Overcoming Challenges When You’ve Raised Funds Haven’t Scaled Operations

India’s Consumer Goods sector is a hotbed of opportunity, yet many companies that have raised funds through private placement but haven’t scaled operations face a critical challenge. Despite securing capital, these businesses struggle to translate funding into growth, leading to frustration for founders and investors. This article provides senior leaders with a roadmap to address capital utilisation challenges, restart growth, and ensure effective use of private placement funds.

The Problem: Raised Funds Haven’t Scaled Operations and What to Do Next

Private placement is a vital fundraising mechanism in India’s Consumer Goods sector, enabling companies to secure capital from select investors without public offerings. It fuels ambitions for product expansion, market penetration, or operational upgrades. However, a recurring issue is that companies that have raised funds through private placement but haven’t scaled operations often stagnate post-funding. A 2024 Inc42 report highlighted that 40% of D2C startups in India failed to meet growth targets within 18 months of funding, citing operational inefficiencies and poor post-funding strategy. For example, several packaged food and personal care brands have faced scaling problems after private placement, struggling to deploy capital effectively due to internal bottlenecks.

1. Diagnosing the Gap: Why Scaling Stalls

To address the issue of having raised funds through private placement but haven’t scaled operations, leaders must identify root causes. Common capital utilisation challenges include:

• Management Bandwidth: Founders often juggle multiple roles, diluting focus on strategic execution. This leads to execution inefficiencies that hinder scaling.
• Lack of Scalable Backend: Inadequate infrastructure warehousing, logistics, or tech systems cannot support rising demand.
• Deployment Issues with Private Placement Funds:

1. Delayed Hiring: Slow recruitment of key roles (e.g., supply chain managers or tech leads) stalls progress.
2. Tech Delays: Investments in CRM or ERP systems face implementation hurdles due to poor vendor selection or scope creep.
3. Legal Hurdles: Non-compliance with investor covenants or SEBI regulations diverts resources. For instance, failure to file timely reports can trigger penalties.
4. Demand Forecasting Errors: Overestimating market demand leads to excess inventory, tying up capital, while underestimating causes stockouts.

These gaps create a cycle of private placement performance issues, undermining the effective use of private placement funds.

2. Strategic Levers to Restart Momentum

To overcome scaling problems after private placement, leaders must act decisively across finance, legal, operations, and marketing.

• Finance: Optimise Capital Allocation

1. Realign Budgets: Conduct a zero-based budgeting exercise to prioritise high-impact areas like supply chain upgrades or talent acquisition.
2. Track Unit Economics: Monitor customer acquisition cost (CAC) and lifetime value (LTV) to ensure sustainable growth.
3. Reallocate Funds: Shift capital from low-performing areas (e.g., ineffective ad campaigns) to critical needs like inventory management.

• Legal: Strengthen Compliance

1. Ensure compliance with private placement obligations, including SEBI regulations and investor covenants. Firms like LawCrust can provide expert legal support to streamline compliance and avoid penalties.
2. Review contracts with vendors or partners to prevent delays in scaling.
3. Maintain timely reporting to build investor trust and avoid private placement performance issues.

• Operations: Fix Process Gaps

1. Address supply chain bottlenecks by diversifying suppliers and optimising vendor relationships.
2. Implement lean inventory management to reduce capital tied up in unsold stock.
3. Use real-time logistics tracking to improve delivery timelines, critical for D2C brands.

• Marketing: Sharpen Go-to-Market Strategy

1. Assess return on ad spend (ROAS) to identify high-performing channels and eliminate wasteful campaigns.
2. Explore D2C and influencer-led growth to build brand loyalty and drive repeat purchases.
3. Customise audience segmentation using data analytics to target high-value customers effectively.

3. Technology & Governance Enablement

Technology and governance are critical to overcoming scaling problems after private placement for companies that have raised funds through private placement but haven’t scaled operations.

• Digitise Workflows: Implement CRM (e.g., Salesforce), ERP (e.g., Zoho), and demand forecasting tools to streamline operations and align production with market needs.
• Conduct Tech Stack Audits: Eliminate redundant tools to optimise IT spending. For example, consolidating analytics platforms reduces costs and complexity.
• Strengthen Governance: Establish a board with diverse expertise to guide post-funding strategy. Regular audits and performance reviews ensure accountability.

4. Investor Relations & Communication Strategy

Maintaining investor trust is vital for companies that have raised funds through private placement but haven’t scaled operations.

• Set Realistic Milestones: Define achievable goals, such as increasing monthly active users by 20% or reducing delivery times by 15% within six months.
• Communicate Transparently: Share regular updates on effective use of private placement funds, including challenges and mitigation plans.
• Plan for Course-Correction: Revamp GTM strategies, overhaul operations, or hire senior leaders (e.g., a COO with scaling experience) to address private placement performance issues.

Conclusion & Action Framework

For Consumer Goods leaders who have raised funds through private placement but haven’t scaled operations, decisive action is essential. By addressing capital utilisation challenges, optimising operations, leveraging technology, and maintaining investor trust, companies can reignite growth. Below is a 30-60-90 day action plan to tackle scaling problems after private placement:

• 30-Day Plan: Diagnose & Realise

1. Day 1-10: Conduct a financial audit to reallocate 10-15% of unutilised capital to critical areas (e.g., tech upgrades, key hires).
2. Day 11-20: Identify top 3-5 operational bottlenecks (e.g., supply chain delays, inventory mismanagement).
3. Day 21-30: Meet private placement investors to share diagnostic findings and outline initial plans.

• 60-Day Plan: Strategise & Implement

1. Day 31-45: Finalise a revised GTM strategy based on ROAS analysis. Begin fixing operational bottlenecks.
2. Day 46-60: Initiate critical hires and conduct a tech stack audit to identify digitisation quick wins.

• 90-Day Plan: Consolidate & Communicate

1. Day 61-75: Roll out CRM or ERP systems to digitise workflows.
2. Day 76-90: Measure KPI improvements (e.g., 15% revenue growth, 20% operational efficiency increase). Share a progress report with investors.

By executing this plan, companies can transform raised funds through private placement into sustainable growth, turning scaling problems after private placement into opportunities.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

For expert legal help, please contact us:

• Email: inquiry@lawcrustbusiness.com