founderfuel backoffice talk oct 4 2011

© Mark MacLeod 2011

Startup

BackOffice

101Mark MacLeod

@startupcfoReal Ventures

© Mark MacLeod 2011

Agenda

What is “Back Office”? & why does it matter?Your Back Office ToolkitMeasuring Your BusinessHiring a CFOWhat Investors Expect...

© Mark MacLeod 2011

What is “Back Office”?

© Mark MacLeod 2011

Startup Back office

AccountingPayroll, HR, BenefitsLegal stuffInvestor RelationsBoard & Governance

© Mark MacLeod 2011

Why it Matters...

© Mark MacLeod 2011

Trust

Accounting: Accurate, reliable, timely, cash controlPayroll, HR, Benefits: Reliable, tax, etcLegal stuff: Accessible, documentedInvestor Relations: Lots of infoBoard & Governance: Documented decisions

© Mark MacLeod 2011

StartupBack 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...

Everything else

Don’t do this...

Your VCs

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Startup Cash Accounting Tips...

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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, equityOperating Statement: Revenues, expenses

Cashflow: Sources and uses of cashDashboard: Key financial and non-financial metrics

© Mark MacLeod 2011

Sample Financials...

ASSETS

CurrentCash & equivalents

Accounts receivable

Other receivables

Prepaid expenses

Long-TermCapital assets, net

Intellectual property

TOTAL ASSETS

LIABILITIES & DEFICITCurrent

Accounts payable & accrued liabilities

Bank loan

Deferred revenue

TOTAL LIABILITIES

SHAREHOLDERS' EQUITYCommon Shares

Preferred 'A' Shares

Preferred 'B' Shares

Accumulated deficit

Share issuance costs

Contributed surplus

ACME STARTUPBALANCE SHEETJanuary 31, 2000

(All amounts in 000s CAD$)

ACME STARTUPSTATEMENT OF OPERATIONSFor the year ended Jan. 31, 2009

(All amounts in 000s CAD$)

REVENUES

COST OF DELIVERYHostingCustomer Acquisition (partners)

GROSS MARGIN

OPERATING EXPENSES

Sales & Marketing Personnel Customer Acquisition Marketing programs Travel & other

Research & Development + QA Personnel Equipment, Licensing & Other

Operations Personnel Equipment, Licensing & Other

Corporate Personnel Recruiting Facilities, Insurance & Office Travel & other Communications & IT Professional fees

Total Expenses

EBITDA

AmortizationSRED, GrantsForeign exchangeFinancial

NET LOSS

© Mark MacLeod 2011

Startup Accounting Tips...

ACME STARTUPSTATEMENT OF CASHFLOW

For the year ended Jan. 31, 2009

(All amounts in $ 000s CAD)

CASHFLOWS FROM OPERATING ACTIVITIES

Income (Loss) for the period

Other non-cash items

Change in non-cash operating working capital items

CASHFLOWS FROM FINANCING ACTIVITIESIssuance of Shares (net of issuance costs)

Loans

CASHFLOWS FROM INVESTING ACTIVITIESAdditions to property, plant and equipment

Increase in intangible assets

DECREASE IN CASH AND EQUIVALENTS

CASH AND EQUIVALENTS - BEGINNING OF PERIOD

CASH AND EQUIVALENTS - END OF PERIOD

WATERFALL

AcquisitionFor every 100 visitors (not including usage)

Registration

Activation

Retention

USERSNew

Total

USAGEStat 1

Stat 2

Stat 3

EMPLOYEES

Net change

S & M

R & D

Ops

G & A

Budgeted hires

Actual hires

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 GLRound up: $000s of $Narrative: Tell your stakeholders what’s going onDashboard: Give people a quick pulse of your

Operating metricsUser and revenue trendsHiringCash 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 usersUsage patternsVirality driversCustomer acquisition cost by sourceChurnAdvance screening for low usage users who may

churn and high usage folks who might pay

© Mark MacLeod 2011

Hiring a CFO

This... Not this...

© Mark MacLeod 2011

Role of the CFO

Financier: Keep the bank flushTechnician: Controls, reportingCloser: Help bring in the big dealsOperator: Process, metrics, disciplineLawyer: Check everything with words & a

signatureSys Admin: Systems, information, data dudeCheapskate: Say “NO” a lotConsigliere: 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

q & a

Questions?

© Mark MacLeod 2011

thank you

mark macleodtwitter: @startupcfo

blog: startupcfo.caweb: realventures.com

about.me/markmacleod