The decision to found a startup sets you on an unpredictable path. That's the difference between starting a small business and launching a startup: the former has a known business model with certain steps that must be taken (all with no guarantee of success, of course), while the latter is a temporary organization in search of a profitable, repeatable, and scalable business model.
In short, startups are chaos.
That doesn't mean, however, that there isn't information with which you can arm yourself to gradually master that chaos. In fact, there's so much information out there that it can be difficult to filter through it all and find what really matters at your particular stage.
That's why Spendesk and The Family came together to put together this guide to one topic in your entrepreneurial life: Startup Finance. Below you'll find a series of stages that startups pass through early in their existence, matched with resources to help you improve your financial operations as you move through each particular stage.
Note: We've built this resource using Notion because we want it to be a living document that can easily change over time. If you have suggestions of additional resources that could be of value to your fellow founders, don't hesitate to leave them as a comment!
Table of contents
You and your cofounders are excited! There aren't many feelings out there like identifying a real problem and throwing all your efforts into solving it.
At the same time, it can find pretty lonely. There are just a handful of you at the moment, and there's probably not a ton of money flowing in. (If there is, congratulations! Feel free to skip to a section more adapted to your stage ;)
But there are still essential things you can do now to make sure your finance operations are working properly. It's already important, and will be invaluable as you keep growing and iterating on your product.
A good business model is key to any startup. You likely won't be profitable for some time, but you still need to show that the company you're building has a marketable future. You may even be able to build early pricing and packaging for your first products, even if these will certainly evolve in time.
Remember that while it's true that great startups lose plenty of money, it's because they're plowing resources into growth - not because the underlying transaction loop isn't profitable. So even if you're experimenting like crazy today and don't really know the final (or even early) numbers, you can't forget about the importance of unit economics.
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Money today is more expensive than money tomorrow. You won't only be dealing with customers, you have to deal with suppliers and service providers, too. Understand the terms and payment periods, negotiate discounts or longer delays, and find free versions of software that give you 90% of what you need.
NB: Solid cash management can all give you more of the most precious resource in any startup: time.
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Until you're really selling a significant amount of products or handling a lots of inventory, you won't have many pressing accounting issues. Brand new companies don't turn over much money, so there's not a lot for the local tax office to worry about.
But you still want to create good foundations for the business. The moment you start trying to raise funds, investors will want to know that their money is in trustworthy hands. So showing clean, well-managed books is important - even if there's not much data in there.
At this stage, you need to understand the basics without going overboard. You likely need some advice from a chartered accountant, but you certainly don't need one full-time.
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Similar to accounting, you won't have a lawyer on the team (unless one of the founders has this background). And you probably won't need much legal advice - you're too busy building.
But you do need to make sure you have the basics right: having all your administrative documents in order from the beginning will show how you manage your business. Remember that anything you sign is going to be binding, so you need to understand what it means; and if something doesn't work for you, keep in mind that everything's negotiable. Don't hesitate to ask a lawyer for advice if needed. Setting up a solid foundation is important because as you approach seed funding, you'll need a lot more advice.
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As this initial period goes on and you get closer to that crucial MVP, your attention starts to turn to the next steps. Raising a seed round feels like the absolute make or break for any startup, and you'd be wise to take it seriously.
A lot of important finance processes will come in the next phase. For now, read the resources listed below and get mentally prepared for this incredibly significant moment.
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You just raised your seed round! Which means you must have a pretty good business idea - or at least one that has real potential. You're going to quickly add people to the team and start creating work systems. The product isn't perfect - yet - but it's getting better, and you're getting feedback from your users. And hopefully there's more cash flowing in today than there was back in the Takeoff stage.
With some money in the bank, you'll need good processes in place to manage it. Remember, though, that the goal is to keep growing. So what should you be thinking about to keep track of spending, speed up growth, and expand your customer base?
We introduced the core ideas in the previous phase. Now that you have money coming in and out more regularly, you'll be able to apply these ideas for real.
Of course, you won't have the high volume of flawless data you'll aim for as you continue to grow. But investors (both current and future) want to see that you can build these equations. Clear unit economics are essential to attract the more lucrative future funding rounds.
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With some money in the bank, you need to decide how to spend it. Remember that there's a big difference between spending money pre-product-market fit (when you're stumbling in the dark, unable to see where money could be best invested) and post-product-market fit (when you might not be working under the brightest lights yet, but at least you've got a flashlight ;).
Regardless, you still need to keep a close eye on money coming in and going out. You'll have more and more customers soon enough, and you need to be able to collect payments. And then all your own spending has to be legitimate and compliant. Plus, your new investors need to know that their money is well spent.
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[ ] Revisit your company expense policy and ensure it makes sense to new employees, including those working remotely.
[ ] If you have lots of travellers or high numbers of employee expenses, consider an expense management app or employee debit cards. Relying on a few company credit cards is fine when you're small, but becomes tedious and risky as the company grows.
Cash Flow Means Growth, Not Dividends, by Nicolas Colin
Company expense policy: A guide for modern businesses, by Spendesk
Cash is King, by Balthazar de Lavergne, The Family
At this stage, your accounting challenges probably haven't changed hugely. But you do have real money in the bank, and you must fulfill your legal obligations to the state.
Accounting is the art of recording transactions. So once you start receiving client payments and paying your own suppliers regularly, good accounting becomes a real need. Unless you're dealing with huge volume, you'll still probably be fine with external help. Most SaaS businesses, for example, bill on a monthly or annual basis, so there aren't too many transactions to handle.
If you do have a high number of transactions to worry about, you'll want an accountant available regularly - perhaps 1-2 days per week. It's still likely too early for a full-time finance team, though.