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  • Writer's pictureKathy Kinder

Three Important Things to Organize Before Raising Funds

Bob Knight is known for saying it is not the Will to Win …. it’s the Will to Prepare to Win that makes a team successful.

The same goes for a startup business that wants to raise funds to help grow the company.

What financial items do you need to address when preparing to fundraise (win)?

There are several items, but my top three are:

  1. Capitalization Table

  2. Financial Records

  3. Good Forecast

Let's briefly discuss each of these basic building blocks of preparation. First, a Capitalization Table (aka Cap Table) is a document that tracks the ownership of the company in the number of shares or units and any associated dollars invested. Many startups will have a simple cap table, however as companies grow their cap table can become complicated. It is important to accurately track ownership for fundraising purposes, tax purposes and understanding dilution. Whether investments are Common Stock, Preferred Stock, Stock Options, or Warrants you will want to know how new investments will impact ownership and dilution.

In LiftBridge CXO’s experience, we often come across early-stage companies that have not maintained their cap table. Sometimes it is due to the founder not understanding the importance; sometimes it is due to the founder thinking the cost of a software solution is too expensive; and many times, it is due to the founder not fully understanding how to prepare and maintain a cap table in a spreadsheet. But the cap table is one of the most important documents for startups to keep updated and accurate. Cap tables can be kept in a spreadsheet or a software solution like Carta or Shareworks. We encourage founders and CEOs to work with their corporate attorney and/ or their Chief Financial Officer (who can be an outsourced CFO) to make sure the cap table is prepared and maintained. It is a requirement for future fundraising rounds and can be important for tax purposes. Impacts on capitalization and founder’s dilution as funds are raised can be calculated using a well-maintained and accurate cap table.

The second item to keep accurately is financial records. Understanding the company’s cash position, profitability and financial strength are key to early-stage companies. Early on managing cash is so important to a founder. Often, we see founders “keeping” track of things in their head or a spreadsheet versus getting help from an accountant or an accounting system like QuickBooks. Both methods are fraught with error, and we strongly recommend using some type of bookkeeping service from the start. If you are a startup and need recommendations for this service, please reach out to us at LiftBridge CXO for assistance.

It is difficult to raise investments or obtain loans from the SBA, banks or other sources without accurate accounting information.

The last item in this list is a good forecast of the company’s planned operating results. This should include an income statement, balance sheet and cash flow statement. Additional information like key metrics, annual recurring revenue (ARR), unit costs, customer acquisition costs and projected investment needs should be prepared. It is sometimes difficult for a founder or CEO to translate their knowledge of the opportunity into numbers. This is one of the functions a good fractional CFO can help with. A CFO can help with strategy, presentation, and pricing models. Also, a CFO can help a CEO with determining the best methods of funding and help get the company’s story told in such a way that others can get excited about the opportunities.

Although a lot goes into preparing to seek funding for an early-stage company, the three items listed here are the basic building blocks of preparation. They are best done as the company goes along instead of trying to catch up, potentially in a rush, right before fundraising begins. Engaging an affordable, fractional CFO can assist a founder in many ways, especially in preparing these basic building blocks for funding.


LiftBridge CXO is here to help. Our passion is lifting early-stage and growth technology companies to the next level of growth by offering interim, part-time, and project-based chief financial officer (CFO) services to sail past common barriers experienced by growing tech companies. Begin a conversation with us.

#fractionalcfo #earlystage #fundraising #captable #financialplan #parttimecfo #cfoservices

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