For any sustainable startup that finally lands its first investment, it can be a whole mix of emotions. Whilst it’s definitely an occasion for celebration, it’s also a pivotal moment for some forward planning. Determining exactly how you’re going to allocate each and every cent of your investment is key to driving growth and achieving your goals as a business. Every impact startup has its own specific needs and circumstances, and nobody knows their business better than you. That being said, it’s advisable to segment your spending across your startup’s needs. In this article, we walk you through some tips for how to spend your very first investment as a sustainable startup.
What makes you an impact startup?
Before we jump into the financials, let’s go back to the basics for a moment: what exactly is an impact startup? Well, impact startups are founded with a commitment to doing business in a way that is net-positive on both the environment and society. This means that beyond getting their business off the ground in ‘conventional terms’, impact startups often face additional challenges compared to any other average, profit-driven, startup. Essentially, impact startups take on the task of not only building a business but doing it for the good of people and planet. In the long term this can lead to is a more sustainable and healthy business model but in the short term these startups face unique challenges.
How should impact startup spend its first investment?
As with anything in business, unfortunately, there’s no single formula for success. When it comes to impact startups, this is arguably even more true. The temptation for many sustainable entrepreneurs is to (understandably) focus all their energy on the positive impact of their business. But as our latest podcast guest, Jennifer Kulenski, advises, finding a product-market fit and building a profitable sustainable business is critical to the success of your impact.
As we mentioned earlier, when it comes to spending your first investment, it’s advisable to ‘divide and conquer’. This means diversifying your spending across a number of different areas of your business, such as:
- Product or service development
- New hires and building out your team
- Customer service
- Marketing and sales
Developing your product or service
Allocating a substantial sum to developing your product or service is fundamental, especially in the early stages of growth. For impact startups, in particular, it’s important to refine and verify supply chains to ensure maximum sustainability. Another element of product development is conducting thorough target audience research. This is vital to understand what your ideal customers are receptive to and how your product will perform prior to investing immense resources and investment in product development.
Finding a product-market fit is absolutely critical for long-term growth and viability. You want to be able to demonstrate that your product is directly addressing a problem or need. You should be able to evidence this through tangible metrics such as number of customers, customer lifetime value, customer retention, and more.
It’s estimated that, on average, the typical startup becomes profitable within three to four years. So if you’re not seeing profits right away, don’t beat yourself up. Instead, manage your runway realistically, setting key milestones for your business (and celebrating the big and small wins along the way).
Though you’re still in the early stages of growth, this is the most important time to demonstrate the value of your product or solution. This will help you secure new investment and keep the momentum going to expand your runway, even if you’re not seeing profit right away.
Growing your business & team
When it comes to growing a business from the ground up, especially one with an impact-oriented mission, you need people that believe in your vision. Finding and paying for the right people to fill key positions within your business will pay off in the long run. Your first investment is a great opportunity to start growing your team and bringing some much-needed expertise to the table.
Growing your team doesn’t necessarily mean new permanent hires, though. Instead of sinking your investment into a single new employee, opting to work with an agency or freelancer is an efficient way to welcome expertise and talent into your business without shouldering too much risk. So, whether you’re in need of a developer, researcher, virtual assistant, writer, or something else, why not consider outsourcing? Plus, this way, you’ll enjoy added flexibility and agility in your workflows (and cashflow), which is invaluable for early-stage impact entrepreneurs. Thank us later!
Building out your customer service
Keeping your customers satisfied and coming back for more is the key to success for any business. Arguably even more so for sustainable startups trying to make a name for themselves. Though we’re sure your product shines in its own right, using some of your first investment to refine your customer service workflows and capabilities will go a long way in cultivating a loyal customer base.
In addition, make sure to ask your first customers for their feedback on your product or service. Find out what they loved, what they didn’t, what they’d change, and what they’d like to see from you. This will help you to confirm your market research and refine your strategy moving forward. Your customers can even be rich resources for marketing purposes. Why not build case studies and create marketing assets using your customers’ stories?
Investing in marketing
Last, but certainly not least, is marketing. As a result of the COVID-19 pandemic, there’s been a significant shift in emphasis to online business which makes digital marketing all the more important. The problem is that ‘marketing’ is a broad term that covers a whole host of different things. In a digital world especially, ‘marketing’ refers not only to conventional ad campaigns, but a multifaceted mix of social media, video content, SEO, and more. Complicated, we know.
Building out brand awareness and honing your brand identity and voice are crucial steps in your growth journey. Though it’s tempting to go ‘all in’ with your marketing strategy, being highly selective about how and where you spend your budget is absolutely essential. Investing in only the most relevant channels for your particular target audience will be far more effective in the long run. In addition, instead of burning through your marketing spend in the form of paid ads, an organic social strategy is key to long-term success and eventually, lower cost per acquisition.
If you’re at a loss for where to start, seeking the guidance of a specialist marketing agency will get you on the right track. In fact, for many impact startups, delegating marketing needs to a specialist sustainability marketing agency is the logical choice. It’s absolutely vital to leverage the momentum that comes with your first investment, and this involves optimizing your marketing strategy and positioning your brand correctly.
Rather than trying to launch and sustain a multi-pronged marketing strategy in-house, for some, it just makes financial sense to outsource. Instead of hiring in, working with a marketing agency, such as Ola Impact, gives impact startups the precious freedom to adjust the amount of work they’re paying for according to their needs. Plus, through working with a specialist agency, your sustainable startup gains access to a whole pool of experts dedicated to helping you build out your brand.
However big or small your first investment, it’s a business milestone to be proud of. Securing investment for your impact startup means that someone else truly believes in the potential of your business and the vision you have for the future. And that’s definitely something worth celebrating.
As we’ve seen, there’s no one right way to spend your first investment, but diversifying your budget across strategic channels is key to lengthening your runway and proving your product-market fit. And remember, though it’s tempting, there’s no need to do it all yourself. Sometimes, delegating and outsourcing the work makes sense financially while accessing talent that can take your impact to the next level. Now that you’ve landed your first investment, you have the resources to do so. And most importantly, handing over the reins can free up your precious time so you can do what you do best: keep growing your impact business.
Author: Aimée Lister