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Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
Startup Cfo Basics
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Startup Cfo Basics

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A presentation on CFO basics for tech startups

A presentation on CFO basics for tech startups

Published in: Economy & Finance, Business
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  • 1. Montreal Startup Workshop Day Dec. 6, 2008 Startup CFO Basics www.startupcfo.ca
  • 2. AGENDA <ul><li>Who the heck is this guy? </li></ul><ul><li>The role of finance in a startup </li></ul><ul><li>Raising money </li></ul><ul><li>Spending money </li></ul><ul><li>Getting money without giving up equity </li></ul><ul><li>Measuring your business – financial &amp; non-financial </li></ul><ul><li>Financial planning – the budget </li></ul><ul><li>Links &amp; resources </li></ul>Copyright © 2008 - Mark MacLeod
  • 3. Who the heck is this guy??? Copyright © 2008 - Mark MacLeod
  • 4. A history (in progress)… <ul><li>1990 – 96: Audit &amp; Corporate finance </li></ul><ul><li>96 -98: Snowboarding </li></ul><ul><li>‘ 99 Startup land: </li></ul><ul><li>2002: Downturn </li></ul><ul><li>2004: Another startup: </li></ul><ul><li>2006: Terrascale: A nice exit… </li></ul><ul><li>2007: Mobivox </li></ul><ul><li>Today: TUNGLE! </li></ul>Copyright © 2008 - Mark MacLeod
  • 5. The role of finance… Copyright © 2008 - Mark MacLeod
  • 6. Why do companies fail? <ul><li>MANY reasons, but ultimately… </li></ul><ul><li>BECAUSE THEY RUN OUT OF CASH! </li></ul>My job? Make sure this does not happen! Copyright © 2008 - Mark MacLeod
  • 7. Finance – Command &amp; Control Image courtesy of Valhalla Partners Copyright © 2008 - Mark MacLeod
  • 8. The role of a Startup CFO… THIS… NOT THIS… Copyright © 2008 - Mark MacLeod
  • 9. The role of a Startup CFO… <ul><li>Financier : Keep the bank flush </li></ul><ul><li>Technician : Controls, reporting </li></ul><ul><li>Closer : Help bring in the big deals </li></ul><ul><li>Operator : Process, metrics, discipline </li></ul><ul><li>Lawyer : Check everything with words &amp; a signature </li></ul><ul><li>Sys Admin : Systems, information, data dude </li></ul><ul><li>Cheapskate: Say “NO” a lot </li></ul><ul><li>Consigliere : Any Godfather fans out there know what I’m talking about… </li></ul>Copyright © 2008 - Mark MacLeod
  • 10. When do you need a CFO? <ul><li>Advisor: From day 1 (opportunity assessment) </li></ul><ul><li>Part time: Early (help with 1 st funding, etc.) </li></ul><ul><li>Full time : “B” round </li></ul>Copyright © 2008 - Mark MacLeod
  • 11. Raising Money Copyright © 2008 - Mark MacLeod
  • 12. The fundraising journey… <ul><li>Friends &amp; Family / Seed: Small &amp; easy </li></ul><ul><li>A round: Local, relatively easy </li></ul><ul><li>B round : The hardest.. </li></ul><ul><li>C &amp; up : All about traction… </li></ul>Image courtesy of Healy Jones @ www.startable.com /www.atlasventures.com Copyright © 2008 - Mark MacLeod
  • 13. The Process <ul><li>Know your </li></ul><ul><ul><li>Business – what makes you unique? </li></ul></ul><ul><ul><li>Industry – key factors, motivations for buying your stuff </li></ul></ul><ul><ul><li>Numbers – metrics, financials, cash burn </li></ul></ul><ul><ul><li>Comparables – competition, relevant exits </li></ul></ul><ul><ul><li>Strengths &amp; weaknesses – Don’t hide them </li></ul></ul><ul><ul><li>Strategy – how will you build a big, valuable business quickly? </li></ul></ul><ul><ul><li>Audience – why are you pitching me? </li></ul></ul><ul><ul><li>Needs – how much money till exit? </li></ul></ul>Copyright © 2008 - Mark MacLeod
