Startup Finance FAQ: 100 Questions Founders Actually Ask
Everything you need to know about startup finance—fundraising, metrics, accounting, taxes, and building your finance team. Direct answers in plain English.
Fundraising & Investors
What should I include in a data room?
A data room should include: corporate documents (incorporation, cap table, stock purchase agreements), financials (P&L, balance sheet, cash flow for 2-3 years), metrics dashboard, customer list/contracts, employee list with salaries, IP documentation, and any material contracts. Organize by category and keep it updated throughout your raise.
How long does Series A fundraising take?
Series A fundraising typically takes 3-6 months from first meeting to wire. This includes 4-8 weeks of meetings, 2-4 weeks of term sheet negotiation, and 4-8 weeks of due diligence and legal. Budget for 6 months of runway during the process.
What's a typical SAFE valuation cap?
SAFE valuation caps vary by stage and market. For pre-seed in 2025-2026, typical caps range from $5-15M. Seed-stage caps range from $10-25M. Caps are higher in hot markets (AI, climate) and lower in competitive or mature spaces. The cap should reflect your expected Series A valuation minus a reasonable discount for early risk.
How much equity do investors get in a seed round?
Seed investors typically receive 15-25% of the company. A $2M seed at a $10M post-money valuation means investors get 20%. Most founders aim to retain 60-70% after seed. Calculate your dilution carefully across all rounds to ensure founders maintain meaningful ownership through exit.
What is dilution and how do I calculate it?
Dilution is the reduction in your ownership percentage when new shares are issued. Calculate it as: New Investor Shares ÷ (Existing Shares + New Shares). If you have 8M shares and issue 2M new shares, dilution is 2M/10M = 20%. Your ownership goes from 100% to 80%.
What's the difference between pre-money and post-money valuation?
Pre-money valuation is your company's worth before investment; post-money includes the new capital. If you raise $2M at $8M pre-money, your post-money is $10M. The investor owns $2M/$10M = 20%. Post-money SAFEs set the cap as post-money, giving investors a fixed ownership percentage.
When should I raise my next round?
Start fundraising when you have 9-12 months of runway remaining. You need 6 months for the process and 3-6 months buffer for delays. Also consider: have you hit the milestones for your next stage? Raising too early with weak metrics is harder than waiting.
What metrics do Series A investors want to see?
Series A investors look for: $1-2M ARR with strong growth (3x+ year-over-year), healthy unit economics (LTV:CAC > 3:1), low churn (<5% monthly for SMB, <1% for enterprise), product-market fit indicators (strong NPS, organic growth), and clear path to $100M+ revenue.
What's a typical pro-rata right?
Pro-rata rights allow investors to maintain their ownership percentage in future rounds by investing proportionally. If an investor owns 10% and you raise a new round, they can invest 10% of the new round to maintain 10% ownership. Standard for institutional investors, often negotiated for angels.
How do convertible notes differ from SAFEs?
Convertible notes are debt instruments with interest and maturity dates; SAFEs are not debt and have no maturity. Notes accrue interest (typically 4-8%) and must eventually convert or be repaid. SAFEs are simpler, have no interest, and only convert at a priced round. Most founders prefer SAFEs for their simplicity.
What is a term sheet and what should I look for?
A term sheet outlines key investment terms before legal documentation. Focus on: valuation and amount, board composition, liquidation preferences (1x non-participating is founder-friendly), anti-dilution provisions, protective provisions, and drag-along rights. Get a lawyer experienced in venture deals.
What is a 409A valuation and when do I need one?
A 409A valuation is an independent appraisal of your common stock's fair market value, required by the IRS before granting stock options. You need one before issuing options and should update it annually or after material events (new funding, major revenue change). Cost: $1,000-10,000 depending on complexity.
How does a down round affect my company?
A down round (raising at lower valuation than prior round) triggers anti-dilution protections, typically increasing investor ownership at founder expense. It signals struggles to employees and future investors. However, survival matters more than optics—a down round is better than running out of money.
