It’s an obvious question. And if you’re looking for startup investors you’d better be able to answer it well, and quickly too. No wandering eyes. No doubt. If you’re doing a pitch, have a slide for it. And be specific.
I liked this from Ben Yoskovitz’s Instigator Blog on Use of Funds:
… most descriptions of “use of funds” are incredibly generic and standard, typically involving the following: hire key personnel, product development, sales & marketing. Hhhm…the phrase, “No s!@# Sherlock…” comes to mind.
And on the other hand, there’s this about that, from Perfecting Your Pitch, by Guy Kawasaki’s Garage.com Ventures:
It should be clear from your financials what your capital requirements will be. On this slide you should outline how you plan to take in funding — how big each round will be, and the timing of each — and map the funding against your key near-term and medium-term milestones. You should also include your key achievements to date. These milestones should tie to the key metrics in your financial projections, and they should provide a clear, crisp picture of your product introduction and market expansion roadmap. In essence, this is your operating plan for the funds you are raising. Do not spend time presenting a “use of funds” table. Investors want to see measures of accomplishment, not measures of activity.