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Startup life is shown with two starkly different images: a couple of entrepreneurs toiling away in a garage or titans managing teams of people in an open-concept office space full of fancy coffee machines and endless snacks.

Although it might be months till we head back to the office, the journey from garage to office park is a physical manifestation of growth.

Company growth is often dependent on the infusion of capital. To understand where investor money goes, we looked at over 11,600 capital raises from January 2019-May 2020, representing over $36 billion worth of funding.

Using ZoomInfo’s Scoops data we were able to understand what projects companies are working on and tying it to funding events. This allows us to track the types of projects companies invest in before and after raising money.

There is no shortage of articles that provide advice on HOW to spend investor’s money. Our question is WHAT are they actually doing with it?

Companies use investor money for new space

The tale of an exodus from the garage to the slick office is more based in reality than you would expect.

When we look at the types of projects companies engaged in one year after funding, the biggest increase is related to the category of Facilities & Support. More specifically, we see a ~20% increase in projects related to Office Operations after companies, large and small, receive funding. When the money comes in, businesses prefer to leave the salad days of cramped quarters in the past.

The money that goes to facilities isn’t just new coffee machines and fancy lighting; ZoomInfo data points to an 11% increase in projects related to Quality Assurance and Forecasting.

As businesses grow and scale, the importance of quality assurance and accurate forecasting becomes critical. This also likely indicates companies are not just using investor money for nicer office chairs but also to ensure consistent quality and accurate projections.

Companies buy new digital tools

Beyond improving their physical digs, a key area of focus after raising money is enhancing the company’s digital capabilities.

Using technographic and funding data, we tracked the most popular technologies that companies implement after receiving funding.

Top Tools Adopted Post Funding:

  • Google Analytics
  • KissMetrics
  • Woopra

Behind analytics software, tools for increasing leads, and brand awareness were the next most popular. Mailchimp followed by Google & Facebook advertising products were some of the most popular tools adopted after raising money. As investors become a larger part of the company, the need for new leads to drive growth, coupled with the analytics to report on that growth, becomes essential.

When companies raise money, what they spend it on after (physical space, a digital presence, marketing, and advertising) isn’t all too surprising. What does stick out, though, is what they were working on shortly before raising capital.

Before The Cash Arrives: Fill the Bench

Looking at the top five most common newsworthy happenings before a funding event, a pretty clear trend emerges: Seeking Replacement, New Hire, Left Company, Executive Moves, and Personnel Moves.

Before a company raises money, it’s quite common for some seat shuffling to occur. It appears that companies seeking money rarely believe they can grow their business without bringing in new talent. Unfortunately for employees, the pursuit of capital does not guarantee job stability. In fact, it may jeopardize it.

Executives leaving companies and layoffs were common topics before a funding event occurred. This indicates that most businesses want to have the right people in place to spend the money before it ever hits their bank account.

Money changed you

Raising money is a milestone event for many startups. It represents confidence in the founders, the product, and the vision.

As rounds of investment continue, the results of money and investor guidance take on a familiar pattern when trying to achieve growth: Restructure the team, bring in new talent, move to a nicer space, improve the quality of the product, forecast production & demand more accurately, and grow awareness to bring in more leads.

While we may think of each business as unique, the commonality of how they spend money is actually fairly similar.

About the author

Sam Balter

Sam Balter is the Director of Content for ZoomInfo, the leading B2B database and sales intelligence platform. He previously worked as a senior manager at Hubspot, where he directed podcast strategy.

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