  • 14. The Process (cont.) <ul><li>A sample timeline: </li></ul><ul><li>Weeks -4,- 2: Prep your deck, exec summ, pro formas. Assemble your hit list </li></ul><ul><li>Week -1: Practice </li></ul><ul><li>Week 1: Launch your attack – parallel, not serial. Send out your teaser. Book 1 st meetings. </li></ul><ul><li>Week 2, 3: 1 st meetings </li></ul><ul><li>Week 4, 5: 2 nd meetings – in person. &gt; 1 partner </li></ul><ul><li>Weeks 6 – 8: Early diligence </li></ul><ul><li>Week 9: ALL PARTNERS MEETING </li></ul><ul><li>Week 10: Term sheet </li></ul><ul><li>Weeks 11 – 15: Docs &amp; closing </li></ul><ul><li>Week 16: Sleep! </li></ul>Copyright © 2008 - Mark MacLeod
  • 15. Fundraising tips &amp; truisms <ul><li>Love at 1 st sight </li></ul><ul><li>Go for the “no” </li></ul><ul><li>Local first </li></ul><ul><li>Be prepared! </li></ul><ul><li>Time is not on your side - Create urgency </li></ul><ul><li>Time around something that generates momentum / buzz </li></ul><ul><li>Get good advisors </li></ul><ul><li>You will be rejected – a lot! </li></ul><ul><li>6 months – maybe more these days </li></ul><ul><li>No agents! </li></ul>Copyright © 2008 - Mark MacLeod
  • 16. Fundraising in a downturn… <ul><li>Will take longer </li></ul><ul><li>Flat is the new up. Down is the new flat </li></ul><ul><li>VC alphabet: B level traction to raise an A round </li></ul><ul><li>Smaller amounts </li></ul><ul><li>Angels are your friend </li></ul><ul><li>Get to revenue faster </li></ul>Copyright © 2008 - Mark MacLeod
  • 17. Spending Money… Copyright © 2008 - Mark MacLeod
  • 18. Where to spend… <ul><li>Team! Engineers, Product Management </li></ul><ul><li>Product &amp; usability </li></ul><ul><li>Good lawyers </li></ul>Copyright © 2008 - Mark MacLeod
  • 19. Where NOT to spend… <ul><li>Big management teams </li></ul><ul><li>Marketing &amp; advertising </li></ul><ul><li>Big outsourcing projects </li></ul><ul><li>Bonuses (with some exceptions…) </li></ul><ul><li>Travel (again, with some exceptions…) </li></ul><ul><li>Outside sales forces </li></ul>Copyright © 2008 - Mark MacLeod
  • 20. Common spending pitfalls <ul><li>Hiring too many people </li></ul><ul><li>Hiring the wrong people </li></ul><ul><li>Doing too many things </li></ul><ul><li>Goldplating </li></ul><ul><li>Not getting short-term, hard returns </li></ul><ul><li>Giving a % of your R &amp; D refund to a consultant </li></ul>Copyright © 2008 - Mark MacLeod
  • 21. Getting money for free (sort of…) Copyright © 2008 - Mark MacLeod
  • 22. Non-dilutive financing sources <ul><li>R &amp; D tax credit loans : </li></ul><ul><ul><li>See your bank </li></ul></ul><ul><ul><li>Investissement Quebec guarantee *** </li></ul></ul><ul><ul><li>Not cheap - Private sources may be better </li></ul></ul><ul><li>IRAP : http://irap-pari.nrc-cnrc.gc.ca/ </li></ul><ul><ul><li>Grants for research </li></ul></ul><ul><ul><li>Currently out of cash till next year </li></ul></ul><ul><li>Investissement Quebec *** or Canada Economic Development: </li></ul><ul><ul><li>Commercialization loans </li></ul></ul>Note: *** This is for Quebec-based companies only Copyright © 2008 - Mark MacLeod
  • 23. Measuring your business Copyright © 2008 - Mark MacLeod
  • 24. Financial measurement <ul><li>The basic financial reporting package </li></ul><ul><li>Balance Sheet : Assets, liabilities, equity </li></ul><ul><li>Operating Statement : Revenues, expenses </li></ul><ul><li>Cashflow : Sources and uses of cash </li></ul><ul><li>Dashboard : Key financial and non-financial metrics </li></ul>Copyright © 2008 - Mark MacLeod
