Long-time mentor, advisor, and business associate, Peter Hubshman joins Bette for #FinanceFriday to discuss Startup Funding. Peter has helped over 100 startups of various levels of sophistication build their business model, create projections, and raise capital for their business venture. Peter and Bette first worked together during her senior year at MIT, and has worked with her throughout her professional career.
Peter Hubshman works primarily in the Boston, New York, and Miami markets, but has experience in the San Francisco and Austin markets as well. Peter’s expertise has helped us establish our expertise in working with Venture Capital Backed Startup companies.
Startup Funding goes smoother with real “Books”
Virtually all startup ventures have under-developed financial and accounting systems. This is problematic for advisors like Peter Hubshman, because investor groups need to develop financials similar to public companies for their valuation exercises. By establishing proper financial systems, raising money is easier and faster, and often comes at a higher valuation. Upon a possible exit of the business, startups with established financials sell for more money and in less time. Peter Hubshman has helped businesses of all ages establish their business financials to support their startup funding process.
Customer Relationship Management (CRM) Systems Drive Further Value
Good startup funding depends upon establishing a solid valuation and prospect for the business. The more systems that produce real information, the higher the valuation and the faster the funding. For pre-revenue startups, it may focus primarily on the technology and projections. However, post-revenue startups can derive value from their current and expected revenues. By having solid CRM systems to establish this business level, that data can be reviewed and evaluated for purposes of funding. While establishing a multiple of revenues is a negotiation, the revenue can be verified by having Corporate “books” and a CRM (Customer Relationship Management) system that show the same results.
Enterprise Resource Planning (ERP) increase your valuation
While traditional ERP (Enterprise Resource Planning) systems target the Enterprise, and not Startups, there are a myriad of ERP-style systems available for Startups because they target the small business and medium business markets. Having an established ERP system shows a commitment to building and documenting process, which is part of the process of scaling a business from concept to industry dominating company.
Account Systems are Usually Improper in Startups
Even Startups that have used an accounting system, they rarely setup the chart of accounts properly. Entrepreneurs without business education often choose the account “alphabetically,” finding the first category that appears to match. While better than no records, this improper system needs to be re-organized into a financial accounting system in order the raise funds. Peter finds that companies without accounting systems may need as much as two months to reorganize their finances, a process that delays startup funding or selling the business.
Keeping Business Plans Up To Date for faster Startup Funding
Many Startup companies develop an initial business plan for raising the initial “Friends and Family” or “Angel Investment” rounds. For those informal investment channels, the simplified business plan may have been sufficient, but larger funding sources require established business plans. Most startups fail to update their business plans and models, but further capital rounds needed for startup funding cannot be established without getting those documents up to speed.