Review with an early-stage startup
I had the opportunity to participate in the business performance review of an early-stage startup. I want to share my learnings and observations here -
Learnings
Our team had done an exercise before the review, to figure out the cash flow situation of the company. We relied on the founder to update the data in our worksheet. Few hours before the review, he expressed doubts about the updated numbers. This put us in a predicament(if we do not have clarity about the numbers, the whole exercise becomes futile). We could have easily avoided this by requesting the financial statements before the exercise. The availability of statements would not only have avoided unintended errors but also acted as a verification. So, the learning here is “Trust but verify”.
Lack of accounting discipline was very evident in the way these founders works. A founder stated that he used to look at cash in the bank to evaluate the runway. Even though he has taken big strides from that point, a lot more discipline needs to be inculcated on this aspect.
Another bias we have as humans is we take action based on what we feel is right. If a founder makes his or her decisions likewise, it would put the future of the organization at risk. Decision making should be based on the generation of the best possible economic outcomes. This is a mindset change that every founder will have to undergo to increase the odds of success.
Observations
The founder was speaking less during the discussion, which was counter-intuitive to me. The comfort level he had with my team would have been a probable reason for it. But, I feel it is worth looking at it.
The founders were very clear on ending an association they had with an incubator. I think it is worth understanding the reason for it.