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Minimum Viable Finance: The Guide for Seed/Series A Startups (causal.app)
125 points by refrigerator on March 17, 2023 | hide | past | favorite | 33 comments



Hi HN, I'm the founder of https://causal.app and the author of this post —

Most of the finance content online is very textbook-y and overkill for early stage cos, so wanted this to be a 'no-nonsense' guide for founders/ops people that have to juggle a bit of finance stuff alongside everything else.

We've helped lots of startups across different stages with finance stuff over the last few years through Causal, so I'm happy to try and answer any questions :)

Thanks for reading!


A few things that could make this guide even better:

0. Variable costs vs. fixed costs, why the difference matters, and how to tell the difference.

1. The difference between gross margin and contribution margin, and the relevance to thinking about unit economics before deciding to focus on scaling.

2. The CEOs role as a capital allocator, and how to assess what % of your burn is going towards different objectives. (It's easy to be self-delusional if you don't approach this in a structured and disciplined way.)


I'm always curious what makes you credentialed for this type of business / corporate knowledge.

It's not to denigrate this person or their current company, but Causal itself seems to only be at the Series A point in funding, maybe they're working on their Series B. The author himself seems to have no other experience in startups, just some past professional experience. On the flip side, it is true his company seems to have 7 or 8 digits of funding and has a few employees after existing for 4 years, which is probably a pretty strong outcome in startup world.

I perceive this to be the value of YC itself for instance - institutional knowledge of a hard-to-get type.


Appreciate the thought-leadership skepticism :)

Causal is a financial modelling tool so while we're only Series A, we've spent the last 4 years working with finance teams across all stages (our customers), as well as the wider startup finance ecosystem of accountants, CFOs, VCs.

The post is mostly based on that accumulated experience, but of course coloured by our own experience operating at the Seed/Series A stage as well.


I like that, multiplicative value because you can self-apply the lessons you applied to your product. Thanks for sharing the knowledge then.


Skimmed the post and there aren't really any "trust me, I'm experienced" items in there. The opinionated bits have detailed reasoning. I have relevant experience pre-seed through C with a bunch of companies, the only thing that stuck out is that the bookkeeping pricing listed is on the low end.

Maybe take the service provider recommendations with a grain of salt but everything else reads like a nice summary.


Anyone have a link/list of notable billion plus market cap companies that reached this valuation without using equity exchanges?


Zoho is one.


Agree, appears to be accurate; only reference to outside funding was an anonymous entry date April 1st, 2000 — which is April fools day:

- https://www.cbinsights.com/company/zoho/financials

Here’s an article that appears to back the claim:

- https://techcrunch.com/2022/09/10/how-zoho-became-1b-company...


Appears founder may only have 5% of Zoho now:

>> While Vembu has been running Zoho for nearly a quarter century, his sister Radha and brother Sekar own the bulk of the company, according to Indian filings. A product manager at Zoho, Radha has a 47.8% stake in the company that’s currently worth an estimated $2.2 billion. Sekar, founder of Vembu Technologies in Chennai, owns 35.2% worth $1.6 billion. Vembu owns 5%, worth $225 million. The family, now worth at least $4 billion, was ranked No. 48 on Forbes’ 2022 list of India’s 100 Richest under Sridhar’s name due to his prominence as founder and CEO.

Source:

- https://www.forbes.com/sites/luisakroll/2023/03/13/zoho-srin...


Zapier?


Appears they raised over million back in 2012:

https://google.com/search?q=zapier+funding+million


Mercury Treasury takes a hefty cut (0.6%) of VUSXX yield. Any alternatives other than opening a Vanguard account?


I know a bunch of startups that are moving their cash/treasury to JP. We're looking into doing the same.


NOTE: Banks have a maximum of $250k in insured deposits


Per person per account type.

Joint accounts are covered at 500k

When a revocable trust owner names five or fewer beneficiaries, the owner's trust deposits are insured up to $250,000 for each unique beneficiary

So 4 people = $1m

https://www.fdic.gov/resources/deposit-insurance/brochures/i...


