All articles by The Startup Station

The cash flow issue is obvious – we all know that we need cash to run a company. But what exactly is working capital and why does it matter?

Let’s start with the definition: working capital is the capital required to run a company day-to-day.

There is a lot of misconception in the startup community about what a startup financial model represents and, especially, how accurate it is. When I discuss the importance of financial analysis with entrepreneurs, they push back arguing that there is no validity to the numbers not verified by the market.

When we think about startup financial issues, we usually refer to funding. However, instead of focusing on funding, which is the outcome, we suggest to focus on the underlying reason which causes a startup to run out of money prematurely. That reason is improper budgeting.

Fundraising is a daunting challenge, even for the best finance professionals, and downright scary for startup founders with no finance experience. According to Fundable and Entrepreneur, 565,000 startups are launched every year and just under 3% receive angel and VC investments. Entrepreneur identifies three main reasons startup founders fail to secure funding that we further address in this article and the corresponding video.

There is a lot of confusion around what startup valuations are really based on.

To start off, let’s understand what they ARE NOT based on:

Numbers taken from the sky, or unjustified projections
Wishful thinking
Desired percent of equity that you “think” you should give away
To drive the point home, you can’t just say: “I think I am going to generate $1M in Year 1, $5M in Year 2, $25M in Year 3, $50M in Year 4, and $100M in Year 5”, just because those numbers seem reasonable, and even if other startups have similar projections.

If you are a founder in the process of creating financial projections for your pre-revenue company for the first time, most likely you have two thoughts.

Thought # 1: “This is hard”, and

Thought # 2: “This is futile because, without any data, I can only guess what my sales would be!”

Well, you are HALF right.

As a startup founder, you have to become familiar with basic accounting concepts. In this article and the corresponding video, we discuss how to categorize various cash expenses from your Income, or Profit & Loss, Statement properly.

All entrepreneurs are risk-takers. If you are uncomfortable with taking risks, entrepreneurship is most definitely not for you. But does that mean you should take every risk you can?

In this article, we discuss how to evaluate which risks are worth taking.

For early-stage companies and founders, few questions get asked more in the startup world than, “When should I try to raise money?”

Although it would be much easier if there was a simple answer to this question, each founder and their respective startups face different obstacles when traversing the path to the point of fundraising.

Investors are not running a charity. The reason why investors make investments is that they believe they will make a profit. For them, it is a business transaction, that is researched heavily and thoroughly thought through. This further means that investors want to know the business they are bankrolling really well and minimize their risk as much as possible. Thus, knocking randomly on their digital doors to ask for cash is not the best way to get funded fast. In fact, contacting investors only when your company needs capital will elongate the search needlessly.