10 Disastrous Mistakes to Avoid After Closing a Fundraising Round

Don't get stuck in a honeymoon mentality after closing a successful round of funding. Dodging these common mistakes will ensure your funding is properly invested into your company.
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Don't get stuck in a honeymoon mentality after closing a successful round of funding. Dodging these common mistakes will ensure your funding is properly invested into your company.

A. They Don't Making a Game Plan With Their Investor


The time immediately after you close your round is the best time to build a plan with your VC or investor how they can be help you move forward. While this was likely discussed, the best time to actually define the plan with deadlines is right after the deal. That's when the optimism and excitement is up. - Andrew Thomas, SkyBell Video Doorbell

A. They Hire Too Quickly


Lots of startups immediately hire team members in anticipation for future customers. As a result, these organizations have many employees who are nice to have around, but don't necessarily contribute toward growth. It's better to hire later on instead of being in the situation where you have to fire, because your headcount is too high. - Ivan Matkovic, Spendgo

A. They Don't See the Big Picture


If you're an entrepreneur who has bootstrapped and used every penny to get the business off the ground, it's hard to change your mindset to see the big picture. For a while, you've been focused on small tasks that get you to the next step. The luxury of funding is that you can now focus on the big picture of your company -- the one that's going to take it global, not local. Don't let this slip your mind when you close a round of funding. - Brooke Bergman, Allied Business Network Inc.

A. They Don't Get Back to Work Soon Enough


Too much money gives entrepreneurs an unrealistic idea of how well their company is doing. Whether the work is taking the new funds and going into customer acquisition mode or leveraging funds to move to the next round, it's critical that an entrepreneur get over the big rush of closing a fundraising round and get back to business. Build the business you've promised investors you would with their money. - Charlie Gilkey, Productive Flourishing

A. They Forget Investor Communications


I hear from investors that, post-funding, many entrepreneurs forget about maintaining investor relations and communications. Leaving investor relations as an afterthought post-funding is a rookie error. It is critical after successful fundraising to keep your investors in the loop regularly, so they can support your strategic and tactical goals in revenue growth, team expansion and subsequent funding. - Doreen Bloch, Poshly Inc.

A. They Don't Build a Public Relations Campaign


You'll need to advertise your success in securing funding. This will help you in your recruiting efforts, and may assist with attracting new investors in the future. When applicable, partner the PR campaign for your funding with the launch of your product for added effect. - Andrew Schrage, Money Crashers Personal Finance

A. They Take a Larger Salary


One of the quickest ways to dilute VC money is to start paying yourself and others a lot more. The reality is that there should not be a big pay day until you sell your company, not before. Do not allow a round of venture capital tempt you to act "as if" you've sold your business and are all of a sudden liquidated. Pay yourself only enough to be comfortable, and no more. - Obinna Ekezie, Wakanow.com

A. They Over-Celebrate


Celebrating is important to do for many milestones, such as obtaining new clients or finishing a new development, but celebrating after you get funding can be dangerous to your success. Funds are typically meant to accelerate things or reach goals, which does not leave time to relax. The moment you receive funds you need to take action to execute plans that use the money efficiently. - David Tomas, Cyberclick

A. They Aren't Cash-Flow Positive


If you have raised a large round, you should have a realistic scenario in which you do not need to raise more money. It is OK to take advantage of a great funding environment or change your mind and raise later, but I don't think enough entrepreneurs consider how immensely valuable it is to raise money by choice instead of out of need. - Katrina Lake, Stitch Fix

A. They Spend Money on the Wrong Things


It's easy to want to go out and get the nicest office, etc. However, you should view money like you'll never see it again. While it's important to use the money you have as a tool, you should also guard it, because you really don't know if you'll see it again. Use your investor's money wisely. - Andy Karuza, brandbuddee

These answers are provided by the Young Entrepreneur Council (YEC), an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

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