What a Use of Proceeds Statement Contains and Why Investors Require It

A use of proceeds statement allocates the total capital being raised across specific operational categories: hiring, product development, sales and marketing, infrastructure, and working capital. Each allocation includes the amount assigned, the headcount or activity it funds, the timeline over which it will be deployed, and the milestone the company expects to reach before or upon full deployment. It is not a budget summary. It is a commitment with logical consequences that investors will test against the financial model.

The Distinction That Matters

A use of proceeds statement is not a narrative document. It is a financial statement that investors use to stress test the raise amount against the company's own plan. If the financial model projects 15 hires over 18 months and the use of proceeds allocates £800k to headcount, investors will calculate whether £800k is sufficient to cover 15 fully loaded hires at the implied seniority level over the stated timeline. A use of proceeds that does not reconcile to the headcount model in the financial model is an inconsistency that will be identified in diligence, not missed.

A raise that is too small relative to the milestones described in the use of proceeds is equally problematic. It signals that the company has not modeled what it will actually cost to achieve the plan it is presenting.

Why It Surfaces in a Raise Process

In a Series A data room, the use of proceeds is one of the first documents an investor's team maps against the financial model. The test is simple: do the allocations in the use of proceeds match the cost structure in the model over the same period? A company that allocates 30% of the raise to sales and marketing in the use of proceeds but shows a different percentage in the financial model has a narrative inconsistency that will require an explanation before the process advances.

The Common Structural Error

The most common error is writing the use of proceeds as a general category list without connecting each category to the financial model. Phrases like "sales and marketing expansion" and "product development" without amounts, headcount assumptions, or milestones do not constitute a use of proceeds statement. They constitute a heading.

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Tool: Financial Model Blueprint