What's the difference between a lead investor and participating investors?
The lead investor sets terms, does the most diligence, often takes a board seat, and writes the largest check (typically 50%+ of round). Participating investors (often angels or smaller funds) accept the lead's terms and fill out the round. Every round needs a lead to set the price.
What is an option pool and how big should it be?
An option pool is shares reserved for future employee equity grants. Investors typically require a 10-20% pool created before their investment (from pre-money). Size based on hiring plans—you'll need to refresh the pool in future rounds. Larger pools mean more founder dilution.
How do bridge rounds work?
A bridge is a small round (often notes or SAFEs) meant to extend runway until a larger priced round. Bridges from existing investors signal confidence; bridges from new investors at low caps can be predatory. Typical bridge terms include discounts to the next round price.
What are liquidation preferences?
Liquidation preferences determine who gets paid first in an exit. A 1x non-participating preference means investors get their money back first, then share pro-rata in remaining proceeds. Participating preferences let investors 'double dip'—get preference plus pro-rata share. Negotiate for non-participating.
What is a board seat and should investors get one?
A board seat gives voting power on major company decisions. Seed investors sometimes get board observer seats (no vote). Series A leads typically get one seat, creating a 3-person board (2 founders + 1 investor). Keep your board small early; add independent directors later.
How do venture debt and equity differ?
Equity gives investors ownership in exchange for capital. Venture debt is a loan that must be repaid with interest, usually with warrants (options to buy equity). Debt doesn't dilute like equity but requires payments and can accelerate if you breach covenants. Best used to extend runway between equity rounds.
What's a clean cap table and why does it matter?
A clean cap table has straightforward ownership with few investors, no complex instruments, and clear documentation. Messy cap tables (many small investors, conflicting SAFEs, missing paperwork) slow due diligence and scare institutional investors. Fix issues before raising.
Metrics & KPIs
What is a good LTV:CAC ratio?
A healthy LTV:CAC ratio is 3:1 or higher—you should generate $3 in customer lifetime value for every $1 spent acquiring them. Below 3:1 suggests inefficient growth; above 5:1 may indicate underinvestment in growth. Calculate LTV as ARPA × Gross Margin × (1/Churn Rate).
How do I calculate burn rate?
Burn rate is your monthly cash consumption. Gross burn is total monthly expenses. Net burn is expenses minus revenue: Net Burn = Monthly Expenses - Monthly Revenue. If you spend $200K/month and make $50K, net burn is $150K. Runway = Cash ÷ Net Burn.
What's the difference between ARR and MRR?
MRR (Monthly Recurring Revenue) is the sum of all recurring revenue normalized to a monthly amount. ARR (Annual Recurring Revenue) is MRR × 12. Use MRR for operational decisions and growth tracking; use ARR when talking to investors. Include only recurring revenue, not one-time fees.
What churn rate is acceptable for SaaS?
Acceptable churn varies by segment. SMB SaaS: 3-5% monthly (30-45% annual) is common but concerning. Mid-market: 1-2% monthly is target. Enterprise: <1% monthly expected, often with net negative churn from expansion. World-class SaaS has net revenue retention above 120%.
How do I calculate customer acquisition cost?
CAC = Total Sales & Marketing Spend ÷ Number of New Customers Acquired. Include all costs: salaries, ads, tools, events, content. Calculate over a consistent period (monthly/quarterly). Blended CAC includes all customers; paid CAC excludes organic acquisitions.
What is net revenue retention (NRR)?
NRR measures revenue from existing customers including expansion, contraction, and churn. NRR = (Starting MRR + Expansion - Contraction - Churn) ÷ Starting MRR. Above 100% means you grow even without new customers. Top SaaS companies have 120-140% NRR.
How do I calculate runway?
Runway = Cash Balance ÷ Monthly Net Burn. If you have $1.5M and burn $100K/month, runway is 15 months. Recalculate monthly as burn changes. Maintain 12-18 months runway; start fundraising at 9-12 months remaining.
