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@jasonpulsifer13jason@conseroglobal.com

Cecilia FrerotteAudit Senior Manager, Wolf & Company, P.C.

12 years experience in accounting/auditing@bostoncpafirmcfrerotte@wolfandco.com

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?