* Per unique FDIC institution, of which there 3000-5000 of them, many of which offer financial services that break deposit down into FDIC insured amounts via institutions the are legally separated per FDIC’s definition, but treated as a single account for transactions.

See post related post that covers this, additional options, and HN user comments here:

- https://news.ycombinator.com/item?id=35109420


Related prior discussion on topic on HN:

How to Insure Your Money When You’re Banking over $250K (2022)

- https://news.ycombinator.com/item?id=35109420


Why buy bookkeeping services, couldn’t you automatically categorize expenses?


Lots of tools integrate with Quickbooks and Xero now so you're right that a big chunk of bookkeeping work is pretty automated, but there will always be a bunch of transactions that don't live inside a nice system that will need manual categorisation, e.g. random invoices from vendors that need to be manually paid and categorised.

Outside of categorisation, there's some more technical accounting stuff that also needs to be done, e.g. accounting for revenue properly on the Balance Sheet.


What about putting those odd invoices that don’t Xero into a shoebox and letting the to be hired CFO deal with them later?


This is just a bad piece of content marketing.

If you just raised a $30-60+ million Series A and are relying on anything in this article, you will have bigger problems. It is this self-righteous approach to finance/accounting that gets companies into trouble down the line.


Hey man, the target audience is normal Seed/Series A companies —

$30m–60m+ Series A rounds are extreme outliers, especially in 2023, and the $1m MRR number you quoted in another comment is 5x higher than where most Series A companies are at.

Would genuinely appreciate feedback on anything specific in the post that you disagree with, with that target audience in mind :)


So this is the level of finance/accounting sophistication now expected for a business with a valuation of $30m–60m? Maybe I'm out of touch. I think this guide lowers the bar unnecessarily.


Wasn't worth responding. It's a totally decent write up.


It's really not. The overall tone is "You don't know anything about finance/accounting as an inexperienced leader but that's okay! - Just outsource it! Oh and here are some tidbits so you can pass off as knowledgeable in conversation"


It's not tone - it's explicitly targeted at people who don't know much/anything about finance/accounting and almost by definition are relatively inexperienced at running a business.

There isn't a great alternative. Taking the time to become an expert certainly isn't a good idea. Hiring a CFO with seed money isn't a good idea.


This is not a helpful comment. Why not point out the actual issues, instead of just calling it "self-righteous", and assuming everyone understands what you mean?


Too much to address so I generalized.

I don't have time to go into details but the very big problems you could encounter mainly revolve around misses on compliance because you took a very lax approach to Finance ie. accounting standards, tax rules, payroll records, stock options and more. Just as a very simple example - I've seen a $1 million MRR company get eviscerated for not paying attention to something as basic as sales tax rules.


Most finance rules are quite reasonable and problems can be fixed retroactively. A serious company should absolutely approach their financial controls with the rigor it deserves but the cost implication of making mistakes early on is overblown.

If a company is turning over tens of millions per year and has missed something as basic as taxes then yes, absolutely, pain is inevitable, but it’s both solvable (after all, they’re doing tens of millions in revenue!) and very different from the type of problem a startup might encounter if they are cavalier with their finances early on.

The OPs post is of great benefit because often the key to avoiding problems is going from oblivious to aware… and so while a post like the OPs may not be exhaustive, it does put people on the right path, as it is heavy on the recommendations of getting a professional involved — and explains how to do that in a very accessible way.

How many startups have died because they didn’t know they had to charge sales tax? How many startups have died because they spent hundreds of hours obsessing over operational minutiae before they earned their first dollar?

(I don’t know the OP, but coincidentally I have worked with one of the companies he recommends, and I was very impressed — it’s clear to me this isn’t just churned out content marketing that uses the first Google result for “accountant”)


This would be more interesting if you did have time to go into details. I'd love to hear about the company getting eviscerated for messing up sales tax.


If someone doesn't pay taxes, they are in trouble. It doesn't it need to be in this write up. Taxes are always there, always complicated and always need to be calculated and paid.

It's a write up on finance basics, not a treatise on all issues at the intersection of finance/legal/compliance.


If you have time to write more about this, or even as a blog post to submit to HN, I'd be very interested to learn more.




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