What is gross margin and why does it matter?
Gross margin = (Revenue - Cost of Goods Sold) ÷ Revenue. For SaaS, COGS includes hosting, support, and customer success costs. Target 70-80%+ gross margins. Lower margins limit profitability potential and affect valuation multiples. Investors scrutinize this closely.
What's a good CAC payback period?
CAC payback is months to recover customer acquisition cost: CAC ÷ (Monthly Revenue × Gross Margin). Under 12 months is excellent; 12-18 months is good; over 24 months is concerning. Shorter payback means faster reinvestment in growth.
How do I calculate customer lifetime value (LTV)?
Simple LTV = ARPA × Customer Lifetime. More precise: LTV = ARPA × Gross Margin × (1/Churn Rate). If ARPA is $500/month, gross margin is 75%, and monthly churn is 2%, LTV = $500 × 0.75 × 50 = $18,750. Account for expansion revenue in sophisticated models.
What is Rule of 40?
Rule of 40 states that growth rate + profit margin should equal or exceed 40%. A company growing 50% with -10% margins hits 40. One growing 20% needs 20% margins. It balances growth and efficiency. Used to benchmark SaaS companies, especially post-Series B.
What is magic number in SaaS?
Magic number measures sales efficiency: (Current Quarter Revenue - Previous Quarter Revenue) × 4 ÷ Previous Quarter S&M Spend. Above 1.0 indicates efficient growth; below 0.5 suggests poor sales efficiency. Between 0.5-1.0 is acceptable depending on stage.
What's the difference between logo churn and revenue churn?
Logo (customer) churn is percentage of customers lost. Revenue churn is percentage of revenue lost. They differ when customer sizes vary. Losing 10 small customers vs. 1 large customer may be similar revenue impact but different logo churn. Track both.
How do I calculate expansion revenue?
Expansion revenue is additional revenue from existing customers through upsells, cross-sells, or increased usage. Calculate as: (Ending MRR from Existing Customers - Starting MRR from Same Customers) for customers who increased. Expansion rate = Expansion MRR ÷ Starting MRR.
What is quick ratio in SaaS?
SaaS quick ratio = (New MRR + Expansion MRR) ÷ (Churned MRR + Contraction MRR). It measures growth efficiency—how much revenue you add vs. lose. Above 4 is excellent; above 2 is good; below 1 means you're shrinking. Higher is better.
What is ACV and how is it different from ARPA?
ACV (Annual Contract Value) is the annualized value of a contract, including one-time fees prorated. ARPA (Average Revenue Per Account) is recurring revenue only. ACV matters for enterprise sales with professional services; ARPA matters for self-serve SaaS.
How do I calculate ARPU?
ARPU (Average Revenue Per User) = Total Revenue ÷ Number of Active Users. For SaaS, often calculated as MRR ÷ Customers = ARPA (per account, not user). Track over time—increasing ARPU indicates successful upselling or moving upmarket.
What is the difference between bookings and revenue?
Bookings are the total value of signed contracts. Revenue is recognized as services are delivered per accounting rules. A $120K annual contract is $120K in bookings but recognized as $10K/month in revenue over 12 months. Investors care about both.
How should I track cohort metrics?
Cohort analysis groups customers by signup date and tracks behavior over time. Key cohorts: retention curves (do later cohorts retain better?), revenue expansion, and LTV by cohort. Improving cohorts indicate product-market fit progression.
What is activation rate and why does it matter?
Activation rate measures users completing key actions that predict retention. Define your 'aha moment' (e.g., created first project, invited team member) and measure percentage of signups reaching it. Low activation = top of funnel problem; high activation with high churn = product problem.
Accounting & Bookkeeping
When should I switch to accrual accounting?
Switch to accrual accounting when you raise institutional funding, exceed $1M revenue, or need GAAP-compliant financials. Accrual matches revenue and expenses to when they're earned/incurred, not when cash moves. Most VCs require accrual-basis financials for due diligence.
