Financial Planning for Startups

People don’t pay for green. Full stop. We see many #climatetech startups marketing their products in this order: 1️⃣ Sustainability - the products are green and have low carbon intensity. 2️⃣ Resilient supply chain - the sourcing of the product is done in a more resilient and reliable way. 3️⃣ Performance - the product is (or nearly is) a drop-in solution. 4️⃣ Price - there is currently a “green premium,” but it will decrease as we scale. Yet, time and again, these companies, especially those selling commodities, experience pushback from an industry unwilling to buy these goods and narratives. The reason is that the industry has the exact opposite set of priorities: 1️⃣ Price - in a high-interest environment where margins are eroded and many businesses face fierce competition (e.g., from China), price parity is the top priority. Even a few cents per kW/h or gallon can make a difference. I recently learned of a battery startup whose raw materials alone cost more than the fully assembled battery of a Chinese competitor. No one will pay that premium. 2️⃣ Performance - many new solutions promise technical performance improvements, but most are not packaged to qualify for all customer requirements and have little evidence to prove long-term benefits. In mega projects, durability is almost always more important than unproven superior performance. Sunfire is flourishing because of their Alkaline cells, not their SoX full cells. 3️⃣ Resilience - following the pandemic and the scarcity of raw materials, this is indeed a growing concern for both industry and governments. 4️⃣ Sustainability - if a product can address all the above topics and also be green, the industry will be happy to adopt it. What does this mean? Startups need to take a market-centric rather than a tech-centric approach. They should develop their go-to-market strategy from day 1 to prioritise customers whose needs align most with their story, and design their entire product and value proposition around those customers requirements. For example, a raw material startup shouldn’t target the battery industry where price and quality are crucial. Instead, they might find success selling to the cement industry, where quality is less critical, and there’s a whole new value proposition around cirularity and sustainability. #venturecapital #fundraising #productmarketfit

18 to 24 months of runway should be enough...right? Maybe not. The time between primary rounds of venture capital has widened at basically every stage of the startup lifecycle. The average startup now takes over 2 years to raise a Series A after their priced Seed round. That same figure is 844 days between A and B rounds, and a whopping 1,090 days between Series B and Series C. Now - a couple caveats. Obviously this data can only show companies that actually raised their next round, and there are many more that have failed to make it to the following fundraise. Also, while the day counts are striking, I'd actually pay equal or more attention to the change over time. A good rule of thumb is the gap between primary rounds has lengthened about 20%-30% over the past year. So what can startups do if they can't raise the next primary round? 1. Go back to current investors and raise a bridge. These are typically done at flat valuations (or perhaps a little increase) and almost always involve investors already on the cap table. We've seen a dramatic increase in these rounds as a percentage of all priced funding in recent quarters.     2. Scrap together more financing using convertible instruments. Startups are starting to use SAFEs and Convertible Notes between priced rounds in much higher numbers. This introduces some complexity but better than running out of cash.     3. Trim burn rate. Most startups have been looking hard at software spend, fixed costs, and of course headcount over the past year. More of that to come in 2024. No denying the difficulty of the moment for startups, especially those that have already raised venture money. As we've been saying internally for months, this is a wonderful time to start a company and a challenging time to grow one. Salute to the founders out there making it happen! #cartadata #runway #founders #fundraising #startups

In 1992, I arrived in Silicon Valley from Iran with $700, unable to speak English and knowing only a handful of people. My first home here? An attic above a yogurt shop where I worked. It wasn’t much, but it was a start. That attic was the foundation of a journey that would lead me from working at a car wash to becoming a seed investor in some of the world’s leading companies, like Dropbox and DoorDash. Here are a few lessons from that journey: 1. Solve Real Problems, Not Just Big Ideas The best entrepreneurs are deeply connected to the problems they’re solving. It’s not about chasing the “next big thing” but addressing a real, specific issue. Start with a problem you’ve experienced firsthand and understand deeply. 2. Perseverance Is Key I’ve learned that building anything worthwhile is hard, often unpredictable. Setbacks are part of the journey, and success comes to those who adapt and keep pushing forward. When I struggled, it was my commitment that kept me going. 3. Strong Co-Founder Chemistry Matters Founding a company is a long, challenging journey. Teams with a history of working well together tend to weather storms better. Chemistry and mutual trust among co-founders are invaluable assets. 4. Be in It for the Right Reasons The best founders think long-term. Their drive isn’t just about quick financial wins; it’s about making an impact. Focus on creating value—whether that’s through happier users, meaningful jobs, or industry transformation. 5. Stay Paranoid (in a Good Way) A little paranoia can be healthy. The best founders plan meticulously, double-check every step, and make decisions carefully. Yet, this caution is balanced with kindness—a quality I look for in leaders who inspire loyalty in their teams. 6. Never Give Up My journey began with hope and the belief that I could make something of myself. Today, I’m grateful for that hope and resilience. From that yogurt shop attic to investing in groundbreaking companies, I’ve learned that every humble beginning holds the potential for greatness if you stay focused, work hard, and never, ever give up.

