Financial Management for Technology Start-Ups

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?

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.

Early-stage investors will usually want to claim a high stake of your business, because of the risk they are taking. This is why at the seed stage, you could be giving up 10–25 per cent of your company. Now the venture capitalist will fund Series A, where you might give up 25– 50 per cent.

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.

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

Unlike traditional businesses, tech start-ups operate within continuous feedback loops where control, action and decision become woven together. Ongoing experimentation becomes vital to move a start-up forward. You need mechanisms for reacting to new information to keep the start-up on a positive course. This

We will learn: about the start-up financial control loop; how we work out financial contribution and track its impact on the start-up; why it is crucial to know what your variable and fixed costs are; how to achieve break-even points; ways to use financial intelligence to guide operational and strategic action.

Any business venture needs to be founded on a business model. This represents the premise on which the business will create and deliver value. For

The start-up financial control loop Start-ups need to keep tweaking their activities on the basis of new information they get, altering their business model as they go. A start-up still needs to have a formal process for this exploratory way of operating that will help it in: planning and structuring its activities; acting on desired pursuits; moni