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You Have the Money -Now What?Finance & Accounting for Startups Post Investment
Your Guides
Jason PulsiferDirector of Business Development, ConseroFounder/CEO, Starting11
15 years experience in startup finance/accounting@[email protected]
Cecilia FrerotteAudit Senior Manager, Wolf & Company, P.C.
12 years experience in accounting/auditing@[email protected]
Agenda
1. To help you communicate with your investors
2. To outline some finance/accounting best practices
3. To help you understand your new responsibilities
Important Terms & Definitions
Investor Questions
Infrastructure Requirements
Compliance
Q&A
Objective
Important Terms & Definitions
Finance: management of money; plan-forecast-budget (what’s going to happen)
Accounting:process of summarizing & reporting financial transactions (what’s happened)
Bookkeeping: process of recording transactions in accounting (what’s happening now)
Key Performance Indicators (KPI): Financial/non-financial metrics used to measure progress
Garbage In – Garbage Out: Sloppy accounting means sloppy results
Budget/Forecast/Projection:Forward looking financial plans – almost always excel
Due Diligence: Analysis & confirmation of facts, data, etc. prior to investment or sale
Income Statement/Profit & Loss/P&L:Revenue – Expenses = Net Profit/(Loss)
Balance Sheet:Assets = Liabilities + Equity
Statement of Cash Flow:Sources/Uses of Cash – Operating, Financing, Investing
GAAP:Generally Accepted Accounting Principles, rules & standards for financial
reporting
Audit:Independent verification of a company’s financial records
Internal Controls:Set of policies, procedures, activities designed to maintain integrity &
reduce risk
Compliance:Ability to acct in accordance with GAAP, Federal, State, Etc Regulations
Fiduciary:Obligation to act in the best interest of another
Questions Every Investor Wants to Know:
1. What are you doing with the money?
2. How is the business performing?
3. When are you going to run out of money?
1. What are you doing with the money?
Financial Reporting
Investor Questions
• Income Statement, Balance Sheet, Statement of Cash flowStandard Financial Reporting
• Period Income Statement compared to budget with variancesComparison to Budget
• Current period compared to prior period with variancesComparison to Prior Period
• Break out Revenue & COGS by each product to show profit and margin %Gross Profit by Product Line
2. How is the business performing?
Investor Questions
Key Performance Indicators & Growth MetricsAgreed upon between Investor and Exec Team prior to funding
SaaS Metrics
• Lifetime Value
• Customer Acquisition Cost
• Monthly Recurring Revenue
• Net MRR Churn
• New Bookings
• New Users by Channel
Other KPIs
• Monthly Active User Growth
• Net Promoter Score
• Average Order Size
• Unique vs Returning Visitors
• Cost per Lead
• Conversion Rate
3. When are you going to run out of money?
Investor Questions
Cash Forecast
Impact of actual results on future consideration
Update Burn Rate Monthly
Project “fume date”
Better to raise money when you don’t need it
Infrastructure Requirements
Systems
People
Process
How do we get there?
Process
Infrastructure Requirements
Best Practice: Automate process workflow, Document Internal Controls
Order to Cash
Accounts Payable
PayrollEmployee Expenses
Employee Onboarding
Options & Equity Grants
Reporting
Systems
Infrastructure Requirements
Best Practice: Integrate systems to automate process
GeneralLedger
AP/AR Payroll CRM Cap Table Payment Employee Expenses
Reporting/ Dashboards
QuickBooks Bill.com ADP Salesforce eShares Stripe Concur Domo
Xero Freshbooks Paychex Hubspot Capshare Square Expensify Grow
Netsuite MineralTree Gusto Zoho Shoobx Paypal Nexonia Visible.vc
Intacct Paysimple ConnectPay Pipedrive Captable.io Braintree Tallie Tableau
People Infrastructure Requirements
Best Practice: Part-time or Full-time? Depends on size, complexity and stage of the business
Title Role Part-time rate Full-time rate
CFO Overall Company Financial Strategy > $200/hour >$200k/year
Controller Accounting Oversight & Reporting ~ $150/hour $120k-$180k/year
VP Finance Finance Oversight & Treasury ~ $150/hour $120k-$180k/year
Finance Director Business Performance Analysis ~ $150/hour $120k-$180k/year
Accounting Manager Month End Close ~ $100/hour $90k-$120k/year
Accounting Staff Transaction Processing (ie. Payables & Receivables) $50-$75/hour $50k - $80k/year
Bookkeeper Data Entry $25-$50/hour $40k-$60k/year
Audits
Compliance
Investor Requirement
• Audit history validates results
• Required in an exit, additional financing round
• Facilitates due diligence
Internal Controls
• Segregation of duties
• Custody
• Authorization
• Recordkeeping
• Document Retention
Common Issues
• GAAP ≠ logic
• Revenue recognition
• Equity & debt transactions
• Non-cash transactions
Taxes
Compliance
Choice of Entity
• C Corp vs Pass-thru
• Fit for future plans?
Federal Filing Requirements
• Don’t buy into the myth!
State Tax Issues
• Nexus
• Implications?
Operating Losses
• What are they?
Contractors
• Contractor vs Employee
• Form 1099
Questions?
