Financial Management for Technology Start-Ups

We can simplify how we think about cost behaviour by categorizing patterns into two types: fixed and variable. We will start with variable costs.

Again, what’s essential is that your accounting intelligence must help you manoeuvre your start-up in a very specific way, through close tracking and monitoring of your experimental activities.

business. That means that the convertible note converts into preferred shares when the Series A funding round closes. The conversion discount lets the angel investor convert the loan into shares at a price 20 per cent lower than the amount the Series A investor paid. Convertible notes are useful because, when getting seed money early on, it can be

properly. Suppose you launched a business six months ago. Your business now needs €600,000 from a venture capital investor who wants 25 per cent ownership. We will call this scenario Series A. If an amount of €600,000 buys 25 per cent of the business, the post-money valuation is: € 600,000/0.25 = €2,400,000

First, you want to be able to work out if you’re getting more out of your business activities than you’re putting in. In other words, are you creating value?

This means that there might be pressure to achieve break-even quickly, but this needs to be balanced with the pursuit of market share.

The key things to think about when it comes to incremental costs are (a) whether costs differ between the alternative courses of action you have and (b) whether these costs imply future incursions. These are the only costs that are relevant for doing this kind of analysis.

The question will be: are you creating as much value as you set out to?

The break-even point is the point in the operations of an enterprise when its revenues and expired costs are exactly equal. If an enterprise keeps running at this level of operations, it will make neither a profit nor a loss. We can use break-even analysis as a useful tool for visualizing future performance scenarios for a business, and this can fe