Founderfuel backoffice talk oct 4 2011

Startup BackOffice 101 Mark MacLeod @startupcfo Real Ventures© Mark MacLeod 2011

Agenda What is “Back Office”? & why does it matter? Your Back Office Toolkit Measuring Your Business Hiring a CFO What Investors Expect...© Mark MacLeod 2011

What is “Back Office”?© Mark MacLeod 2011

Startup Back office Accounting Payroll, HR, Benefits Legal stuff Investor Relations Board & Governance© Mark MacLeod 2011

Why it Matters...© Mark MacLeod 2011

Trust Accounting: Accurate, reliable, timely, cash control Payroll, HR, Benefits: Reliable, tax, etc Legal stuff: Accessible, documented Investor Relations: Lots of info Board & Governance: Documented decisions© Mark MacLeod 2011

Startup Back office Toolkit© Mark MacLeod 2011

Startup Accounting... Do this... Also good (but your accountant won’t like them...) Don’t do this...© Mark MacLeod 2011

Startup Payroll & Benefits... The default... Bonus tool: It’s free... Don’t do it in house© Mark MacLeod 2011

Startup legals... Standard Agreements... Your VCs Everything else Don’t do this...© Mark MacLeod 2011

Startup Cash Accounting Tips...© Mark MacLeod 2011

Startup Accounting Tips... Vendor Payments: 15th & end of month Credit card for everything Outsource & batch (no more than 2x/ month)© Mark MacLeod 2011

Startup Legal / Governance Tips... Scan & archive everything NDA list Use lawyer only for templates & key docs Must: IP assignment, confidentiality,Work for hire© Mark MacLeod 2011

Measuring Your Business The basic financial reporting package Balance Sheet: Assets, liabilities, equity Operating Statement: Revenues, expenses Cashflow: Sources and uses of cash Dashboard: Key financial and non- financial metrics© Mark MacLeod 2011

Sample Financials... ACME STARTUP STATEMENT OF OPERATIONS ACME STARTUP For the year ended Jan. 31, 2009 BALANCE SHEET (All amounts in 000s CAD$) January 31, 2000 (All amounts in 000s CAD$) REVENUES COST OF DELIVERY ASSETS Hosting Customer Acquisition (partners) Current GROSS MARGIN Cash & equivalents Accounts receivable OPERATING EXPENSES Other receivables Sales & Marketing Prepaid expenses Personnel Customer Acquisition Marketing programs Travel & other Long-Term Capital assets, net Research & Development + QA Intellectual property Personnel Equipment, Licensing & Other TOTAL ASSETS Operations Personnel Equipment, Licensing & Other LIABILITIES & DEFICIT Current Corporate Accounts payable & accrued liabilities Personnel Bank loan Recruiting Facilities, Insurance & Office Deferred revenue Travel & other TOTAL LIABILITIES Communications & IT Professional fees SHAREHOLDERS EQUITY Total Expenses Common Shares Preferred A Shares EBITDA Preferred B Shares Amortization Accumulated deficit SRED, Grants Share issuance costs Foreign exchange Financial Contributed surplus NET LOSS© Mark MacLeod 2011

Startup Accounting Tips... WATERFALL Acquisition ACME STARTUP For every 100 visitors (not including usage) STATEMENT OF CASHFLOW For the year ended Jan. 31, 2009 Registration (All amounts in $ 000s CAD) Activation CASHFLOWS FROM OPERATING ACTIVITIES Retention Income (Loss) for the period USERS Other non-cash items New Total Change in non-cash operating working capital items USAGE Stat 1 CASHFLOWS FROM FINANCING ACTIVITIES Stat 2 Issuance of Shares (net of issuance costs) Stat 3 Loans EMPLOYEES CASHFLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment Net change Increase in intangible assets S&M R&D Ops DECREASE IN CASH AND EQUIVALENTS G&A CASH AND EQUIVALENTS - BEGINNING OF PERIOD Budgeted hires Actual hires CASH AND EQUIVALENTS - END OF PERIOD LIQUIDITY Cash & Equivalents Working Capital Number of months pure burn on hand© Mark MacLeod 2011

Tips for Good Reporting Summary format: Don’t send your whole GL Round up: $000s of $ Narrative: Tell your stakeholders what’s going on Dashboard: Give people a quick pulse of your Operating metrics User and revenue trends Hiring Cash burn & runway Don’t spend a lot of time on this early on© Mark MacLeod 2011

Non-Financial Measurement.. All web businesses should be data-driven! Know your Waterfall & conversion rates – visitors to register to active to paid Sources of best users Usage patterns Virality drivers Customer acquisition cost by source Churn Advance screening for low usage users who may churn and high usage folks who might pay© Mark MacLeod 2011

Role of the CFO Financier: Keep the bank ﬂush Technician: Controls, reporting Closer: Help bring in the big deals Operator: Process, metrics, discipline Lawyer: Check everything with words & a signature Sys Admin: Systems, information, data dude Cheapskate: Say “NO” a lot Consigliere: Any Godfather fans out there know what I’m talking about…© Mark MacLeod 2011

When you need one... Advisor: From day 1 (opportunity assessment) Part time: Early (help with 1st funding, etc.) Full time: “B” round© Mark MacLeod 2011

Investor Expectations Accurate, consistent & timely info You understand key metrics You know where $ are being spent Package: - Monthly ﬁnancials & dashboard - Regular blurb from the CEO (incubator - weekly; seed - bi-weekly; series A on - monthly) - One on one call before board meetings or if you have major issues - Full transparency (good, bad, ugly...)© Mark MacLeod 2011

thank you mark macleod twitter: @startupcfo blog: startupcfo.ca web: realventures.com about.me/markmacleod© Mark MacLeod 2011

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Founderfuel backoffice talk oct 4 2011

by Mark MacLeod on Oct 07, 2011

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