In the very early-stages, your startup finance strategy may be pretty straightforward. You need to establish your accounting platform and systems, including accounts receivable and accounts payable. You are going to want to identify the best payroll and banking solution for your company. And you definitely want to give some thought to tax considerations.
Financial projections are essentially made-up numbers that have nothing to do with your real business—they’re just another hoop that you need to jump through to satisfy investors, right? Wrong!
You’ve identified a pain point. You’ve come up with a solution. You’ve thought through your offering—and it’s a winner. You’re ready for next steps. You’re ready to raise some funding.
Or are you?
Bottom line is that you’re in business to make money. If your customers aren’t paying you, that’s a serious cash flow problem. If they’re slow to pay, that’s a problem as well. While late invoices are fairly common for many businesses, that doesn’t mean you can’t fight it. The key is process.
Valuation. You know you need one. Annually. What you may not know is that it really does matter who performs your valuation. There are a lot of valuation companies out there, so I know many entrepreneurs are tempted to just shop around until they find the lowest price, but this is a mistake.
Honestly fundraising can oftentimes feel like you’re navigating a minefield: one false step and the money blows up! That’s why you need to be clear on what you’re looking for, where to look for it, and what you need to get it.
Do you understand your true business costs? Do you know how much it really costs to run your business? If you don’t really understand your fixed and variable costs, how can you make sure that you are covering them?
“How can I connect with investors?” is one of the most common questions I hear from early-stage entrepreneurs. “Connect” is a good word to use. If you’re looking for funding, you don’t just want to “meet” investors, shake their hands and give them your quick pitch. You want to “connect” with them, to really make a deeper connection.
If the point of a business is to make money, then obviously you want to be very careful when it comes to managing that money. Your bank is key in this matter. Choosing a banking solution is one of the most important decisions you need to make as a startup. Your bank is more than just a place to store your money; it’s a tool to help you to minimize your financial risks and to manage your cash flow.
Once you have a VC on the hook, you’ll want to negotiate the best deal in terms of valuation and deal terms. Once you’ve reached an agreement, you’re done…or not!
Far from the end, receiving funding is actually just the beginning of a whole new stage for you and for your company —a stage full of financial statements, board meetings with VCs and more. A lot is about to change…
