After fundraising make sure to stop and formulate a strategy. Avoid costly mistakes by focusing your newfound resources where they yield the most results.
Now stop working
Congratulations! You’ve successfully raised your first round, maybe seed or pre-seed. You literally feel like a thousand bucks. I’m here to bring you down to earth again. Sorry. Raising money is never the goal. It’s a challenge and sometimes a prerequisite for success, but it is never the goal and you still have a lot of work to do. But before you start doing all that work you need to stop.
Recently I wrote an article about the danger of not releasing early. I tried to make the point that by not releasing early you risk squandering your resources by not building the thing your customers actually want. Because even though you’ve raised a round you’re still constrained in the amount of work that your new cash buys you. You need to be sure that all resources that you expend moves the company forward. Or more in line with reality; if 20% of your effort moves you forward you’re doing OK.
If you don’t stop right after fundraising but instead power through, thinking that through sheer will and work ethic you’ll succeed you may find that none of the cash you spend actually moves you forward. This happens if the map you are navigating after does not accurately reflect reality i.e. your strategy is wrong. The first step in getting your strategy right is taking a break. Take a week’s vacation. Trust me, you have the time and you literally can not afford not taking a week off.
Four conceptual levels
Generals talk about four levels of planning. Political, strategic, operational and tactical. On the strategic level you would ask questions like: “To which theater of war do we direct our resources? Asia or Europe?” or “Should our navy focus on gunships or carriers?”. On the tactical level you ask questions such as: “There’s a sniper in that house over there, how do we take him out?” or “Where should we set up our machine gun?”.
After you’ve fundraised it is critical you spend some time at the strategic level. You need to ask these questions at the very least:
- What goals should we achieve?
- What resources do we need (personnel/competence, ad buys, technical infrastructure etc) to achieve these goals?
- Is the cash that we have now enough to get us to the our goals?
Now you’re saying: “How do you think I raised my round? I already have this figured out.”. Just remember that a vision is not a plan. You may have the “why” figured out, but do you know the “how”? Be honest with yourself: How detailed was the plan that you presented to investors. Was your plan based on best estimates? Does it need readjusting? Now that you know what resources you have available you need to plan the war effort.
You’ve taken a week off and you’re recharged. Ready to go. But it’s still not time to work. The next week, and maybe more, you’ll spend planning. It’s important that, if possible, you not work at all during this week. If I start coding my mindset goes from strategic to tactical. Instead of planning for success I’m thinking about how to refactor our authentication code. I’m sucked down to a low level of abstraction and I am unable to think long term big picture.
Now you should be asking yourself what metrics you need to achieve. Where should the company be when you plan to raise series A? Or what steps do you need to take to get to a positive cash flow? Once you have a plan you need to verify that it makes sense; that the map matches the terrain. You do that by releasing early. Identify your most risky assumption and figure out how to minimise risk.
With planning done you should start executing like crazy. But make sure to stop every once in a while, take a break and get your bearings. Is the map still making sense or do you need to change your strategy?
I can’t think of a situation where fast is more important than right.