Dec
08
My presentation on CFO basics for startups
This weekend, I was invited to speak at Montreal Startup‘s workshop day for its portfolio companies. The topic? Fundraising and CFO basics for startup companies.
Here is the presentation…
About StartupCFO
Mark MacLeod is a Partner at Real Ventures, Canada's largest seed VC fund. He is also an advisor to some of Canada's leading startups.
Hey Christine, This presentation is targeted at tech startups. In the vast majority of cases, such startups succeed and exit because of their product & technology, not because of sales & marketing. i.e. the value of these startups lies in a great user experience & unique technology. If a startup is to focus its efforts, it should not focus on market share (and marketing) but on creating something that a bigger company must own. i.e. product & technology. The studies you refer to all apply to much more mature companies that span many industries. Mark
Maybe I'm biased as a marketing professional, but I completely disagree that marketing and advertising is an expense that can be disregarded. History has shown that companies that invest in marketing tend to rise above their competitors, especially in an economic downturn. In a study performed by McGraw-Hill and the American Business Press back in the '80s, they tracked the marketing habits of 600 companies during the 1981-1982 recession. By 1985, those who had aggressively advertised rose 256% over competitors who cut their advertising budgets. Another study performed by Penton Research Services and Coopers & Lybrand after the 1990-1991 recession had similar findings. A company cannot succeed if it cannot attract and retain customers. I would say that struggling companies should cut back on more costly forms of advertising — traditional media such as TV spots, print ads in magazines, etc — and focus instead on more cost-effective forms of marketing such as social media, guerrilla advertising, promotional programs, etc. Still, having a marketing professional on your team, whether in-house or from an agency, is critical to maintaining a significant presence within a competitive marketplace.
Tobias, we're saying the same thing. I'm just being cute about it in my slide. The point is that companies fail for all the reasons you give and more. But, they can continue to try and mis-execute as long as there is money in the bank. Only when there is no more cash or the investors realize there is no hope and pull out the remaining cash does the business fail. It's not the root cause but it is always the final bullet.
Well OK, good presentation, I did enjoy it very much. I do want to talk about slide 6 though. Do you really think that companies ever fail because they run out of money? They fail because they are not founded on sound economical principals: They make something people don't want, they make something people don't want to spend money for, they make something and don't ship it early enough or ship it too early or anything along those lines. Maybe they are mismanaged. The money is never the problem, it's just the live line that naturally terminates the experiment when it has run its course. If a company runs out of cash than this is a easy way of saying that the company failed it's test for economic soundness. A good CFO in a dud of a company can only hope to prolong the lifeline.