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Struggling with Uncertainty in Finance and Operations Post-Series A

Consider these priorities when reviewing your startup’s finance and operations.

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By M13 Team
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August 18, 2020
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1 min

operations

You're VC-backed, you've hit product-market fit, and you're scaling like mad.

Given how much has changed (and given how much uncertainty there is in the rest of the year), how do you plan for 2020?

Cash and runway are king. Try to position your business so that you have at least 24 months of runway. Target cash runway through Christmas 2021, and find a plan that gets you there.

Brainstorm and prioritize cash burn improvement tactics. What is your monthly burn now, and what target number would extend your runway to 24 months?

Make pessimistic assumptions about revenue (e.g., 20%/50%/80% miss on topline), with downsides to gross margin.

Make pessimistic assumptions about working capital (e.g., customer defaults, payment delays, tighter credit, supply chain disruptions)

Generate a long list of potential expense reduction and working capital improvements between now and 2022. You may not have to actually make those cuts, but have the list and get ready to prioritize.

Communicate with your stakeholders to prioritize levers. Group your financial levers into buckets like revenue, expense, working capital, and equity/debt. Communicate often and openly to make sure you’re in agreement with the stakeholders on your board and executive team. Use a simple table like the below to drive conversation around prioritization.

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What are some opportunities and challenges of raising capital over the next three months?

Universally, everyone wants to take a breath, take stock of where things are, and exercise caution.

Venture firms are hyper-focused on working with their existing portfolio right now. This doesn’t mean deals won’t happen, but the bar will be raised across the board.

During times of stress and uncertainty, we hope these prioritization tips can help guide you as you weigh critical decisions that will affect your startup’s finance and operations.

You're VC-backed, you've hit product-market fit, and you're scaling like mad.

Given how much has changed (and given how much uncertainty there is in the rest of the year), how do you plan for 2020?

Cash and runway are king. Try to position your business so that you have at least 24 months of runway. Target cash runway through Christmas 2021, and find a plan that gets you there.

Brainstorm and prioritize cash burn improvement tactics. What is your monthly burn now, and what target number would extend your runway to 24 months?

Make pessimistic assumptions about revenue (e.g., 20%/50%/80% miss on topline), with downsides to gross margin.

Make pessimistic assumptions about working capital (e.g., customer defaults, payment delays, tighter credit, supply chain disruptions)

Generate a long list of potential expense reduction and working capital improvements between now and 2022. You may not have to actually make those cuts, but have the list and get ready to prioritize.

Communicate with your stakeholders to prioritize levers. Group your financial levers into buckets like revenue, expense, working capital, and equity/debt. Communicate often and openly to make sure you’re in agreement with the stakeholders on your board and executive team. Use a simple table like the below to drive conversation around prioritization.

‍

‍

What are some opportunities and challenges of raising capital over the next three months?

Universally, everyone wants to take a breath, take stock of where things are, and exercise caution.

Venture firms are hyper-focused on working with their existing portfolio right now. This doesn’t mean deals won’t happen, but the bar will be raised across the board.

During times of stress and uncertainty, we hope these prioritization tips can help guide you as you weigh critical decisions that will affect your startup’s finance and operations.

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The views expressed here are those of the individual M13 personnel quoted and are not the views of M13 Holdings Company, LLC (“M13”) or its affiliates. This content is for general informational purposes only and does not and is not intended to constitute legal, business, investment, tax or other advice. You should consult your own advisers as to those matters and should not act or refrain from acting on the basis of this content. This content is not directed to any investors or potential investors, is not an offer or solicitation and may not be used or relied upon in connection with any offer or solicitation with respect to any current or future M13 investment partnership. Past performance is not indicative of future results. Unless otherwise noted, this content is intended to be current only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in funds managed by M13, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by M13 is available at m13.co/portfolio.