Cloud ERP

April 20, 2022

Got VC Money? Time to Make it Grow

VC Investment

It’s a great time to go shopping for investors. More venture funds were raised in 2021 and more startups received funding than at any other point in history. 2022 looks to be just as good. If your company is seeking a VC investment, or has recently received some cash, it pays to have a solid plan of how you’ll turn the funds into a tidy return — for you and your investors. At the heart of the plan is financial management software that can handle the complexities facing every ambitious company. Is your business ready to make your investors proud?

Always be preparing

Because there are so many investment opportunities available now, some companies figure they can simply wait to modernize and professionalize their financial infrastructure. However, whether you’ve just received your first seed round investment or have your sights set on a Series A, B, or C infusion, it’s smart to always be preparing for the next round. At various points in a company’s growth trajectory, investors could be looking for growth rates as high as 100%. If you’re not hitting investors’ milestones, your first cash infusion will likely be your last.

We encourage the young companies we work with to create a strong financial platform early in their development. Sometimes starting small becomes a limitation in itself. Without robust tools to effectively manage finances and automate workflows, companies must spend valuable cash hiring additional personnel to maintain spreadsheets and complete manual tasks.

Metrics matter

Everyone loves a good KPI (key performance indicator) — and perhaps no one loves them more than VC investors. With plenty of fish in the sea, investors want the ability to quickly assess opportunities, and KPIs are an excellent tool to assist with those snap judgements.

Some of the most coveted metrics for investors looking at early-stage SaaS companies are Customer Acquisition Cost (CAC), Customer Life-Time Value (CLTV), Committed Monthly Recurring Revenue (CMRR), and Gross Churn. As a company matures, investors will also want to see KPIs surrounding Upsells, Renewals, Net Churn, and Gross Margin. Companies that have the right financial management system can generate these metrics in real time — any time they’re asked. Investors aside, every company will benefit from quick and timely access to these business performance metrics. 

ASC 606 automation

The ASC 606 and IFRS mandates loom over SaaS companies and other companies whose revenue models rely on complex revenue models like subscriptions and leases. Since entry-level accounting applications like QuickBooks don’t know what to do with these business models, young companies turn to spreadsheets to track revenue. Sure, it can work while you’re small, but it’s simply not sustainable.

The best time to automate revenue recognition workflows is in the earlier stages of your company’s growth. The more contracts you have, the more challenging it will be to migrate those contracts to real financial management software later. In addition, your ability to demonstrate to investors that you have a scalable billing platform will give them the confidence they may need to write the check.

Compete for talent

The war for talent is especially intense for financial professionals — especially those with experience in SaaS. There remains a critical shortage of accountants and finance executives. As your company seeks capital infusion, it may also be seeking an accounting manager or CFO. How can you compete for the best?

Early-stage SaaS startups are notoriously “messy” in terms of financial consistency, structure, systems, and procedures. Since finance professionals have the upper hand in this labor market, they may pass over messy companies in favor of those that have completed — or at least started — to modernize and professionalize their finance technology.

Sage Intacct is the VC posterchild

It’s hard to imagine a more ideal solution for companies leveraging VC investment funding than Sage Intacct. Founded in 1999, Intacct received multiple rounds of funding from VC firms before it was acquired by Sage (for $817M) in 2017. Back in 2012, Intacct secured $13.5 million in additional funding from a venture capital firm. From the ground up, the solution was designed to meet the needs of startups and growing businesses.

On the other side of the table, Sage Intacct is a favorite financial management application for private equity (PE) and venture capital (VC) firms themselves. Go ahead and ask your investors what accounting software they use. While your investors may not insist you run the same software they do (some might), they most certainly want you to run on secure, auditable, and compliant applications — and Sage Intacct is that and more.

If you’re in the market for a VC investment or have successfully won one, ensure your finance technology — and your business partner are capable of impressing. BT Partners works extensively with SaaS companies, so we can help you create an investor-worthy platform that will serve you well at every stage of your growth.

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