The 29th United Nations Climate Change Conference (COP29), held in Baku, Azerbaijan, concluded. Here are the 10 key outcomes which will impact businesses: 1.Global Carbon Credit Market Established Businesses can trade carbon credits globally, incentivising emission reductions. Economic impact: Potential cost savings for compliant businesses and revenue opportunities for those investing in renewable projects. 2. $300 Billion Annual Climate Finance Commitment Funding will assist developing nations’ transitions to greener economies. Economic impact: Opportunities for businesses in infrastructure, renewable energy, and technology transfer in emerging markets. 3. $120 Billion Annual Pledge by Multilateral Banks Increased lending for climate-related projects in low- and middle-income countries. Economic impact: New markets for sustainable technologies and climate adaptation solutions. 4. Loss and Damage Fund Operationalised Financial assistance for nations affected by climate impacts. Economic impact: Businesses must account for increased disaster recovery costs and integrate resilience measures into operations. 5. Strengthened Nationally Determined Contributions (NDCs) Governments will require stricter compliance from businesses to meet climate targets. Economic impact: Increased compliance costs but also market opportunities for businesses offering low-carbon solutions. 6. Global Carbon Market Valuation at $250 Billion by 2030 Expansion of the carbon market creates a high-value trading ecosystem. Economic impact: New revenue streams for businesses innovating in emissions reduction technologies. 7. Increased Private Sector Investment Expected Policy alignment with 1.5°C goals will drive private sector financing of sustainable projects. Economic impact: Greater competition for investment in renewable and energy-efficient technologies. 8. Focus on Adaptation and Resilience Emphasis on addressing climate risks encourages businesses to prioritise resilient infrastructure. Economic impact: Increased costs for climate-proofing operations but reduced long-term risks. 9. Opportunities in Emerging Markets Developing nations receiving climate finance create demand for green technology and services. Economic impact: Growth prospects for businesses specialising in clean energy, water management, and waste reduction. 10. Economic Penalties of Inadequate Action The $2.5 trillion annual cost of climate impacts underscores the need for rapid action. Economic impact: Delayed adaptation exposes businesses to higher costs from supply chain disruptions, infrastructure damage, and reduced productivity. These outcomes highlight a dual impact: businesses face rising costs from compliance and climate risks, but proactive strategies aligned with COP29 goals offer significant opportunities for growth in the green economy. #cop29 #decarbonisation #co2 #emissions #carbon #carbonmarket #cop #un #unitednations #co2market

Founders stumble in fundraising on two fronts: —They fail to do due diligence on investors. — And they fail to anticipate the due diligence investors will do on them. My new Substack article tackles the second (I deal with the first one elsewhere) — drawing on my analysis of 1,000+ VC investors. 70+ questions smart investors will ask you: https://lnkd.in/gUdzpH87 My advice to every founder: go through this list yourself before any investor does. Identify your red flags. Some you can fix. Others you should own up in the first meeting — investors appreciate founders who recognize their own weaknesses and have a plan to address them. The list opens with the section that decides most deals: Founders. The single most common reason investors pass on a startup is that they don't see how the founders will make it successful. If they don't believe in you, nothing else matters. The 12 questions in this section: — What is founder-product-market fit? (Why you, and not someone else?) — Have I learned anything new from the founders? — Do the founders have the necessary domain expertise? — Will the founders stay tough when things get rough? — Are the founders trustworthy? — How passionate are the founders? — Do the founders have charisma? — Can the founders recruit an A-team? — How committed are the founders to the startup? — How much effort and money did the founders put into it? — What previous start-up experience do the founders have? — How deeply have the founders thought through the project and all its challenges? This is just the first section. The full post covers 70+ questions across every category investors probe.