What's included in a chart of accounts?
A chart of accounts organizes all accounts into categories: Assets (cash, AR, prepaid), Liabilities (AP, deferred revenue, debt), Equity (stock, retained earnings), Revenue (by type), and Expenses (COGS, S&M, R&D, G&A). Customize for your business but keep it simple—overly detailed charts create maintenance burden.
How does revenue recognition work for SaaS?
SaaS revenue is recognized ratably over the subscription period under ASC 606. A $12K annual contract recognized as $1K/month. Prepayments become deferred revenue (liability) until earned. Professional services recognized as delivered. Incorrect recognition is a common audit issue.
What is a monthly close process?
Monthly close is the process of finalizing financials for a period. Steps: reconcile bank accounts, update AR/AP, record accruals, verify deferred revenue, review expenses, generate financial statements. Target closing within 10-15 business days of month end. Faster closes = better decisions.
When do I need a financial audit?
You need an audit when: raising Series B+ (often required), revenue exceeds $10-20M, entering regulated industries, or planning exit/IPO. Some enterprise customers require audited financials. Audits cost $25K-100K+ and take 2-3 months. Plan ahead—messy books delay audits significantly.
What's the difference between bookkeeper, accountant, and controller?
A bookkeeper records transactions and reconciles accounts (entry-level). An accountant prepares financials and handles tax compliance (CPA helpful). A controller manages the accounting function, handles audits, and builds processes (CPA + experience). Most startups outsource bookkeeping, then hire controller at Series A.
How should startups categorize expenses?
Use standard categories for investor reporting: COGS (hosting, support), R&D (engineering salaries, tools), S&M (sales salaries, marketing spend), G&A (admin, rent, legal). Track by department and type. Consistent categorization enables benchmarking and helps with metrics calculation.
What is deferred revenue?
Deferred revenue is payment received for services not yet delivered—a liability on your balance sheet. When you collect an annual subscription upfront, it's deferred revenue that converts to recognized revenue monthly. Important for SaaS cash flow planning and GAAP compliance.
When should I get an accounting system (not spreadsheets)?
Get real accounting software immediately—QuickBooks Online or Xero work for most startups under $10M revenue. Spreadsheets create errors, lack audit trails, and waste time. At Series A or $2M+ revenue, consider NetSuite or similar for multi-entity and advanced reporting.
What are prepaid expenses?
Prepaid expenses are payments for future services shown as assets. Annual software subscriptions, insurance premiums, and rent deposits are common prepaids. Expense them ratably over the service period. Tracking prepaids ensures accurate monthly P&L.
How do I handle accounts receivable?
AR tracks money customers owe you. Invoice promptly, set clear payment terms (Net 30 is common), follow up on overdue accounts. Monitor DSO (Days Sales Outstanding)—target under 45 days. Build AR aging reports to spot collection problems early.
What is accounts payable?
AP tracks money you owe vendors. Record when billed, pay according to terms. Monitor DPO (Days Payable Outstanding) to optimize cash flow. Don't extend payment beyond terms—it damages vendor relationships and may indicate cash problems.
How do I account for equity compensation?
Stock options require ASC 718 accounting: recognize expense over vesting period based on grant date fair value. Record monthly expense with offset to additional paid-in capital. Get 409A valuations to set strike prices. This creates non-cash expense that affects GAAP P&L.
What is a bank reconciliation and how often?
Bank reconciliation matches your book balance to bank statement, identifying discrepancies (outstanding checks, unrecorded deposits, errors). Reconcile monthly at minimum—weekly for high-volume businesses. Unreconciled accounts indicate sloppy processes and potential fraud.
What financial statements do I need?
Three core statements: Income Statement (P&L) shows revenue and expenses over a period; Balance Sheet shows assets, liabilities, equity at a point in time; Cash Flow Statement shows cash movements by category. Add departmental P&L and AR/AP aging for management reporting.
