan that informs everything from business strategy and priorities to product development, hiring decisions and social impact.
To put it simply, being wrong about business decisions is costlier than taking time to get it right, something that venture capitalists understand when vetting companies for investment. If that’s not the case and they don’t understand, you might have the wrong VC as a partner, but this is a topic for another article.
When it comes to growth potential, a Salesforce study found that, aside from market timing, personnel decisions are the most significant indicators of startup success. Indeed, choosing the right person for the right job can significantly accelerate a company’s trajectory.
Hiring additional personnel is a natural next step after acquiring venture capital funds, but it’s also something that requires more purposeful decision-making than most startups realize. For example, hiring before there’s a real need just to show growth or hiring the wrong fit with your business can be costly.
To be sure, finding and hiring the right team is a time-consuming process, but being cavalier about personnel decisions or hiring just to fill seats can be even more expensive in the long run.
Focus on the Customer
Ultimately, sales are the lifeblood of any company, so maximizing growth always comes down to the customer experience. While venture capital funding can provide the resources necessary to shore up sales methodology, both through refinement and augmentation, deriving customer satisfaction from the value of your product is the ultimate secret to sustaining and growing business.
Moreover, the customer base is a treasure trove of valuable insights into product development, which drives prioritization and maturation. In keeping the business focused on the customer, startups ensure that what matters most is what’s receiving the most attention.
Acquiring venture capital funding is an exciting and possibly life-changing opportunity, but it doesn’t guarantee success. While taking calculated risks is a necessary part of the startup experience, it’s also possible to foster future growth by taking time to make the right moves. Now that the funding has arrived, methodically map out your next steps.
This article originally appeared on the BIP Capital blog and was reprinted with permission.