- Many companies spend too much money too quickly after raising their seed round
- Running out of money is one of the top reasons why companies fail
- It is important to spend money with the assumption that another round of funding may not be possible
- Fundraising is difficult, and most companies are unable to raise subsequent rounds
- The goal should be to make the company survive, not just to raise another round of financing
- Set clear milestones and metrics for what you plan to achieve with the funding
- Typically, you have about 24 months to achieve these milestones
- Start planning for the next round of funding when you have about 8 months of runway left
- When a company starts making revenue, spending can increase, but not more than the revenue generated
- One trick is to put half of the seed round money in a separate account and pretend it doesn't exist for the first year to encourage frugal spending
- Most startups spend money too quickly, making it difficult to raise additional funding.

YC Partner Gustaf Alströmer on how much money to spend after fundraising.

https://twitter.com/gustaf

Topics
00:05 - Too many companies spend their money too fast 
00:27 - Most companies that raise a seed round will not be able to raise a Series A
00:40 - Fundraising is just a means to an end
00:55 - An average funding round lasts 18-24 months
1:25 -  When you're making money you can increase your spend proportionally 
1:45 - Spend your money like you'll never be able to raise again

How much money should I spend after I raise my seed round?

The reason I feel so strongly about this topic is I see way too many companies spend way too much of their money way too fast.

Running out of money is a top 2 reason your company will die.

You should spend the money with the assumption that you'll probably never be able to raise another round.

In fact, most companies are not able to ever raise another round.

That's because fundraising is really hard.

Most of the companies that raise a seed round will not be able to raise a Series A.

And most of the companies that raise a Series A will not be able to raise to Series B.

Your goal as a founder is to make your company survive, not to raise another round.

Raising another round of financing is just a means to an end and not a goal itself.

And as a result of doing it you own less of your company.

If you run your company with this in mind you probably make different decisions.

On the first day of your new financing or earlier you set a very clear set of milestones with good metrics of things you plan to achieve with this fundraising.

Typically, the time frame you're given to achieve this is about 24 months.

Since you won't race another round right when you run out of money, it's good to start when you have about 8 months of runway left.

That leaves 16 months to try to achieve your milestones.

Some companies make the 24 months last to 36 months or even longer.

When a company starts making revenue, you can start increasing your spend on things like hiring or marketing, but not more than the revenue you're bringing in.

1 trick that we sometimes advise YC companies is to take half of the money that they raise in the seed round, put in a different bank account, and imagine like they don't have that money for the first year.

That makes you a lot more frugal and spend your money more wisely.

In closing, most startups spend their money way too fast, and because it's so hard to raise another fundraising, you


Speaker 0: How much money should I spend after I raise my seed round? The reason I feel so strongly about this topic is I see way too many companies spend way too much of their money way too fast. Running out of money is a top 2 reason your company will die. You should spend the money with the assumption that you'll probably never be able to raise another round. In fact, most companies are not able to ever raise another round.

That's because fundraising is really hard. Most of the companies that raise a seed round will not be able to raise a Series A. And most of the companies that raise a Series A will not be able to raise to Series B. The bar just gets higher. Your goal as a founder is to make your company survive, not to raise another round.

Raising another round of financing is just a means to an end and not a goal itself. And as a result of doing it you own less of your company. If you run your company with this in mind you probably make different decisions. So how much should I spend? On the first day of your new financing or earlier you set a very clear set of milestones with good metrics of things you plan to achieve with this fundraising.

Typically, the time frame you're given to achieve this is about 24 months. Since you won't race another round right when you run out of money, it's good to start when you have about 8 months of runway left. That leaves 16 months to try to achieve your milestones. Some companies make the 24 months last to 36 months or even longer. When a company starts making revenue, you can start increasing your spend on things like hiring or marketing, but not more than the revenue you're bringing in.

1 trick that we sometimes advise YC companies is to take half of the money that they raise in the seed round, put in a different bank account, and imagine like they don't have that money for the first year. That makes you a lot more frugal and spend your money more wisely. In closing, most startups spend their money way too fast, and because it's so hard to raise another fundraising, you

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How Much Should You Spend After Fundraising? - Gustaf Alströmer