The Startup Playbook, 2nd Edition

Chapter 16Finance and Human Resources

Ah, now we're getting to the fun stuff: finance and HR at the beginning of a company. I (Rajat) kid, of course. I don't know too many founders who are dying to be booking debits and credits and filling out IRS paperwork. But, here's the thing: getting this wrong can derail a business, if not outright kill it.

I'll give you two examples from my startups, which in this case will remain nameless. Example number 1: we were about to go public and the investment bankers had just run a background check on all of our leadership team. Out pops an issue with one individual. We, as founders, had no idea of the issue and when confronted by the legal team from the investment bankers were in a panic. We were trying to get our IPO completed as quickly as we could because we were running out of cash, so this presented a very real issue to us in raising capital. How do we handle this with the public market investors, and then how do we handle this internally as well?

Example number 2: we were raising our first institutional round of capital for one of our companies. We had just given the potential investors projections and a financial model for the future of the business. Literally, the next day we found an error in the model that rendered it materially wrong. We ended up sending them a revised model, but not before they seriously questioned our abilities to execute and understand our own business. How could we send them a model that was so wrong?

In both ...