So you have Capital. Now what?

When investors give you money, they want to know how you plan to use it. When giving your pitch presentation, if you don’t have a clear idea of how much money you need and how you plan to spend it, you might as well cut your losses.

Here are some things you should consider when asked how you are going to spend the money investors give you.

How can you use this money to scale your business?

Investors invest in you and your startup because they believe there is opportunity for growth and they want to help you through that growth. If you can show them a clear picture of how you plan to use their money to scale your business, you are on the right track. Keep in mind that proof of scalability generally comes with you having sold your product or service to at least one person at full price. Showing that there is interest in your product or service is a good place to start.

What are your current expenses?

Do not show up to your pitch meeting with a list of all of your expenses. Odds are, the investors already have an idea of where your money is going. Instead, come with an outline of two to three expense categories and the percentages of where you’re going to allocate those funds. (ie. 40% will be dedicated to Research and Development, 60% dedicated to Marketing).

When you come with a clear plan of action, it shows that you have carefully thought through where funds are most needed – in areas where you will be able to see the most amount of growth. 

Here are a few areas where you may want to dedicate your funds to:

  • Product Development
  • Marketing and Branding
  • Research and Development
  • Product Line Expansion
  • Cross-Market Legalities
  • Packaging and Shipping

Will these funds be allocated to your own personal salary?

When building a startup, having your own personal salary in mind is not a good way to start. Investors are taking a risk when they help fund your venture. They want to ensure you are also willing to take a risk. Salaries should be divvied out once earnings start to occur.

Investors have to be convinced that your use of their money will maximize their returns in the near future. This is why it is essential to come to a pitch presentation with a clear understanding and outline of how you plan on spending the money you are asking for.

Want to learn more? Altitude Accelerator clients have access to pitch prep and investor readiness training!

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