The Ins and Outs of Customer Acquisition Cost

In days of yore, before online tools that allow companies to see exactly where their customers are coming from, advertising was a big old guessing game.

Was a new buyer drawn in by a particular promotion? No way to tell! Was an expensive ad buy really worth it, in terms of ROI? Who knows! Let’s throw more at the wall and hope that it sticks!

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A Supreme Court Decision SaaS Companies Need to Know

Head’s up, SaaS leaders. Sales tax laws are changing, and smart companies will change with them.

On June 21st, a U.S. Supreme Court decision made waves in the world of retail, rethinking a long-debated question about state sales taxes in light of the rise of digital commerce. This decision has implications for software companies, including SaaS businesses, which may suddenly find themselves with responsibilities for state sales tax collection and remittance that they didn’t previously have to worry about.

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Getting Your Startup's Financial House in Order

Why is it essential for startups to have their financials in order?

This was the topic of a recent webinar that featured a lively conversation between Lighter Capital’s Chief Investment Officer Allen Johnson and Sirk Roh, consulting CFO of Early Growth Financial Services, a company that provides financial services to privately-funded, venture-backed startups.

The webinar focused on how startups can get their financials in shape to approach investors, but all the advice applies to any young company that wants to make sure its house is in good working order.

Fortunately, the essential advice on this topic is more straightforward than many assume.

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Top 6 Financial Mistakes to Avoid for Early-, Mid- and Late-Stage Startups

You're a startup founder. Your to-do list is never ending: hiring, culture, sales, marketing, product development, fundraising -- it goes on and on. With everything on your mind, founders often don't spend enough time thinking about their finances. Those startup leaders who understand (and avoid) specific financial pitfalls across the three stages of their company’s life--early, mid and late--are positioned to win. So, take note. Here are the big financial mistakes to avoid across the three stages of your startup, according to Tiffany Meyers at Built In Chicago, and Michael Burdick, CEO of Paro, a company providing an exclusive network of on-demand financial professionals.

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Managing your SaaS startup’s burn rate

Here’s the deal with raising growth capital for your startup: it will only last you so long, and you’ll spend it far faster than you ever imagined. Managing your burn rate, or the pace at which you spend your cash, requires a balanced approach to risk. There’s no getting around it; you need to spend money to make money. So, at certain times in your startup lifecycle, you’ll hit the gas pedal and blow through some money to make things happen. On the other side, you should be prepared to slow down (or pull the emergency brake) if you’re moving through your capital too fast.

The thought of finally obtaining the funds to take their business to the next level, and the possibility that it could all slip away (or burn up, if you will) keeps many founders up at night. Founders find themselves fixated on questions like how much runway is left? What’s the zero-cash date? Knowing how to calculate your burn rate, and keep it low, are fundamental to startup success. Read on to see how it’s done.

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Q&A: SaaS accounting struggles holding your startup back from funding

On Wednesday, we hosted a webinar about the critical accounting challenges SaaS companies face with inDinero. Investment Director Zach Hoene represented Lighter Capital, and inDinero brought Carter Hawke, Accounting Manager.

The webinar covered many bookkeeping woes, from the new revenue recognition rules (effective 2019 for private companies) to accounting stock-based compensation to capitalizing CAC for new customer contracts. It ended with a Q&A where listeners asked for advice solving their businesses’ accounting challenges. The whole video is available here, and here’s what our experts had to say about your questions.

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7 accounting basics new startups need to know

In 2014, my friend started her first company. She used her personal savings to fund development, buy computers, and hire a UX designer to help her get off the ground. For a while, things went very well. Then, a few months in, my friend decided to open a business bank account. She called in a favor to a mutual friend who was an accounting major in college: “Will you help me deal with my mess?”

And what a mess it was. She had been using various personal credit and debit cards to pay vendors and employees and letting late fees and interest pile up. She had “kept track” of her expenses by stuffing some of her receipts into the bottom drawer of her desk. She couldn’t remember which receipts were personal or business-related, so her financial history and profit-and-loss reports were unreliable, to say the least. Our accountant friend helped her untangle the mess, and things are better now, but without a real accounting strategy in place, the nightmare is inevitably going to creep back up.

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How your startup’s R&D expenses can earn you $250,000 in tax credit this year

Each year the US government provides billions of dollars to innovative businesses for developing new or improving existing technologies, products, materials, and processes, under the US Research & Experimentation Tax Credit (R&D Tax Credit) program.

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The problem with deferred compensation

Many times I have seen the following happen: a company is running out of money. In order to keep going, the team is going to have to take pay cuts. The Founder & CEO tells the team, ”We’ll have to 'defer' your salary. As soon as we raise our next round (or as soon as we sell), we’ll pay you what you have deferred.”

This is a mistake, and sometimes a costly one. The word “defer” is a dirty word in the law. Sort of like the word “backdating” (ok, maybe not that bad, but it is still not a good word). Why is “defer” a dirty word? Because when you “defer” you give rise to a number of potential adverse legal complications that you should, and can, avoid.

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Want to impress investors with great startup financials? Ditch Excel

As our Chief Investment Officer, I’ve been involved in many of the 150+ funding deals we’ve completed, as well as many deals that never went through. I’ve seen some wacky stuff when it comes to startup financials: hand-built spreadsheets that are a cross between an income statement and a balance sheet. Personal finances completely intertwined with company finances. Unbalanced balance sheets. Incorrect formulae.

We have so many great companies and leaders apply for funding from us, CEOs and Founders who build innovative tech solutions and run companies generating $1M or more in annual revenue. But sometimes we dig into a company’s financials—just like any investor will—and they’re a mess. When a company’s financials are in disarray, we (and other investors) simply don’t have the right information to evaluate and fund them.

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