How should I track department spending?
Code expenses by department (Engineering, Sales, Marketing, G&A) and category. Set up cost centers in your accounting system. Compare actual vs. budget monthly by department. Department owners should review their spending regularly to catch issues early.
What is GAAP and do I need to follow it?
GAAP (Generally Accepted Accounting Principles) are US accounting standards. Follow GAAP when: raising institutional funding, preparing for audit, reporting to board, or planning exit. Many early startups use cash-basis accounting but switch to GAAP accrual at Series A.
How do I handle multi-currency accounting?
Record transactions in original currency and convert to functional currency (usually USD) at transaction date. Revalue foreign balances monthly at current rates. Gains/losses flow through P&L or other comprehensive income. Most accounting systems handle this automatically.
What is the difference between cash and accrual accounting?
Cash accounting records transactions when money changes hands. Accrual accounting records when transactions occur (earned/incurred). A December sale paid in January is December revenue under accrual, January under cash. Accrual gives a truer picture of business performance.
How do I handle contractor vs. employee classification?
Misclassification is a major risk. Employees: you control when/how work is done. Contractors: they control their work, use own tools, work for multiple clients. Factors include behavioral control, financial control, and relationship type. When in doubt, consult an employment lawyer.
Taxes & Compliance
What is a 409A valuation?
A 409A valuation is an independent appraisal of your common stock's fair market value, required by IRS Section 409A before granting stock options. Sets the strike price for options. Get one before first option grants and update annually or after funding rounds. Costs $1K-10K.
How do R&D tax credits work?
R&D tax credits offset taxes dollar-for-dollar for qualified research expenses—typically 6-8% of eligible spending. Qualified activities: developing new products, improving existing ones, creating software. Startups under $5M revenue can apply up to $500K/year against payroll taxes even if unprofitable.
Why incorporate in Delaware?
Delaware offers: predictable business-friendly laws, experienced Chancery Court for disputes, no state tax on out-of-state income, and investor familiarity. VCs strongly prefer Delaware C-corps. The franchise tax is modest. You'll still register in states where you operate.
Do I owe sales tax on SaaS?
SaaS taxability varies by state—some states tax it as tangible property, others as a service (often exempt). You have nexus (tax obligation) where you have employees, significant sales, or physical presence. Use automated tools like Avalara or TaxJar. Get a sales tax study done.
What is an 83(b) election?
An 83(b) election lets you pay tax on restricted stock at grant (low value) rather than vesting (potentially higher value). Must file within 30 days of grant—no extensions. Critical for founders receiving stock at incorporation. Missing this deadline can cost millions in taxes.
What are the tax implications of different entity types?
C-corps pay corporate tax (~21%) and shareholders pay again on dividends (double taxation). S-corps and LLCs pass through to personal returns (avoiding double taxation). VCs require C-corps for investment. Choose based on fundraising plans—convert to C-corp before raising.
What is QSBS and how does it save taxes?
Qualified Small Business Stock (Section 1202) excludes up to $10M or 10x basis from capital gains tax on eligible C-corp stock held 5+ years. Requirements: company under $50M assets, active business, acquired at original issuance. Can save millions at exit. Plan early.
When do I need to file state tax returns?
File in states where you have nexus: employees, significant sales, or registered to do business. Most states require annual returns if you have nexus. Some states (like California) tax apportioned income. Track employee locations carefully—remote work creates new nexus.
What is payroll tax and how do I handle it?
Payroll taxes include: employer and employee Social Security/Medicare (7.65% each), federal and state unemployment, and income tax withholding. Use a payroll provider (Gusto, Rippling) to handle calculations, deposits, and filings. Missing deadlines triggers penalties.
How do stock options get taxed?
ISOs: no tax at grant or exercise (if held); taxed as capital gains at sale (if held 1+ year after exercise, 2+ years after grant). NQSOs: taxed as income on spread at exercise. AMT may apply to ISOs. Employees should consult a tax advisor before exercising.
