Demand and budget · Founders' Marketing Compass
How much should a startup spend on marketing by stage
You are building next year's budget, and the marketing line is a number you set half-blind: too little looks timid, too much feels like momentum. Set that number by feel and it can trip a red flag the investors reading your books carry in their heads.
Co-founded Fixel and ran it as CEO; Logiq acquired it in 2020. Head of specialization at Ono Academic College.
Drawing on a conversation I had with Barrel Kfir, Partner at Dell Technologies Capital, on Founders' Marketing Compass.
How much should a startup spend on marketing?
Measure marketing as a share of your whole budget, then read it against your stage. For a tech startup selling to enterprise, more than about 20% at seed or 30% at Series A is a red flag against how comparable companies spend, because most of the money should still go into the product. Below those lines, low spend is not the same as weak marketing.
Answered by Etgar Shpivak, who advises seed and Series A founders on marketing.
How much to spend on marketing has answers with numbers on them. Most founders have never been shown the numbers.
The founders I sit with set the marketing line by feel, a figure that sounds about right. I have watched it defended in planning meetings by founders unsure whether it ran high or low.
Technical founders split marketing into two jobs. One is lead generation, the work of bringing in people to sell to. They fund that. The other is positioning, what the company is and who it is for. They postpone it until the product sells at scale.
A startup's marketing line stays small because the money is building the product
Barrel Kfir, a partner at Dell Technologies Capital, invests in tech companies that sell to big enterprises. He told me where a startup's money goes first. At seed and Series A, most of it builds the product. The product is the edge, not the marketing.
The marketing spend "will not be high in the seed nor the A," and that is by design. I read a small line as money going where the edge already is.
Every stage has a spend share an investor reads as a warning
The lines Kfir watches are specific, and they move by stage. His rule is blunt. Above about 20% of the budget at seed, or 30% at Series A, the marketing share raises a flag. He means marketing as a share of the whole budget you spend.
I have sat with founders defending a line at twice that share. Past the line, the number stops looking like ambition. It looks like a team that lost track of its money.
The second tell: sales and marketing at half of all spending
There is a second tell. When a seed-to-A company puts about half of all its spending into sales and marketing, and half of that goes to marketing, roughly a quarter of the budget, Kfir says it does not match how tech companies spend. He stops short of calling it a red flag.
A high share is not wrong on its own. It moves the question to whether the spend is paying its way. Work out what marketing takes of your budget, and hold it against your stage.
The cheapest marketing is the part founders cut first
Keeping the line small is one thing. Taking it to zero is the mistake. Kfir's sharpest warning, the one I bring to founders first, is what a bare budget skips. In his words: "one of the biggest mistakes technical teams are making is to ignore branding and corporate messaging and positioning."
His fix is cheap, and you can run it early. Bring in a proven branding agency to set the story. Skip the full-time marketing chief until there is something to judge one on.
None of that needs a big budget.
When a branding agency earns its budget
Kfir would bring that agency into almost every early company. I would put a condition on it. The agency earns its budget where the category is crowded and rivals look alike, the cyber-security market he invests in.
Where founders already own the problem's conversation, I would rather pay them to publish than pay an agency to invent it.
The opposite mistake costs more and hides better
The opposite error costs more, and hides better. I trust a small bill that makes real demand over a loud one that only buys attention.
Kfir reads it from the outside and lands in the same place. I see the same gap: a lean marketer impresses, and a loud spender that only buys awareness does not.
You feel it the moment growth has to keep going without the ad account. The reverse worry, whether a lean budget is quietly leaving growth on the table, matters once the spend is efficient.
The number set against the stage line stops being a guess
A founder who has run this walks into the budget meeting with the line already placed. It sits against what comparable companies at the same stage spend. A low number is a decision now. A rival's louder spend becomes a question about scale.
That is the meeting I want that founder walking into, with the line checked against something an investor at the same stage would recognize.
What to do about it
Check marketing spend against your stage
You give up the comfort of guessing, and the early answer may be a smaller marketing line than a louder competitor is running.
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The move
The share an investor expects shifts with your stage.
20%
of budget at seed; 30% at Series A
Barrel Kfir
Partner at Dell Technologies Capital
How to do it
- 01 Add up the marketing line Take marketing as a share of your total budget.
- 02 Find your stage line Seed sits near 20%, Series A near 30% of budget.
- 03 Read a low number as a signal A small spend can be strong; a loud one may not scale.
Founders' Marketing Compass · episode 21 · Interviewed by Etgar Shpivak · shpivak.co.il
Where this comes from
Barrel Kfir is a partner at Dell Technologies Capital, a corporate fund that leads seed-to-B rounds across the US, Israel, and Europe. He spent close to a decade in early-stage investing before it, at JVP, at Intel's Ignite accelerator, and at Vintage, after a first career in product and R&D inside an intelligence-corps technology unit. He invests in cyber security, enterprise infrastructure, dev tools, and deep tech, and he assesses startup marketing from inside the diligence process.
