Technology startup funding tips - 'go faster' money

Money invested in a company is there to make something happen.  I normally refer to it as ‘go faster’ money – as the most normal use is to fund the business accelerating towards it’s goals using the extra funding as fuel. 

In comparison, the following are not seen as reasonable uses of their money by investors:

• Giving yourself a great salary
• Taking expensive office space
• Feeling better because you’ve got some ‘breathing space’ money in the bank
• Acquiring a nice company car
• Funding extravagant trips to conferences on tropical islands
• Fancy lunches
• Upgrading office computers

Early stage investors want to see that you are working hard with their money and doing things that will make them (and you incidentally) wealthy.  Every pound/dollar/euro should, in their view, be sweated harder than a fat guy in a sauna. 

So if you want an investor to give you funding then provide them with the details of the ‘as is’ business case and the relevant changes that will be made to the business with the new money.

For example, HP studies (and some real classic thinking) showed that a product delivered on time will make substantially more money back than a product delivered six months late.  Time really is money in that case.

What is it in the business in question?

• A bigger sales team
• A new territory opened early
• A new platform
• Incentives
• More developers
• A license agreement for technology

Whatever it is, the investment case should indicate the clear financial benefit of the altered plan.

 Copyright Richard A D Jones 2005