Spend Your Seed Capital Wisely or Risk Starving Down the Road [video]
A venture leader provides advice for preserving capital.
Startups need money—it’s their lifeblood, especially in infancy. It’s also, usually, the most difficult resource to secure.
When they do find cash, be it in a founder’s personal checking account, or from an angel or a venture capital fund, it’s imperative they allocate it strategically.
Startups should nurture seed capital. They will need it tomorrow, perhaps even more than today. And that discipline leads to good business practices. In fact, Silicon Valley history is littered with the carcasses of companies that have imploded, frankly, because they were given too much cash. They spent it in ways that did not allow them to learn along the way.
To prevent bleeding cash needlessly, test everything at every stage. Even once your product is built, you are going to want to test different marketing channels.
Kate Mitchell, a co-founder and a partner with Scale Venture Partners in Foster City, Calif., knows this about as well as anyone. As a thought leader in the venture capital space — she’s also the former chairman of the National Venture Capital Association and a mentor for Kauffman Fellows—Mitchell is really smart about how venture investment is best deployed.
Discipline with cash can provide the very innovations that make a company great.
This story was a guest column by Kauffman Fellows CEO Jeff Harbach in Entrepreneur. Jeff is president and chief executive of Kauffman Fellows. He tweets at @jeffharbach.