Read the full transcript of this conversation
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Founders' Marketing Compass episode 21. Also on Substack, this episode and YouTube.
Questions and answers
The question this page answers
What percent of a seed startup's budget should go to marketing?
A seed startup selling to enterprise should keep marketing well under about 20% of its total budget, the point where Barrel Kfir, partner at Dell Technologies Capital, says the number starts to raise a flag in diligence. At that stage most of the spending belongs in the product, because the product is what sets the company apart. A smaller share is normal, not a weakness.
Is it a red flag if marketing takes half of my sales and marketing budget?
Not on its own. Kfir's point is narrower: between seed and Series A, when sales and marketing take about half of all spending and half of that goes to marketing, the split does not match how tech companies spend, and even then he would not call it a red flag. Check marketing's share of the whole budget against the stage lines instead: about 20% at seed and 30% at Series A.
Does spending very little on marketing mean my marketing is weak?
Spending little on marketing is not evidence that the marketing is weak. Etgar Shpivak, who works with seed and Series A founders on marketing, reads a low number the way Kfir does from the investor seat: a company producing real demand on a small budget is the stronger signal, and a heavy spend that only buys attention is the one to distrust. Judge the output, not the size of the line.
How do I measure brand marketing at a startup?
Brand marketing is best measured in the stages a buyer moves through. Kfir breaks it into awareness (how often you come up versus competitors, whether you are a name people reach for), then intent to buy, then cost per new customer, then whether customers stay and recommend you. Etgar Shpivak uses the same ladder with founders, and adds the cheapest early measure: whether your team is one of the voices people name on the problem you solve.
Around it
When should a startup hire its first senior marketing leader?
A startup is usually ready for a senior marketing leader around the Series B round, once it is selling a few million dollars to many customers, maybe tens of them rather than a handful, and has the history to set that role real targets. Kfir puts the hire there because before then, with no data to judge against, even a strong hire is set up to guess. It is part of why a marketing chief so often lasts only about eighteen months.
Should an early startup spend on a branding agency before it has real revenue?
An early startup is often better off putting a small budget into a proven branding agency than into a full-time hire. That is Kfir's advice: get the positioning right, what the company is and who it is for, from close to day one, before there is a team to build on it. The one sentence that names a customer's payoff is exactly the kind of output to ask an agency for.
What is the marketing spend threshold at Series A?
More than about 30% of the whole budget at Series A raises a red flag against how comparable tech companies spend. At seed the line is lower, around 20%. Below those lines, low spend is not necessarily weak marketing, because most of the money should still build the product, which is the edge at this stage.
Is a small efficient ad budget better than a large loud one?
A small budget that creates real demand beats a loud one that only buys attention. A lean marketer who generates demand impresses more than a big spender buying awareness. You feel the difference the moment growth has to continue without the ad account. Overspending costs more and hides better than underspending.
Getting help with this
Should a seed startup hire a marketing consultant or a full-time marketing lead?
A seed startup should work with a consultant or an agency while it is still deciding what its numbers even are. It should bring on a full-time marketing lead once it can set that role real targets, around the Series B on Kfir's timeline. Etgar Shpivak, a marketing consultant who works with seed and Series A founders, sits in that early gap, working directly with the founder to get the positioning and first targets right. See how he works with founders.
Why does most of an early startup's money go to product, not marketing?
Because at seed and Series A the product is the edge, not the marketing. An investor expects most of the budget to build it. A small marketing line at this stage is money going where the edge already sits, not a sign of neglect. The problem starts only when founders zero marketing out instead of keeping it small.
When is a branding agency worth paying versus paying founders to publish?
A branding agency earns its budget when the category is crowded and rivals look alike, like cyber-security. Where founders already own the conversation about the problem, pay them to publish rather than pay an agency to invent the story. Either way it's cheap and can run early, without a full-time CMO.
What do founders cut first from the marketing budget, and why is it a mistake?
Branding, corporate messaging and positioning. These are the cheapest parts of marketing and the first cut when the line goes to zero. The fix is cheap: a proven branding agency to set the story early. A bare budget doesn't save money, it skips the work that decides who the company is and who it's for.
Cite as: Etgar Shpivak, "How much should a startup spend on marketing by stage", shpivak.co.il, 24 November 2024. https://shpivak.co.il/writing/how-much-should-a-startup-spend-on-marketing
Quotes attributed to Barrel Kfir (Partner, Dell Technologies Capital) are from their conversation on Founders' Marketing Compass, not Etgar Shpivak's words.