Investing 101: How companies use your funds

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Investing 101: How companies use your funds

Startups and expanding companies always need cash. They often need cash for similar reasons - some of the most common being scaling production, research and development, sales and marketing for reaching new audiences, acquiring real estate, and hiring skilled personnel.

Major shareholders and lead investors (professionals like venture capitalists and angel investors) will have a say in how a company spends their investment capital. But in a crowdfunding scenario, the vast majority of retail investors won’t. So you’ll need a firm understanding of how your funds are going to be used before you trust a company with them.

Here are a few key metrics to look at when assessing a company’s planned use of funds.

Market strategy

What are the company's short term and long term goals? For example, are they looking to get a new product to market? Or are they in the process of scaling the business?

Outlined goals should be measurable, divided into milestones, and directly related to the amount of funds the company is seeking. These could be things like acquiring 20 new high-profile accounts, acquiring real estate, hitting 100k subscribers, or producing x quantity of stock.  

Understanding a company’s goals will help you measure up whether they’re achievable or not with the funds being requested.

Burn rate

‘Burn rate’ is industry-speak for how quickly a company will go through the invested capital. Every investment round will be followed with a timeline. This is usually between 12 to 18 months.

Understanding this timeline will let investors know when the next round of funding is likely to be needed. With practice, you’ll be able to recognise how realistic a company’s offer is within the time constraints they’re suggesting. Remember to factor in basic costs (e.g. staff wages, building leases) when analysing how quickly a company might burn through their funds.


A lot of investor pitches involve some pretty generic ‘use of funds’ promises. More often than not, they’ll include product development, sales and marketing, and ‘hiring key personnel’. Seeing anything other than these standard three is a good sign a company has thought creatively about how they can get the most out of your funds.

If you’re ready to take the plunge, you can view our live campaigns here or join us here to stay updated.

James Brannan

Director of Operations at STAX

Sam Henderson

Director of Marketing at STAX

Natalia Forato

Social Media Manager at STAX

All views, investment or financial opinions expressed are those of the author and do not necessarily reflect the official policy or position of STAX. The information contained in this post is not investment advice or a recommendation to buy or sell any specific security.
Understand the Risks

Under crowdfunding legislation in Australia, STAX is what’s known as a ‘gate keeper’. That means we’re obliged to check certain company details on your behalf. Read more about how we select companies here.

Like anything in life though, investing on STAX comes with risks. While we carefully screen every company, we can’t actually guarantee their success. Nor do we give any investment advice or take responsibility for losses. We’ve covered the general risks here.

Information is currency.
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