The Startup Guide to Working Capital: How to Scale SaaS & AI After Your Seed Round

The Startup Guide to Working Capital: How to Scale SaaS & AI After Your Seed Round

You’ve raised your seed round. You’ve got 12-18 months of runway. Now, every hire, every test, every dollar is a bet on what comes next. The real question: how do you scale without setting fire to your capital? 41% of startups fail because of a lack of product-market fit. The second most commonly cited cause was running out of money (29%). 

The choices you make now as a founder will be critical to the business’s success. In the first 90 days post-seed, you’ll want to prove a scalable product-market fit (PMF), build an acquisition engine, and manage/track key metrics. Each of these takes money, but the question is—where (and how) should you spend it to be most effective?... And what do you do if you need more working capital than you have?

5 Common Capital Management Mistakes to Avoid

Knowing what not to do can be as important as knowing what to do. This is where startup founders commonly make mistakes—blowing through their seed-round funding and running out of capital. 

1. Overhiring too early: Building a headcount to match the industry titans can feel tempting. It lets you look around the office and feel like you’ve made it. It will also eat up your runway faster than you can say, “We’ve got top-tier snacks in the breakroom.”
2. Excessive spend on non-essentials like brand and PR: Don’t get sucked into the sirens call of spending on brand before you’ve grown the business. Once you’ve proven your market fit, your brand will develop inherent meaning…and it will be easier to secure PR placements.
3. Premature GTM Scaling: If you scale GTM before you understand buyer behavior, pricing, or your value proposition, you’re wasting money. 
4. Cloud or AI infrastructure waste: If you’re repeatedly training large models without optimization or running always-on inference when it's unnecessary, you’re burning cash. For startups, especially AI startups with GPU-heavy workloads, managing your cloud/computing resources is essential to avoiding massive, surprise bills f AWS, GCP, or Azure.
5. Lack of financial discipline: If you avoid the “boring” tasks, like creating KPIs, building a clear financial model, or burn tracking, you’re on the road to running out of money. 
   

The SaaS and AI Post-Seed Roadmap for Success

Early stages of SaaS and AI come with particular challenges. Delayed revenue realization can add strain to the already stressful process of starting and growing a business. Seed funding is a little like a trust fund. When used prudently, it can be an essential vehicle for wealth creation. If you’re not paying attention, you can run out of money real fast. Here’s how to protect your capital while pursuing post-seed benchmarks. 

1. Keep Spending Focused with Product-Led Growth

Taking a product-led approach can be one of the best ways to protect working capital while pursuing growth. In practice, this looks like focusing on your PMF—ensure your product is so aligned with your target customer’s pain points that traction and growth happen organically. Validating your PMF before you scale spending in other areas, like marketing or hiring, can save you.

Take Loom, for example. Their early days offer a masterclass in product-led growth (PLG). Instead of dumping money into traditional advertising and marketing channels, Loom let customers experience the product first-hand through a freemium model. Their early strategy focused on creating a coral loom through user engagement and sharing—every time someone sent a video, it worked to promote the tool to potential users. Once the PMF was sticky, Loom doubled down on growth, investing in traditional marketing and ad spend. 

2. Create a GTM Strategy That’s Profitable and Repeatable

Nothing is scalable unless it’s repeatable, and it’s not worth repeating unless it’s profitable. Your go-to-market strategy (GTM) will require you to use working capital—the key is to use it strategically and test small before investing heavily in any one channel. This is the time to focus on defining your ideal customer profile (ICP), building a sales playbook, and investing in one or two proven acquisition channels, like paid ads, social media, or SEO. 

The real-world proof: Clerarbit, an AI-powered B2B data company, kept their ICP really narrow when targeting SaaS marketers. They focused on content and outbound targeting. This strategy helped them scale until they were ultimately acquired by HubSpot (they subsequently rebranded to Breeze Intelligence). 

3. Hire for Leverage, Not Headcount

Limit your hiring spend by focusing on employees and contractors who can generate leverage. Avoid bloated managerial layers and focus instead on engineering, revenue ops, or essential marketing functions. 

Linear, a product development SaaS company, has made this a cornerstone of their process—hiring only when and where they need to. Head of product, Nan Yu, described this as adopting an “heirloom tomato org chart.” Heirloom tomatoes are lop-sided but delicious, whereas symmetrical tomatoes are often bland. In practice, this looks like Linear hiring engineers where they need them while keeping other teams, like marketing, lean (many of Linear’s departments are still staffed by fewer than 10 people). 

Top Tips for Conserving Capital During Post-Seed Scaling

• Monitor runway and cash burn rate: Whether you create visual dashboards or closely monitor spreadsheets, knowing how long your current funds will last at the current burn rate allows you to make informed decisions about spending and timelines. 
• Launch a minimum viable product (MVP): Launching with an MVP allows you to test your value proposition using minimal resources. Launching an MVP can help you gather user feedback that will inform product development and enhancement, giving you a better PMF and limiting excess spending. 
• Seek customer feedback early and often: Actively seeking feedback from early users and iterating based on their input ensures that your product evolves to meet market needs.
• Focus on high-value customers and features: Ensure your efforts are aligned with areas that offer the highest ROI. Prioritize features that drive the most value to reduce unnecessary development costs. Identify and concentrate on the top 20% of your customers. They’re likely generating the lion’s share of your revenue. 

3 Ways to Access More Working Capital (No Equity Required)

Most SaaS and AI startups will need additional funding at some point. Here are the 3 founder-recommended ways to increase working capital without giving up any equity. 

1. Revenue-Based Financing

Revenue-based financing (RBF) allows businesses like subscription-model SaaS and AI companies to access funds based on annual recurring revenue (ARR), potentially providing upfront working capital without dilution. Mexico-based fintech Intelligental used RBF to grow 150% year-over-year. Non-dilutive funding allowed them to maintain their vision of stable, sustainable growth. RBF allowed them to develop a new line of business, which quickly found a solid PMF, and to repay more expensive (high-interest) debt. 

2. Optimizing Billing and Contracts

If you have strong customer retention, you may benefit from defaulting to an annual contract rather than monthly billing. This gives you increased capital upfront, allowing you to make greater investments in the business. This helps solve one of the key challenges in SaaS and AI, shortening the revenue delay and allowing you to recoup customer acquisition costs more quickly.

3. Invoice Factoring

Invoice factoring allows a business to sell its outstanding invoices to a third-party factoring company at a discount. The business receives immediate cash, typically 70-90% of the invoice value, in exchange for the invoices. Invoice factoring can help post-seed startups access cash when they need it quick. It’s typically more expensive than other types of capital, but when time is of the essence, invoice factoring can save the day. 

Increase Working Capital Without Sacrificing Equity

Here’s how we’ve helped more than 150+ founders make capital work on their terms: up to $2.5M in non-dilutive funding and an application that can be completed in just 5 minutes.