👋🏾 Hi friends!
This weekend I spoke at Niyo Fest about the gender and ethnic funding gap that seems to be persisting.
An interesting (and depressing) stat that I talked about from this Crunchbase article says it all:
It was great to have been able to give my perspective on what founders can practically do to improve their chances of securing funding – irrespective of the real or perceived barriers out there 💪🏾
I’m well underway writing about all the things I’ve learned from the last couple of decades as founder, CFO and CEO, so sign up for early access to Off Balance – The Book and feel free to share with anyone else you think might enjoy it 😄.
Now let’s get down to business…
In this weeks Off Balance:
🎙️ Andrea Gurnari from 2100 Ventures on Nothing Ventured talking about building hardware and investing across Europe.
🔥 What founders often get wrong about burn.
This week on Nothing Ventured I spoke to Andrea Gurnari, Partner at 2100 Ventures 🚀
2100 Ventures is a pre-seed and seed stage fund dedicated to supporting European entrepreneurs driving the new golden age of industrial innovation, investing in B2B businesses across a range of verticals. Prior to 2100 Ventures, Andrea was an investor with Atomico and Connect Ventures before which he worked in and co-founded startups in Italy and the UK.
We talked about:
💸 How early should founders be thinking about monetisation.
🇬🇧 The collaborative and international nature of the UK and why that’s a huge advantage for the country.
🤔 How the psychology of the founder impacts their decision making, accepting that the experiment hasn’t worked can be very difficult.
🧠 Why founders need deep intellectual honesty.
👹 The ecosystem owes it to founders to not demonise failure.
🧪 Everything starts with experiments.
🇪🇺 Can we innovate on the old economy of Europe and rebuild productivity the region has lost.
🤨 Andrea’s contrarian take – sometimes you have to judge the reasoning not the output.
Listen on YouTube, Spotify, Apple or wherever you get your podcasts!
If you have any feedback on the podcast or the newsletter, just reply to this mail or ping me online!
If you like what I’m putting out, do give me a follow on LinkedIn and Twitter.
(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Off Balance” and, importantly, tell me why you’d like to connect 💪🏾)
Now let’s get into it.
This edition of Nothing Ventured is brought to you by EmergeOne.
EmergeOne provides fractional CFO support to venture backed tech startups from Seed to Series B and beyond.
Join companies backed by Hoxton, Stride, Octopus, Founders Factory, Outlier, a16z and more, who trust us to help them get the most out of their capital, streamline financials, and manage investor relations so they can focus on scaling.
If you’re a CFO working with venture backed startups and want to join a team of incredible fractional talent, drop us your details here.
If you’re a growing startup that knows it needs that strategic financial knowhow, drop your details here to see how we can support you as you scale 🚀
Off Balance
Finance is full of acronyms and a variety of terms that, if you haven’t really learned them, can be easy to get wrong (I recall one founder I worked with who insisted on calling the cap table a capX table – conflating capex and capitalisation).
One of my bug bears is when folk talk about EBITDA as if it was the exact same thing as their burn.
New flash.
It’s not.
Here’s why…
Founders stop shorthanding EBITDA for your burn.
There is a reason that it’s not formally recognized by the Securities Exchange Commission (SEC), International Financial Reporting Standards (IFRS), or Generally Accepted Accounting Principles (GAAP).
But for tech founders that don’t have a strong understanding of finance, it feels like a power move to quote EBITDA and, as I have seen far too often, sub it in for burn.
Let’s break it down.
Take a SaaS business that sells 5 annual contracts at $50k a pop, has monthly payroll of $100k and, for the sake of simplicity has no other costs running through it.
On the Income Statement they’d actually show the following:
➡️ Revenue = $20.8k
➡️ Costs = $50k
➡️ EBITDA = $(29k) – loss.
Now let’s assume they capitalise 50% of their payroll to the balance sheet as they are creating long term IP.
The income statement now looks like this:
➡️ Revenue = $20.8k
➡️ Costs = $25k
➡️ EBITDA = $(4k) – loss.
But neither of these equate to their <actual> burn which looks like this:
➡️ Inflow = $250k
➡️ Outflow = $50k
➡️ Net burn = $200k inflow
These are three pretty different numbers and all three are correct from an accounting perspective, but only one of them shows the actual cash performance of the business.
Yes there is further complexity, yes there are other reasons to point to EBITDA, yes you can wrangle business numbers till the cows come home.
But I’m just here to inform and hopefully educate.
Cos you can trip yourself up and look naive if you get it wrong and it gets picked up.
So if you’re not sure what your actual burn is, have a chat to someone that can help you figure it out and remember,,, cash really is king.
As always, my office hours are open, if you’d like to chat about this or anything else, just grab some time 😊.
I hope you found Off Balance #52 useful. As always, I’d love to get your feedback and understand the sort of topics you would love to hear about.
Just hit reply to this mail or drop me a line at [email protected] and let me know 😊
🚀And that’s a wrap for this edition of Off Balance – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.
📨 And if you think someone else might love this, please forward it on to them,
🎧 Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.
That’s it from me so until next time…
Stay liquid 🙂
Aarish
“Like Morning Brew (but for venture capital)”
Join 15,000+ VCs and investors getting smarter on venture capital by reading this free daily newsletter.
Start getting the headlines that matter, lists of companies breaking out, and other resources and playbooks you won’t find anywhere else.
Become a smarter investor in < 5 min a day.
