more than half of founders don\u2019t have a decent \u201cuse of funds\u201d slide<\/a>. This isn\u2019t great. Founders, you can do better.<\/p>\nWhen you\u2019re building a house, of course you\u2019d demand a blueprint, a timeline, and a clear picture of what your future home will look like. You wouldn\u2019t settle for a contractor whose only plans are to \u201cwing it.\u201d In startup land, however, founders often expect investors to buy into a dream that\u2019s woven with threads of ambiguity.<\/p>\n
Investors, much like homeowners, are not looking to pour their money into a foundation that leads nowhere. They want to invest in a \u201chouse\u201d that, at the end of the construction period, is not only standing but is also ready for the next phase, whether that be living in or selling.<\/p>\n
For a startup, the \u201cfinished house\u201d isn\u2019t bricks, mortar, and those cool USB power sockets, but it\u2019s built with milestones and achievements.<\/p>\n
Will the startup have filed any patents? How many customers will it attract? What revenue figures will it boast? These are the \u201crooms\u201d and \u201cfixtures\u201d investors are looking to find in the startup house. If these milestones align with what investors expect for the startup\u2019s next funding round, the startup stands a pretty decent chance at a successful fundraise.<\/p>\n
The house analogy works in more ways than one: Mistakes happen, and estimates that are flat-out wrong are pretty common. No one expects a contractor to predict the future with absolute certainty; weather delays, supply issues and other unforeseen events can always throw a wrench in the works. However, a good contractor will have a plan, a schedule and contingency measures in place.<\/p>\n
When it comes to startups, looking over the plans and poking holes at it is what\u2019s called \u201cdoing due diligence.\u201d Startup founders can\u2019t foresee every market fluctuation or challenge, but they can and should outline their goals, strategies and how they plan to overcome potential obstacles. This plan is their blueprint for success, and the plan should be at least in the realm of doable.<\/p>\n
Look, I get it. Founders might shy away from providing detailed plans, perhaps due to fear of failure or criticism. Perhaps it\u2019s their first startup. Or maybe there are huge gaping holes of the unknown in their future. That\u2019s fine, that\u2019s reasonable, but show that you know how to plan for that, too.<\/p>\n
The journey of building a startup is an adventure filled with unexpected twists and turns, much like the construction of a dream home. Anyone who\u2019s taken their home down to the studs has at some point sat in the middle of a wrecked living room, sobbing their eyes out when yet another curveball comes their way. That\u2019s startup life: You roll with the punches.<\/p>\n
But you need a plan, and you need to be able to present that plan as part of your pitch. Nobody\u2019s going to give you a pickup truck, a blank check and directions to your nearest Lowe\u2019s. You need to nail your \u201cuse of funds.\u201d<\/p>\n<\/p><\/div>\n
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