What is transfer pricing?
Transfer pricing governs how multinational companies price transactions between subsidiaries. Must be 'arm's length' (market rate). Relevant when you have international entities. Improper transfer pricing triggers audits and penalties. Get tax advice when expanding internationally.
When do I need international tax planning?
Consider international tax planning when: hiring abroad (contractor vs. employer of record), establishing foreign subsidiaries, selling internationally (VAT/GST), or having founders in different countries. Structure early—fixing problems is expensive.
What records should I keep for taxes?
Keep for 7 years: bank statements, invoices, receipts, payroll records, tax returns, contracts. Indefinitely: incorporation documents, stock records, IP assignments. Use cloud storage with backup. Organized records make audits manageable and support deductions.
What is nexus and how does it affect my tax obligations?
Nexus is the connection triggering tax obligation in a jurisdiction. Physical nexus: offices, employees, inventory. Economic nexus: significant sales (varies by state, often $100K or 200 transactions). You must collect/remit applicable taxes where you have nexus.
How do I handle 1099s for contractors?
Issue 1099-NEC to US contractors paid $600+ annually. Deadline: January 31 to recipients, IRS. Collect W-9s before payment. Report payments by contractor, not invoice. Failure to file triggers penalties. Your payroll provider or accounting software can generate 1099s.
What is the Delaware franchise tax?
Delaware franchise tax is an annual fee for Delaware corporations. Two calculation methods: Authorized Shares (often results in huge tax) or Assumed Par Value Capital (usually much lower). Most startups should use Assumed Par Value. Due March 1. Minimum $175, cap $200K.
What are quarterly estimated taxes?
C-corps pay estimated taxes quarterly if expecting to owe $500+ annually. Due dates: April 15, June 15, September 15, December 15. Calculate based on expected annual tax or prior year safe harbor. Underpayment triggers penalties. Track with your accountant.
How do I deduct startup costs?
You can deduct up to $5K of startup costs immediately (reduced if over $50K total) and amortize the rest over 180 months. Startup costs include market research, training, and legal fees before operations begin. Once operating, expenses are deducted normally.
What tax implications does fundraising have?
Equity fundraising isn't taxable—you're selling stock, not receiving income. However: SAFEs/notes may have imputed interest, stock issued below 409A value triggers income recognition, and preferred stock terms can affect common stock value. Consult a tax attorney during raises.
What is Section 174 and how does it affect R&D expenses?
Section 174 (effective 2022) requires capitalizing and amortizing R&D expenses over 5 years (15 years for foreign) instead of immediate deduction. This increases taxable income for R&D-heavy companies. Major impact on startup cash flow. May be modified by Congress.
CFO & Finance Team
When do I need a fractional CFO?
Consider a fractional CFO when: preparing to raise funding, revenue exceeds $1-2M, financial decisions become complex, board/investors want better reporting, or you're spending significant founder time on finance. A fractional CFO provides strategic finance leadership without full-time cost.
What's the difference between CFO and controller?
A controller manages accounting operations: monthly close, reporting, compliance, and team management. A CFO focuses on strategy: fundraising, financial planning, investor relations, and business partnership. Most startups need a controller before a CFO. Some fractional CFOs include controller work.
How much does a fractional CFO cost?
Fractional CFO costs range from $2,000-10,000/month depending on scope, experience, and time commitment. Early-stage companies typically pay $2,500-5,000/month for monthly reporting, board support, and advisory. More intensive work (fundraising, M&A) costs more.
What should a CFO do day-to-day?
CFO activities include: financial planning and forecasting, investor/board relations, cash management, strategic analysis, pricing and deal structuring, team building, and business partnership with other leaders. Time allocation varies by stage—more operational early, more strategic later.
When should I hire a full-time CFO?
Hire a full-time CFO when: revenue exceeds $20-30M, complexity requires daily strategic finance attention, preparing for IPO, or post-Series C. Earlier for complex businesses (hardware, international). Full-time CFO salaries: $200-400K+ plus equity.
