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Concept Stage:
Business Fundamentals:
Start operating like a real company.
By
Gerald Youngblood and David Mackie
Managing Partners, seedstage.com |
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When it comes
down to operating like a real company, the most critical fundamentals will center
on financial controls and legal issues, and they should be in place from day one.
Why
It's Important
Your credibility in the
eyes of investors and venture capitalists during the financing process will be significantly
increased when they see that you are operating like a real company.
How It
Works
If your aim is to be a
public company, start out with a good firm of public auditors. You will need them
for taxes, your numbers will never be questioned and they'll help you set up financial
controls.
From a legal standpoint: Be sure you're incorporated, that you understand the difference
between an employee and a consultant, that you have a legal and well-understood agreement
with Aunt Susie if you borrow money from her, that you didn't give Uncle Albert all
the voting rights in exchange for $25,000.
Conduct your daily operations professionally: Don't pay for a service or product
before you get an invoice, send your own invoices instead of just calling someone
to tell them what they owe, keep good records so you know if that purchase were for
a new PC or new tires for a car.
Never intermingle funds: Don't pay the babysitter out of the company checkbook, don't
put office supplies on your personal credit card and plan to sort it out later, don't
borrow money from the company when you're a little short. |
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| DO: |
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- Find an accounting
firm early on, preferably one that has experience with startups and that works with
investors and venture capitalists.
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| DON'T: |
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- Forget that if the
relationship between a company and its initial investors is not readily understood
or is tangled, investors won't invest - it's too much trouble.
- Forget that your
numbers are going to be scrutinized eventually.
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