How to manage your capital as a startup

Startups have the luxury to experiment, pivot, and push innovation over the limits — unlike very well-established businesses and enterprises. On the downside, when it comes to money, startups face the pressure of making each spent-cent to bring value. So, how to manage your capital as a startup?

These are the game rules when your capital is relatively small and frequently not even yours, as a startup, but investors' or VCs.'

We investigated the art of managing your capital as a startup right from the source. We are talking about those who earned, lost and recovered their financial resources. 

In 2019, TechCrunch gathered 250 startups from over 50 countries at TechCrunch Disrupt Berlin. TechCrunch is  one of the most important publishers reporting on the business of technology, startups, venture capital funding, and Silicon Valley

All the startups were eagerly exhibiting their digital products during Startup Alley. Besides that, 14 were selected to compete for the well-known Startup Battlefield Cup with a $50.000 prize. 

So, what a great place to investigate on how to pitch your startup and manage your investment, right?!

 This is exactly what we also did! 

Here’s an insightful sum up for you on how to manage your capital. Find the opinion of the startup that won the Startup Battlefield Cup of 2019 as well!

     1. Market Research

Spend your startup investment money wisely from the very beginning and start with an in-depth market research!

We know how the three Fs (friends, family, and followers) are known as a good source of feedback to start with. But we recommend you to take it with a grain of salt — as it is not the most reliable one to scale. 

Talk to your (potential) buyers and take interviews! 

Work on a professional survey with simple and straightforward questions, and send it to your target audience. This way you can get insightful and specific answers! 

Also, do detailed competitors' analysis — as it will surely give you an overview regarding your market. Furthermore, it will influence your product and business decisions a bit. Don't hesitate using experts' services for that.

You've already launched? Even better. Then you have a product worth updating and adjusting to your growing audience. Market research will help you with that as is a must step of any product development process. 

     2. Technology/Product Development

Congrats! You already have your investment (or the first customer who trusts you!)! But, no matter the source of the capital, there is an expectation for a better product to be built with this. Should you manage your capital towards that?

Wait! Don't rush into overstuffing. 

Be a conscious business owner who firstly analyses, sets, and prioritizes the new updates the product needs.

Take a glance at your market research for ideas!

Now, evaluate the team you already have, and it's potential. A new employee may be an excellent decision to scaleup, and much more reasonable than 10 new team members with no need.

We are pretty sure you've got some genius developers in the team if you have come to such a brilliant product. Take into consideration giving your experts a hand and hire a project-based team when need it (be it for quick MVP or to scale-up faster!). 

Bonus to that, you will have extra money left for equipment and tools to complete your tech solution, especially if it's a hardware one.

     3. Legal & Accounting

Most startups have a CEO and a CTO but they rarely have a team member who is an expert in legal and accounting. Although founding a startup includes dealing with a lot of processes and documentation related to the business, investments, expenses, fees, etc. 

A good example of a legal and accounting challenge for a startup is the fee of about $25k for raising A funding. And this is usually covered by the startup. Most people have no clue how to deal with this!

This kind of service (or skill in the team) will take off your plate basic, but painful problems in terms of the paperwork. It will surely save you from outstanding bills or liability issues in the future.

It's as clear as day that these are the most popular startup expenses to manage your capital for. 

But how would you manage your capital of, for example, $50.000? 

The winner of the Startup Battlefield Cup, Scaled Robotics, shared with us their ideas. This Barcelona-based construction robotics startup is on a mission to digitize construction. Now that TechCrunch Disrupt Berlin is over, they plan to invest the $50.000 prize on either one of these:

1. add one more person to their team;

2. use the prize for a pilot deployment; 

3. purchase hardware.

No matter the struggle your startup is facing, follow the advice of Bharath Sankaran, The Co-Founder & CTO at Scaled Robotics: 

"Money, unfortunately, is a startup's lifeline. You have to be very judicious and thrifty with how you spend your money. For an early-stage startup, "If it doesn't directly contribute to your product, don't spend on it". So any money spent on things that don't result in employee productivity and well being should be looked at very carefully."

As a startup, your dreams are limitless, which isn't quite the same about your cash reserves. 

And with the first cash flow, it's so hard to stand the temptation of building the appearance of a solid business. 

Focus on business growth and revenue generation, even working from a modest office, coworking space or a coffee shop (or have us as your strategic partner in building a scalable version of your product). Be sure, a strong team with a great culture and office will come along by itself once you have a powerful product and a solid database of clients.

May everything you do to make cents!