  • 25. My tips for good reporting <ul><li>Summary format : Don’t send your whole GL </li></ul><ul><li>Round up : $000s of $ </li></ul><ul><li>Narrative : Tell your stakeholders what’s going on </li></ul><ul><li>Dashboard : Give people a quick pulse of your </li></ul><ul><ul><li>Operating metrics </li></ul></ul><ul><ul><li>User and revenue trends </li></ul></ul><ul><ul><li>Hiring </li></ul></ul><ul><ul><li>Cash burn &amp; runway </li></ul></ul><ul><li>Don’t spend a lot of time on this early on </li></ul>Copyright © 2008 - Mark MacLeod
  • 26. Sample Balance Sheet Copyright © 2008 - Mark MacLeod
  • 27. Sample Operating Statement Copyright © 2008 - Mark MacLeod
  • 28. Sample Cashflow Statement Copyright © 2008 - Mark MacLeod
  • 29. Sample Dashboard Show at least 3 months Key metrics Usage trends Copyright © 2008 - Mark MacLeod
  • 30. Non-Financial measurement <ul><li>All web businesses should be data-driven! </li></ul><ul><li>Know your </li></ul><ul><ul><li>Waterfall &amp; conversion rates – visitors to register to active to paid </li></ul></ul><ul><ul><li>Sources of best users </li></ul></ul><ul><ul><li>Usage patterns </li></ul></ul><ul><ul><li>Virality drivers </li></ul></ul><ul><ul><li>Customer acquisition cost by source </li></ul></ul><ul><ul><li>Churn </li></ul></ul><ul><ul><li>Advance screening for low usage users who may churn and high usage folks who might pay </li></ul></ul>Copyright © 2008 - Mark MacLeod
  • 31. Financial Planning <ul><li>The Budget or Pro Formas… </li></ul>Copyright © 2008 - Mark MacLeod
  • 32. Pro Formas <ul><li>Typical Contents </li></ul><ul><li>Assumptions – document ALL key assumptions </li></ul><ul><li>Core financials – Balance, Ops, Cashflow </li></ul><ul><li>Hiring plan </li></ul><ul><li>Department plans </li></ul><ul><li>Capex plan </li></ul>Copyright © 2008 - Mark MacLeod
  • 33. Pro Formas <ul><li>Bonus Contents </li></ul><ul><li>Per user economics + when do they become positive? </li></ul><ul><li>Break-even point for your business </li></ul><ul><li>Key metrics </li></ul>Copyright © 2008 - Mark MacLeod
  • 34. Pro Formas <ul><li>Tips for great budgets </li></ul><ul><li>Enable the reader to test different scenarios just by changing assumptions </li></ul><ul><li>Include sensitivity on revenue </li></ul><ul><li>Involve all key people in the process </li></ul><ul><li>Make people accountable </li></ul>Copyright © 2008 - Mark MacLeod
  • 35. Pro Formas <ul><li>Getting budgets approved </li></ul><ul><li>Don’t surprise investors – give them time to understand </li></ul><ul><li>Remember – once they have invested, budget approval is the biggest control your investors have. They will use it </li></ul><ul><li>Get 1 on 1 buy-off, then ask for official approval </li></ul><ul><li>Final thoughts… </li></ul><ul><li>Not a big fan of multiple versions…(1 for VCs, 1 for running the business) </li></ul>Copyright © 2008 - Mark MacLeod
  • 36. Links and resources Copyright © 2008 - Mark MacLeod
  • 37. Smart people (oh and me too…) <ul><li>http://cracking-the-code.blogspot.com/ (SaaS thoughts) </li></ul><ul><li>http://onstartups.com/ </li></ul><ul><li>http://bostonvcblog.typepad.com/vc/ (great VC blog) </li></ul><ul><li>http://www.startable.com/ (ditto) </li></ul><ul><li>http://startups.alltop.com/ </li></ul><ul><li>Http://www.startupcfo.ca </li></ul>Copyright © 2008 - Mark MacLeod
  • 38. THANK YOU! Copyright © 2008 - Mark MacLeod

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