SIIA recently took its Deciphering Finance event series to Austin, TX. The event brought together senior finance executives, CEOs and investors to discuss strategic planning, forecasting, risk management, revenue recognition, audit preparations, technology challenges and solutions, and more. I thought I would take a moment to share some key comments that came out of the discussion, some of which (if you really listen to) could impact your future growth and expansion.
Preparing for a sale:
Who owns the IP? Consider who your employees are, employees or independent contractors.
Get written assignments to IP.
On capital, get proper documentation in placebo.
Get buy-sell agreements.
Is it an asset sale or equity sale?
Buyers like asset sales.
Sellers prefer to sell equity.
Do your own due diligence on your investors.
Don’t raise money from someone who is not an accredited investor.
Negotiate the control of the earnout.
Screwing up equity incentive award grants to employees
Granting stock options without board approval
Startups should not issue common stock to investors, should issue preferred stock
What do investors look for when considering an investment?
Do you have your stuff together? (they used a different word here but will go with this version)
Why is the investment dollar you are seeking the right number? Do you know why you are asking for a specific amount?
Be able to tell the story, including what the investors going to get out of it.
Knowing your market – size and attributes.
What are the qualified metrics for various funding
A is not a larger version of seed.
Seed is about hope, vision and potential – your ability to share a vision.
A – Investors can see what you are selling and will look at the early management system.
B – Investors are looking at the ability to forecast, a mature management system and should be able to show a track record of predicting.
Things to remember:
Be realistic about time and how long it will take.
Don’t just look at investors in your market, shop around the country.
Strategic investors can help give you validation in the marketplace.
You might need different pitch decks, depending on the where the VC is based, know who you are pitching.
Don’t spend the money before it is yours, wait until you close.
First quarter after funding is where most companies fumble, have a plan.
You should always be thinking about your exit.
Be open to different types of exits. You may find that one buyer is a better fit for your culture than another
Do your homework before engaging an investment banker.
You don’t always need an investment banker.
Make sure the banker has your best interest and that you have the same vision.
Do your own due diligence on any potential investment banker.
If possible, invest in an audit. It provides credibility to sellers.
Accountant is just one role of finance. Consider the role about growth and being part of the growth process.
Changing the mindset is the biggest challenge. You should fire anyone who repeatedly says, “But we have always done it that way”.
Accounting systems do GAAP well but not SaaS metrics
Systems will be releasing those capabilities soon to provide finance teams a better picture of the business.
You can drive productivity when you upgrade systems.
You will not scale without the right systems.
For more details on the content discussed at Deciphering Finance please reach out to me at firstname.lastname@example.org.
SIIA’s Deciphering Finance series will continue in 2018. Stay tuned for dates and locations.
View the event photos below.