What does fundraising actually fund and what gets left out of budgets?

Full Explanation

A founder raises £1M and plans: engineering (£600K), sales (£200K), marketing (£100K). Where's the rest? Missing: legal (incorporation, contracts, IP, employment law = £50K+), accounting (CFO consulting, bookkeeping, audit = £30K+), payroll taxes (employer contributions = 15-20% of salaries), professional insurance (liability, D&O = £20K+), contingency buffer (15-20%). Realistic £1M spend: engineering (£450K after accounting for inefficiency), sales (£150K), marketing (£80K), legal/accounting (£80K), taxes/insurance (£100K), contingency (£40K). Total: exactly £1M, with no buffer. Founder honesty: "We're raising £2M to hit the following milestones: 1) product development (£800K, 12 months), 2) go-to-market team (£600K, sales and marketing), 3) compliance and infrastructure (£300K, legal, security, ops), 4) working capital and contingency (£300K, covers 3-month buffer and unexpected costs). Monthly burn: £165K. Runway: 12 months from deployment." This is realistic. Underestimating non-product costs (legal, accounting, compliance) creates cash crises mid-year. Fundraising investors specifically evaluate: do you have line-item budgets? Have you allocated for legal, accounting, compliance? Do you have contingency planning? Companies without realistic budgets run out of cash mid-product development.

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