The startup ecosystem has been flourishing since 2008, primarily due to the unprecedented availability of capital. This phenomenon has led to the growth and success of numerous startups, but it has also created a blind spot for many founders. In the process of rapidly scaling their businesses, they often overlook the importance of having a war-time Chief Financial Officer (CFO) and a strong capital markets team. This blog post will delve into why this oversight can be detrimental and explore the significance of a solid financial foundation, including the utilization of credit facilities, to maintain liquidity and avoid negative consequences like down rounds or undue pressure on the capitalization table. Additionally, we will highlight how Manning + Co, as a professional capital markets team, can help growth companies and our portfolio companies secure credit facilities and navigate financial challenges.
The Post-2008 Startup Landscape
An era of easy capital
The impact of quantitative easing on startup financing
The rise of venture capital and angel investors
Effects of readily available capital on startups
Rapid scaling and growth
The focus on revenue generation over profitability
The emergence of "unicorn" companies
The Importance of a War-Time CFO
Defining a war-time CFO
Contrasting peace-time and war-time CFOs
The role of a war-time CFO in uncertain economic conditions
Why most founders lack a war-time CFO
The influence of easy capital on founder mindset
Misconceptions about the CFO role in startups
The benefits of a war-time CFO
Navigating financial challenges and uncertainties
Prudent financial management and risk mitigation
Implementing cost controls and streamlining operations
Building a Strong Capital Markets Team with Manning + Co
The role of the capital markets team
Ensuring access to diverse funding sources
Advising on strategic financial decisions
Components of a robust capital markets team at Manning + Co
The right blend of experience and expertise
Building relationships with financial institutions
Aligning the capital markets team with the war-time CFO
Collaborating on financial strategy and risk management
Coordinating efforts to maintain liquidity and financial stability
Leveraging Credit Facilities for Liquidity
The significance of credit facilities in startups
Types of credit facilities available to startups
The benefits of having access to credit facilities
How credit facilities can help avoid down rounds and cap table pressure
Providing a buffer during financial downturns
Reducing the need for additional equity financing
The role of Manning + Co in securing credit facilities for growth companies and portfolio companies
Identifying appropriate credit facilities
Negotiating favorable terms and conditions
Conclusion
The abundance of capital in the startup ecosystem since 2008 has allowed many companies to thrive. However, it has also created a sense of complacency among founders regarding the importance of having a war-time CFO and a strong capital markets team. As economic conditions change, it is essential for startups to be prepared to face financial challenges, maintain liquidity, and avoid down rounds or cap table pressure. By recognizing the value of these financial leaders and credit facilities, founders can build resilient businesses capable of weathering the storms of an uncertain economic landscape. Manning + Co, as a professional capital markets team, is committed to helping growth companies and our portfolio companies secure credit facilities and navigate financial challenges, ensuring long-term success and stability.