The latest insights for founders.
Strategies, guides, and analysis to help you navigate the financial complexities of scaling your startup.
The Founder’s Guide to Burn Multiples
In the current fundraising environment, growth at all costs is out. Efficiency is in. The “Burn Multiple”—a metric popularized by David Sacks—has become the gold standard for measuring capital efficiency.
Simply put, it measures how much cash you are burning to generate each incremental dollar of ARR. A burn multiple under 1.0 is incredible; anything over 2.0 is suspect.
Key Takeaways:
- Calculate it monthly: (Net Burn) / (Net New ARR). Keep a rolling 3-month average to smooth out volatility.
- Context matters: Seed stage companies will have higher multiples as they build product. Series B companies must show efficiency.
- Optimization: Before cutting headcount, look at CAC payback periods. Often, the inefficiency lies in sales and marketing spend, not R&D.
Founders who obsess over this metric are better positioned to extend runway and raise capital on favorable terms.
Unlocking R&D Tax Credits: Free Capital
Every year, thousands of startups leave money on the table by ignoring the Research and Development (R&D) Tax Credit. If you are developing new technology, software, or products, you likely qualify.
The credit allows you to offset up to $250,000 of your payroll taxes annually. For a pre-revenue startup, this is essentially non-dilutive funding directly from the IRS.
What Qualifies?
- Wages: Salaries for engineers, designers, and product managers.
- Contractors: 65% of payments to US-based contractors doing technical work.
- Cloud Costs: Hosting expenses related to development environments (AWS, GCP, Azure).
Don’t wait until tax season. Documentation should happen in real-time to ensure you maximize your claim.
Cash vs. Accrual Accounting: Why Investors Demand the Switch
Most startups begin with cash-basis accounting because it’s simple: you record revenue when cash hits the bank. But as you scale, this method hides the truth of your business.
Accrual accounting records revenue when it is earned and expenses when they are incurred. This matches income to the costs used to generate it, providing a true picture of profitability.
Why it matters for SaaS:
- Deferred Revenue: If a customer pays $120k upfront for a year, cash basis says you made $120k this month. Accrual says you made $10k, and owe $110k in service.
- SaaS Metrics: You cannot accurately calculate MRR, Churn, or LTV without accrual-based books.
- Due Diligence: No serious venture capital firm will invest in a Series A company running on cash-basis books.
The CFO Tech Stack 2025
The days of manual data entry and disjointed spreadsheets are over. The modern finance stack is integrated, automated, and real-time. Building the right stack early saves massive headaches later.
The Core Components:
- General Ledger: QuickBooks Online or Xero. The source of truth.
- Expense Management: Brex, Ramp, or Mercury. Automated receipt matching and controls.
- Payroll: Gusto or Rippling. Integrated seamlessly with the GL.
- Billing: Stripe for volume, or specific subscription management tools like Chargebee.
- FP&A: Tools like Causal or just well-structured Excel/Google Sheets that pull live data.
Integration is key. If your systems don’t talk to each other, you aren’t building a stack; you’re building a mess.
Preparing for Due Diligence: The Series B Checklist
Series B is the “prove it” round. Investors are no longer betting just on the vision; they are betting on the machine you’ve built. Due diligence will be invasive and thorough.
Preparation starts months before the term sheet.
The “Must-Haves”:
- Clean Cap Table: Ensure all SAFEs, options, and warrants are perfectly reconciled.
- Data Room: A structured folder with incorporation docs, board consents, material contracts, and IP assignments.
- Financial Model: A bottom-up forecast that defensibly links spend to growth. “Hockey stick” graphs without logic will get shredded.
- Customer Cohorts: Retention data is king. Show net revenue retention (NRR) by cohort over time.
A disorganized data room signals a disorganized company. Use your finance function to signal operational excellence.
Ready to upgrade your finance operations?
Institution provides the infrastructure you need to scale with confidence.