What does a startup finance team look like?
Typical progression: Founder does everything → Outsourced bookkeeping → Fractional CFO + bookkeeper → Full-time controller → Finance team (analysts, AP/AR) → Full-time CFO. At $10M ARR, expect 2-4 finance people. At $50M, 8-12. Build based on complexity and needs.
Should I outsource bookkeeping?
Yes, for most startups under $5M revenue. Outsourced bookkeeping costs $500-2,500/month and handles transactions, reconciliation, and basic reporting. Choose a firm with startup experience. Bring in-house when volume justifies it or you need daily finance support.
What should I look for in a fractional CFO?
Key criteria: startup experience (not just big company), your industry knowledge, fundraising experience if needed, board-ready communication skills, strategic thinking (not just accounting), and strong references. Chemistry matters—they'll be a close advisor.
How do I know if my bookkeeper is doing a good job?
Signs of good bookkeeping: monthly close within 10-15 days, reconciliations match bank statements, financials are accurate and consistent, they catch errors proactively, and you can answer investor questions from the data. Red flags: late closes, repeated errors, unclear explanations.
What is FP&A and when do I need it?
FP&A (Financial Planning & Analysis) covers budgeting, forecasting, variance analysis, and strategic analysis. Startups need basic FP&A from seed stage (usually handled by fractional CFO). Dedicated FP&A hires typically come at $15M+ revenue or when business complexity demands it.
How do I work effectively with a fractional CFO?
For best results: set clear expectations on deliverables and timing, share context about business challenges, include them in strategic discussions, give them access to key data and people, and provide feedback. The relationship should feel like partnership, not vendor management.
What financial reports should I get monthly?
Monthly package should include: P&L (actual vs. budget), balance sheet, cash flow statement, runway calculation, key metrics dashboard, AR/AP aging, and department spending. Add board deck quarterly. Reports should arrive within 15 days of month end.
Should finance be involved in strategic decisions?
Absolutely. Finance should partner on: pricing, hiring plans, market expansion, product investments, customer segmentation, and vendor negotiations. The best finance leaders translate data into strategic recommendations, not just report numbers.
How do I build finance processes that scale?
Design for 10x current volume: document procedures, use systems (not spreadsheets), build in controls, automate recurring tasks, and create clear ownership. Processes that work at $1M break at $10M. Invest in infrastructure before you desperately need it.
What is the finance function's role in fundraising?
Finance leads fundraising operations: data room preparation, financial model, investor Q&A, due diligence management, and term sheet analysis. The CFO/fractional CFO should partner closely with CEO on investor meetings and be able to speak credibly to sophisticated investors.
When should I hire a finance analyst?
Hire an analyst when you have enough data work to keep them busy full-time and someone to manage them. Typically $10M+ revenue or post-Series B. Before that, fractional CFO or outsourced support handles analysis. Analysts cost $70-120K in major markets.
What does 'board-ready financials' mean?
Board-ready financials are: accurate, timely (within 15 days of month end), formatted for clarity, include variance explanations, show key metrics, and anticipate questions. The goal is enabling productive board discussion, not just compliance.
How do I evaluate finance team performance?
Measure: close timing (days to complete), accuracy (errors caught in review), response time on requests, strategic contribution (insights provided), and stakeholder satisfaction. Good finance teams make the business faster and smarter, not just compliant.
What tools does a startup finance team need?
Core stack: accounting software (QBO, Xero, NetSuite), payroll (Gusto, Rippling), expense management (Brex, Ramp), FP&A/modeling (spreadsheets, then Mosaic or Runway), payments (Bill.com), and cap table (Carta). Add tools as complexity increases.
How do I transition from fractional to full-time CFO?
Plan the transition: define full-time role clearly (different from fractional scope), recruit with 3-6 month runway, have fractional CFO help with handover, document all processes and relationships, and maintain fractional access during transition. Rushed transitions lose institutional knowledge.
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