Most people who join startups as employees are joining with the dream of working in a company towards a shiny exit. The harsh truth is that a small percentage of startups actually have a significant exit, and even when companies do exit, returns are typically distributed first to investors. Employee outcomes depend on the company’s structure, timing, and individual equity terms. When an employee signs a work agreement with a startup he or she is usually being granted stock options. I find options are one of the most misunderstood concepts in venture that is creating a lot of frustration among talent but also lack of trust with founders and CEOs. In a company I worked with, one of the early employees was positive that when he joined the company he was granted equity, real shares in the company vested over 4 years. He worked in the company for 10 years reaching a VP level. He worked day and night, weekends, and was one of those legendary people who was there from day one. But when he decided to leave, he discovered that what he thought was equity, was actually Stock Options. He was so furious that day, having to pay over $120k to buy the rights for his vested stock options. He wasn’t expecting to pay such a large sum, also having a new baby and planning to buy a new apartment. He simply could not afford it, and decided to let it go - 10 years of equity were lost. That was in 2008, and after a while the company exited. He could have paid his mortgage, and be well off. I personally was offered several times stock options as an advisor, and today I’m quite open and say that I am only joining for equity and not the option to buy equity. I believe the mechanisms in which we incentivize employees to join startup teams have to change and we must address the fact that more than 55% of startup employees* miss the opportunity to really exercise their stocks and become owners of the startups they worked for. There are two things I recommend founders to do to build that trust with new employees: 1. Be clear with your new joiners that what they are getting in their package is stock options and explain the difference from realised equity.  2. Provide them with a solution like Equitybee that allows employees to cover the cost of exercising their options, including taxes, without risking their personal savings. When they decide to leave, or make a career move, they can afford to become owners of the company and live the dream you may have sold them when they joined. * according to Cara State of Startup Compensation H1 2025 | Equitybee is FINRA/SIPC member. 

Lack of transparency in VC continues to put founders at a disadvantage Last year we shared our term sheet and a guide to key negotiation points Today we are making public a model cap table for pre-seed and seed rounds Plug in the details and immediately see the impact to make sure you are fully informed before agreeing terms You can access the cap table directly below or via the new Pre-Seed Resources section of our website Any questions? Just ask in the comments below (our brilliant CFO Matt Gill, CFA will be along to answer any tricky ones 😂 ) #Founder #funding #business #investing #vc #venturecapital #entrepreneur #startup

The best founders don't just think about their next funding round. They think about their funding STACK. And honestly? This shift in thinking is the biggest pattern I'm seeing right now across SXSW Sydney - from FKS community chats, partner & investor conversations, coffee catch-ups with Tractor portfolio companies, and pretty much every other startup event I've been to lately too. It's like something clicked for founders in the last 12-18 months. 𝐇𝐞𝐫𝐞'𝐬 𝐰𝐡𝐚𝐭 𝐜𝐡𝐚𝐧𝐠𝐞𝐝: Founders used to see funding as this linear path: raise seed → burn through it → raise Series A. One round after another. Now they're architecting something completely different. They're building mixed funding stacks. 𝐖𝐡𝐚𝐭 𝐝𝐨𝐞𝐬 𝐭𝐡𝐚𝐭 𝐚𝐜𝐭𝐮𝐚𝐥𝐥𝐲 𝐥𝐨𝐨𝐤 𝐥𝐢𝐤𝐞? Think of it like this: you wouldn't build a tech stack with just one tool, right? You've got your CRM, your analytics, your payment processor, your comms platform. Each one does something specific at the right time. Funding works the same way. 🚜 The founders getting this right are layering different capital types strategically: → Equity capital for the big milestones (seed, Series A, Series B) → Non-dilutive capital for extending runway between rounds → Revenue-based financing when you've got predictable income → Bridge capital when you need 6 months to hit the metrics that'll 2x your valuation It's not about picking one. It's about knowing which lever to pull and when. 𝐈'𝐯𝐞 𝐬𝐞𝐞𝐧 𝐭𝐡𝐢𝐬 𝐩𝐥𝐚𝐲 𝐨𝐮𝐭 𝐝𝐨𝐳𝐞𝐧𝐬 𝐨𝐟 𝐭𝐢𝐦𝐞𝐬 𝐧𝐨𝐰: A founder raises their seed round. Hits $1.5M ARR. Has 8 months of runway left. They COULD raise their Series A now at a $10M pre. Instead, they add $400K of bridge capital. Extend runway by 6 months. Launch their enterprise tier. Hit $2.5M ARR. Then raise their Series A at $18M pre. ̲𝘚𝘢𝘮𝘦 $3𝘔 𝘳𝘢𝘪𝘴𝘦. 𝘉𝘶𝘵 𝘵𝘩𝘦 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘤𝘦? 30% 𝘥𝘪𝘭𝘶𝘵𝘪𝘰𝘯 𝘷𝘴 16% 𝘥𝘪𝘭𝘶𝘵𝘪𝘰𝘯. On a $50M exit, that's $7M more in their pocket. All because they knew when to add a different type of capital to their stack. 𝐇𝐞𝐫𝐞'𝐬 𝐰𝐡𝐚𝐭 𝐈'𝐦 𝐬𝐞𝐞𝐢𝐧𝐠 𝐰𝐨𝐫𝐤: Founders are using non-dilutive capital to: → Buy time to hit the metrics that actually move valuation → Launch revenue-generating features before their next raise → Close enterprise deals they've been nurturing for months → Test profitability without needing to raise at all And the best part? None of this is about avoiding equity funding. Most founders I work with WANT to raise VC. They're building venture-scale businesses. But they're being strategic about when they raise and how much they give up. The mixed funding stack approach gives them options. And options mean you're making decisions from a position of strategy, not desperation. How are you thinking about your funding stack? (send me a DM if you’ve ever got questions on how Tractor Ventures may help!). 🙂

