Running a lean startup, part 2: Where to deploy venture funds


How do you make the most of your venture capital to drive growth and achieve your startup's goals? Get practical advice and real-world examples to help you allocate your resources strategically at the seed stage.
At Sesame Labs, we’ve learned the importance of strategically deploying startup resources (especially if you’re on a tight budget). As founder and CEO, I've developed an understanding of how to allocate capital effectively to find product-market fit (PMF) and drive growth. Be sure to read Part 1 of this two-part series if you haven’t already!

In this post, I'll give you some practical tips for how to spend your startup capital, based on our own journey — including highlighting the areas where founders should consider investing their funds to maximize their chances of success.

Your key resources and goals at the seed stage

When you're at the seed stage of your startup journey, you've likely already laid some important groundwork. You've identified a market opportunity, developed a reasonable understanding of your target customer and crafted a clear problem statement that your product aims to solve.

Your seed funding provides you with the resources to start building out your product and experimenting with different solutions to find PMF. This is where you'll be putting your venture capital to work. Your job is to iterate on your offering until you've found a solution that resonates with your target customers and meets their needs in a compelling way.

While the specific allocation of your seed funds will vary depending on your industry, business model and unique challenges, most startups at this stage need to deploy capital for product development, customer acquisition, team building and operational expenses.

In these early days, it’s critical to be strategic and disciplined with your resources. You want to allocate your seed capital in a way that allows you to make meaningful progress toward PMF, without overextending yourself or burning through your runway too quickly.

Your best investment areas

As a startup founder, it's crucial to be strategic about where you allocate your resources so you maximize your chances of finding PMF. Based on my experience with Sesame Labs, here are some critical areas where deploying capital can make a significant impact:

Open up time for the founder

One of the most valuable things you can do with your startup's money is to buy back time for yourself as a founder. This can show up in simple ways, like opting for an Uber over driving or taking public transit so you can work or take meetings during your commute. When you're putting in 12 to 15 hours a day, every minute counts. Spending a little extra on transportation or other time-saving logistics can pay off in a big way.

Clear bottlenecks for your team

As your team grows, you may start to encounter productivity bottlenecks related to your workspace or other resources. For example, when our team at Sesame Labs reached 4 people, we found ourselves wasting a lot of time trying to secure meeting rooms or whiteboards in our co-working space. By investing in a dedicated office, we significantly boosted our productivity with just a marginal increase in spending.

Use on-site meetings strategically

If you have team members working remotely, it can be incredibly valuable to bring them on-site for strategic meetings or project kickoffs. Even though it's a short-term expense, the context setting and alignment that happens during these in-person gatherings can have significant long-term value. We found this especially true for roles like design, where close collaboration and real-time feedback are essential.

Leverage launches as lead gen tools

Many early-stage startups treat launches as learning opportunities, but if you're not deliberate about your approach, they can end up being more of a distraction than a value-add. Instead, think of launches as a lead generation tool. Investing in high-quality launch materials and promotion can help you attract a large number of potential customers to engage with and learn from.

At Sesame Labs, we once spent $30,000-$50,000 on a single launch, including marketing and video production. That launch and the social proof we gained from coverage in TechCrunch led to roughly 400 leads and 250 demo requests. That's the kind of impact that would be hard to match by just hiring a business development rep.

Take advantage of on-call experts

Throughout your startup journey, you'll likely encounter specific technical or strategic challenges that your team doesn't have the expertise to solve efficiently. In these cases, it can be well worth the money to bring in an expert consultant, even at a high hourly rate.

For example, we faced some tricky DevOps issues with our AWS setup that were only cropping up once or twice a year. Rather than having our team spend days or weeks trying to resolve these issues, we built a network of expert consultants we could bring in as needed to solve the problem quickly. Similarly, we had a sales coach on call to help us navigate specific challenges around outreach and closing deals.

The key is to be strategic about when you bring in outside experts and to think of it as an investment in your team's productivity and learning. One-off engagements with a clear scope can be incredibly valuable, but be wary of open-ended retainers that can quickly add up.

The art of strategic resource allocation

Allocating your startup's resources strategically can make a significant impact on your ability to find PMF and set your team up for long-term success.

As you consider where to deploy your capital, keep these lessons in mind:
  • Buy back time for yourself and your team by investing in creative solutions.
  • Address productivity bottlenecks proactively, even if it means a marginal increase in spending.
  • Use strategic on-site meetings to align remote teams and drive long-term value.
  • Treat launches as lead generation tools and invest in high-quality marketing assets.
  • Build a network of on-call experts to solve specific technical and strategic challenges.
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