Where and when to spend your recently raised dollars

The market today has a lot of activation energy, even as the pandemic continues to play out. We’re seeing ample capital, a focus on distributed investing, more first-check investors than ever before, and, fittingly, a parade of new startups.

That said, momentum has a way of overwhelming even the most ambitious. For founders at the earliest stages of building a company, it’s imperative to spend in a balanced yet growth-focused manner. At TechCrunch Disrupt 2021 last week, Harlem Capital’s Henri Pierre-Jacques and BBG Ventures’ Nisha Dua explained how founders should allocate their recently raised dollars in today’s environment.

Personal finance — even for founders — varies for everyone, but the investors drew from their experience with their portfolio companies and their own ethos to give general advice on everything from the importance of an emergency-day fund to how much energy to actually put into hiring new talent.

Hiring 101

Dua addressed the elephant in the room right away: Hiring. As we’ve seen, hiring has always been hard for startups, which are more strapped for resources than, say, a Facebook that can offer an engineer a $1 million signing bonus without blinking an eye. Founders and investors tell me that hiring is only getting harder as an increasing number of well-capitalized startups are rising up with impressive valuations.

Dua feels it’s right for hiring to be at the top of every founder’s list, but she urged those listening to start by thinking backward.

It’s easier to raise and harder to spend these days, because there’s such a high demand for talent. The answer for where to spend is going to be different for every company across many different industries.

I think a lot of us would admit that we’re not really great at planning or budgeting in our own lives. But we have to be great at that for our companies to succeed, to grow and to get to profitability. And so what we like to sort of challenge founders on is, ‘Can you articulate your North Star? And then what is your plan? And is that plan executable to get to that North Star?’ That’s really where the plan for how to spend comes in. You’re not going to reach that North Star in the first 18 months after your first check, obviously, but you’re going to have a set of milestones that get you to the first hurdle.

[So, think about] the things that are going to make this company most successful in the pursuit of achieving that greater North Star? Hiring is certainly going to be at the top of that list.

Pierre-Jacques drew from his portfolio company, Miami-based Pangea, which recently raised a $70 million Series B, to illustrate one way he’s seen entrepreneurs navigate the talent wars. In short, founders should permit themselves to step away from the hiring process.