"Hire two engineers and launch v2 by Q3" beats "grow the business" every time.
When an investor asks "what will you do with the money?", they're asking two things at once. First: do you know what your priorities are? Second: will this investment actually move the needle, or will it just extend the runway without a clear destination?
A use of funds section is where you answer both questions clearly. It's one of the most underestimated parts of a fundraising pitch.
Start by defining the milestone you're trying to reach before your next fundraise. What does the business need to achieve to unlock the next round, or to become self-sustaining?
That milestone should be specific and measurable. "Get to product-market fit" is not a milestone. "Reach £15k MRR with less than 5% monthly churn" is a milestone. "Sign 20 paying enterprise customers" is a milestone. Once you have the milestone, work backwards: what does it take to get there? That becomes your use of funds.
Keep it to three to five categories. The most common ones at MVP stage are:
Product development — engineering time to build the features needed to reach your milestone. Be specific: "complete the reporting module and launch the mobile app."
Hiring — name the roles, not just the headcount. "One senior engineer and a part-time sales lead" is clearer than "two hires."
Sales and marketing — how you'll acquire the customers you need to hit your milestone. What channels, what budget, what expected return.
Operations — the infrastructure costs that come with growth: hosting, customer support tooling, legal and compliance where relevant.
A simple percentage breakdown tied to outcomes. "Product: 45% — gets us to a full v2 launch by Q3. Hiring: 30% — covers a lead engineer for 18 months. Sales and marketing: 20% — funds three months of paid acquisition to test two channels. Operations: 5% — covers tooling and infrastructure." That's it. It fits in a paragraph. It answers the question completely.
Vague categories with no outcomes attached ("growth: 40%"). Allocating money to things that sound impressive but don't connect to your milestone. Budgeting too tightly with no buffer for surprises. And treating the use of funds as a formality rather than a statement of priorities.
If you haven't already defined how much to raise and your runway calculation, read the guide on structuring a financial ask — the two go hand in hand.
A founder who says: "We're raising £250k. Here's exactly where it goes, here's the milestone each spend category enables, and here's the specific outcome that positions us for our seed round in 18 months." Investors who hear that know their money has a destination.
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Try the funding finder →This is general information, not financial or legal advice. Always do your own research and seek independent professional advice.