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Spare your investors some agony after your pitch bowls them over

feature-bowling-over-investors-200Getting investment is often touted as the key goal of a budding entrepreneur, but funded founders and investors agree that this milestone actually marks when the hard work starts.

A million-dollar investment validates the efforts of a "ramen" start-up, one that has bootstrapped its way out of the parent's garage, but big money carries big responsibilities, which forces start-ups to instantly become more accountable.

So, how can you make the most of your funding, keep your investor happy and decide when you should chase the next tranche of cash?

Invest in a person, not just the product

Entrepreneurs and investors can sometimes be at loggerheads but there's one thing they agree on: investment is not the end game.

In fact, it's just the beginning.

When Posse founder Rebekah Campbell signed the funding documents that delivered her $1.2million in late 2010 her joy was quickly replaced by the realisation that she now had 23 new bosses to answer to: her friends, family, and angel investors.

Immediately, she had to prepare for next month's board meeting, where she explains the business in terms of key metrics including user numbers, retail numbers, and engagement levels. These have taken place every month since.

She had to get to work on the Posse rewards/loyalty system.

The first task was to hire the best employees, whose skills complemented her own and bought into her vision. The long process would take years. She had to fire the wrong people first so she knew who the right people to hire were.

"It's harder to put together the team than it is to raise the investment," she said.

Ultimately she was assisted by her investors such as Freelancer.com's Matt Barrie, Atlassian's Scott Farquhar, and Facebook's Lars Rasmussen.

For Campbell, investment is the third biggest challenge for a start-up: behind product-market fit, and then team and culture.

She would find the product-market fit two years later, when she overhauled the business model to scale faster and more profitably.

She shifted the target from music bands to small retailers, where customer "champions" could be rewarded if they referred friends. The new strategy would also secure $1.2 million injection of funds from another group of investors but first she had to convince her existing backers.

Campbell had already demonstrated her capacity to execute on her vision, and she used metrics to explain why this was the best business opportunity. Moreover, she was convinced this was the future.

The shareholders unanimously approved.

"I didn't realise it at the time but people invest in your ability to make these important decisions when you need to," Campbell said.

"Not to say you take it lightly, but we knew what we needed to do."

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Andrew Sadauskas

TechCompany editor

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