Just closed your Series A round? Congratulations! Raising a Series A is a major milestone in the lifecycle of any startup. It demonstrates your business has real traction and that investors believe in your product, your leadership, and your future prospects.
Take a moment to celebrate. Running a startup is no easy task, and it’s important to take a second and appreciate your wins. But after that, it’s time to get back to work.
A Series A brings about a wide range of new opportunities for your business. Perhaps for the first time, you have significant capital to put to work. That means you can hire talented professionals, build out a salesforce, invest in marketing, and so on.
But all of this, plus the demands of your new investors, does mean that you have to take a slightly more sophisticated approach to accounting and finance.
Here are six accounting and finance steps you should take after closing a Series A round:
- Become GAAP compliant
- Commit to regular board meetings
- Build a long-term financial forecast
- Identify (and track) key metrics
- Monitor spending carefully
- Hire an outsourced CFO
By taking these steps, founders can ensure they build their company on a solid financial foundation. A structured approach to accounting and finance strengthens relationships with investors, minimizes the potential for nasty financial surprises, and helps leaders make critical decisions with higher levels of clarity.
Ready to get serious about your accounting and finance infrastructure? Check out our Ultimate Guide to SaaS Business Accounting to learn everything you need to know.
1. Become GAAP Compliant
As private businesses, startups aren’t required to be GAAP-compliant by law, but that doesn’t mean investors won’t mandate it.
Generally Accepted Accounting Principles, more commonly known as GAAP, are a series of accounting rules and standards that create a uniform structure for businesses to use when reporting financial results.
Investors see becoming GAAP-compliant as a sign of fiscal maturity: an indicator your company will allocate capital in a transparent, measurable way. A major part of GAAP compliance is committing to producing three financial statements each month: a Profit & Loss Statement, a Balance Sheet, and a Cash Flow Statement. Committing to creating these statements every month gives both leaders and investors increased clarity into the financial position of the business.
2. Commit to Regular Board Meetings
Maintaining a strong, productive relationship with your board of directors is crucial to the long-term success of your business. A major component of that relationship is board meetings: regular meetings between your leadership team and your investors (plus any independent directors).
Board meetings are an opportunity to share your business’s progress, discuss challenges, and build consensus around the strategic direction of the business. Meetings should occur at least quarterly but can happen more often, sometimes on a monthly basis. Merely meeting regularly isn’t enough: as a founder, you need to satisfy board reporting requirements to ensure that these meetings are valuable to the business.
The best CEOs we have worked with do not look at these meetings as obligations but a chance to share the progress and challenges with the board and get guidance on the pressing issues of the day. If board members are hearing things for the first time during board meetings, then you should consider increasing the frequency of informal communications with the board between formal board meetings. Nobody likes to be surprised when reviewing the board materials prior to the meeting or worse at the meeting.
3. Build a Long-Term Financial Forecast
A robust, data-backed financial forecast is a crucial asset for any fast-growing business. It functions as a strategic roadmap, informing major decisions and defining critical milestones.
As a founder, it’s likely you already have a rudimentary version of this that you shared with investors during the fundraising process. Now that the round has closed, it’s time to flesh this out with more specifics, outlining timelines, budget amounts for different departments, and hiring plans as your business scales.
Create multiple versions of your model and stress-test these to ensure your business is resilient enough to handle every challenge it faces. Consider working with an outsourced CFO with a proven track record of successfully building these models.
4. Identify (And Track) Key Metrics
What gets measured gets managed.
Under GAAP, all businesses track certain core metrics: revenue, net income, and so on. And while these are clearly important, it’s also crucial to track non-GAAP metrics that provide a true representation of your business’s progression.
If you’re a SaaS or technology business, some additional metrics you track will likely include:
- Recurring Revenue
- Customer Acquisition Cost
- Revenue Churn Rate
- Logo Churn Rate
- Net Dollar Retention
- Monthly Growth Rate
Looking for a comprehensive guide to the metrics SaaS businesses should track? Read this article next: 8 Critical Financial Metrics for SaaS Businesses
Track these metrics on an ongoing basis and include them in financial reports to investors and other stakeholders. Ideally, the metrics you choose should be transparent, universally understood, and enable your business to clearly communicate progress against its stated goals.
5. Monitor Spending Carefully
It’s important to be a prudent steward of the capital investors have entrusted to you. Your responsibility is to allocate this funding effectively to grow your business. Creating more sophisticated internal accounting frameworks is a key step in ensuring that your business is investing money in the right areas – not wasting it on frivolous expenses.
Another major element of monitoring your business’s spending is closely tracking its burn rate. As you spend the capital raised in your Series A round, it’s likely your business will have negative cash flow, showing significant losses every month. If you’re investing in growth, this is to be expected, but it’s vital to track this negative cash flow, more commonly known as the burn rate.
By keeping track of your business’s burn rate, you can calculate your cash runway: the amount of time your business has until it must raise money again or become cash flow positive.
6. Hire an Outsourced CFO
Navigating these issues can be a challenge for many founders. After you’ve closed your Series A round, your focus is squarely on accelerating the momentum your business has built – spending time with engineers, visiting key customers, and making important executive hires.
Amidst this backdrop of relentless activity, it can feel impossible to find the time to build out the sophisticated accounting and finance infrastructure that supports the continued growth of your business.
Fortunately, this isn’t a task you have to (or should) handle alone. Forming a partnership with an outsourced CFO with experience working with businesses at similar stages to yours can be a game changer. These professionals bring experienced financial leadership that helps fast-scaling startups improve financial processes while reducing costs.
Learn More: Contract CFO Services for Technology Companies
G-Squared Partners: Outsourced Financial Services for Series A Companies
At G-Squared Partners, we’re experienced advisors to SaaS and technology startups. With proven leadership experience in public and private technology companies at all stages, our professionals bring first-hand experience running successful businesses to every engagement.
We provide a wide range of outsourced financial services, from outsourced accounting and bookkeeping to executive-level outsourced CFO services. We have the capacity to function as a full-service accounting and finance team that scales with your startup as it grows, with support available in everything from GAAP compliance to raising equity and debt financing.
Interested in learning more about how G-Squared Partners can help take your business to the next level? Reach out and schedule a consultation today.