It took 30 years to scale HomeServe to a £4.1bn exit... If I had these 20 tips, it might have been 15. That's the thing about building a billion-pound business:   It requires learning from painful mistakes. Here are 20 tips for founders from one who has done it: 1. Copy and pivot ↳ We’re taught at school that copying is bad. But in business, copying and improving is brilliant. 2. Prove your model first ↳ Don’t go big until you’ve proven your model works. I did go big, and it almost cost us the business. 3. Create a “not-to-do” list ↳ Focus comes from what you refuse to do, not what you say yes to. 4. Hire your replacement ↳ After 8 years, I realised I was a rubbish CEO. So I stepped up and hired someone better to run HomeServe UK. 5. Go global with local leadership ↳ Americans buy from Americans, for example. Hire local. 6. Use direct mail because many businesses have stopped.  ↳ So now you get a bigger share of the doormat. 7. Get an investor  ↳ I borrowed £10,000 from my mother when the bailiffs came knocking, to keep the business afloat. 8. Build a hedgehog strategy ↳ Founders are naturally foxes: curious, full of ideas. But to scale, you need the focus of a hedgehog. 9. Evolve your product or service, not your purpose ↳ We naturally evolved from plumbing cover to electrics and then boiler breakdown cover. 10. Have a couple of performance moderators ↳ Use presets to measure progress. 11. Get the economics right ↳ Make sure there is a route to initial and ongoing probability. 12. Test before you invest ↳ Small-scale testing saves you from expensive mistakes. 13. Trust your people ↳ If you can’t delegate, you can’t scale. Build a culture where people can decide without you. 14. Learn constantly ↳ I went to Harvard, aged 50 to work out my career objective for the next 25 years. Still learning after 30 years. 15. Obsess over customer feedback ↳ Some of our best product decisions came directly from what customers told us. 16. Live by three core values ↳ Courage, persistence, and integrity got us through everything. Choose your values and stick to them. 17. Have honest conversations early ↳ We kept a few of the wrong people too long. Because we avoided tough conversations early enough. 18. Manage cash flow carefully  ↳ Profitable businesses can still run out of cash. 19. Give up equity for the right partner ↳ My co-founder and I gave up 52% of the business. The right partner will help you scale. But aim to sell less of your business than we did. 20. Maintain your health  ↳ I go to the gym, eat well, and run a 15K most weekends. Health is wealth. If I'd known these lessons at the start, we might have reached £4.1 billion much faster. The hardest lesson for me was hiring my replacement.  But that's how you scale beyond yourself. Share your biggest scaling challenge in the comments.  I'll read it and give my two cents. 

I’ve secured over $1.2M in funding for my company. But the path has not been what you’d expect. After 3 years of building Chezie, here's our actual fundraising journey: - $20K of our own savings - $275K from grants - $160K from friends/family - $110K from pitch competitions - $100K from accelerators - $470K from VCs - $25K from revenue-based financing Two things most founders miss: 1. Revenue unlocks everything     Without paying customers, we wouldn't have qualified for grants, VC, or loans.      Focus on revenue first and all of the other funding options become available to you.      2. Don't limit your options     Only about a third of our funding came from VCs. Another third was completely equity-free.      Be open to whatever funding source you can get to reach your goals. The reality is that there's no 'right way' to fund your startup. Whether working your day job longer, consulting to get some early revenue, taking loans, or raising from friends and family, do whatever works. The best funding source is the one that keeps your company alive. And sometimes that means taking the path others won't. Build your company your way. What untraditional funding paths have you taken to grow your startup? Share them in the comments! 👇🏾