SFCW Startup to Scale-up Summit

At this year's San Francisco Climate Week, Enduring Planet, Climatebase, Mark1, and Planeteer came together to host the Startup to Scale-up Summit. This was our 6th Community Event, and our first in-person gathering since we launched this series.

If you missed our first five, we highly encourage you to go back and read the teardowns on the Enduring Planet Insights page. You can also sign up for the event calendar here to make sure you don't miss any future virtual or in person gatherings.

At the Startup to Scale-up Summit, we convened experts across the climate ecosystem to discuss how startups should adapt their approach to internal financial operations and fundraising as they mature. Whether founders are implementing foolproof financial systems and working with a fractional CFO or navigating a complex capital stack of venture capital, debt, and non-dilutive funding - preparing early and predicting what’s coming around the next corner of scale is essential for founders.

From a day of invaluable insights, the message is clear – everything depends on your startup’s ability to align its current financial strategies to its future trajectory. So what did we learn? Read on!

Financial foundations across every stage

When you’re under pressure from investors, struggling to meet milestones, and running out of runway, you’re only as good as the systems you’ve built. Hiring a fractional CFO and having best-in-class back office support in place can be the difference between staying afloat and collapsing entirely.

Delving into the financial foundations your startup needs, this panel was facilitated by Hannah Friedman, Head of Partnerships at Mark1 and Venture Partner at Planeteer Capital. Speakers included Dimitry Gershenson, CEO and co-founder of Enduring Planet; Jimmy Chuang, CFO at Twelve; Veery Maxwell, Partner at investment firm Galvanize; and Jennifer McFarlane, currently board member of four climate tech companies. Notes were taken by Alex Scott. 

Fin ops: The good, the bad, and the ugly 

In the words of the panel, first-class financial operations are reliable and well-documented, with clear and robust budget control and liquidity management capabilities. But that doesn’t mean you have to opt for an overly complex, expensive system like Oracle NetSuite – look for something simple like Quickbooks or Ramp that can tick your boxes. Similarly, beware of AI-driven finance tools, which are prone to making mistakes. Without someone’s trained financial oversight, you may not even know an error was made. 

Even without AI, horror stories of bad financial processes abound: from calculating runway as 9 months instead of 45 days, to missing payroll after misbooking a receivable. If you want to avoid these mistakes, look at your cash burn once a week when your cash is tight, and trust but verify. 

When to nail down your systems

When the stakes are this high, it’s important to prioritize your financial operations from the get-go. You should get outside fin ops help (at least a bookkeeper) once you raise any outside funding, and then scale those systems alongside your growth and progress. Companies that delay can end up with opaque, inconsistent systems. A lack of accounting processes or tools to efficiently manage payments, receivables, etc., and an inability to use your financial status to drive strategic decision making will be painful and expensive to fix, and could even derail your future investment. 

Choosing KPIs & keeping track over time

If you have more metrics than can fit on one PowerPoint slide, it won’t be clear to investors (or other key stakeholders) what’s actually driving your business. Only three or four really matter. When your company’s early, focus on your revenue, revenue growth, and headcount, while later you’ll drill down into metrics that are more specific to your business model (whether that’s SaaS or durable goods). Once you’re approaching profitability, your focus will shift to gross/net margin over revenue.At all stages, you want to understand and articulate your path to positive EBITDA, whether that’s through expanding your customer base, lowering your cost structure, or other sector-specific levers. 

Of course, the best way to track things is over time; nearly all investors want to see the slope of the line. However, just because certain numbers are going up or down doesn’t necessarily mean things are moving in the right direction: How you perceive the numbers versus what they actually signify might not be the same thing. A shortfall in understanding is a common pitfall for founders, so don’t overestimate yourself – consider enlisting an expert fractional CFO who’ll get it right. 

Conveying your metrics to the Board of Directors

To Board members, the only metrics that matter are those that are “decision-useful” and drive value creation. Remember: You’re always managing up to your Board, and proactively bringing the right data to help them help you make decisions is a winning strategy. These metrics might bolster the decisions around the pathway to your next raise (driven by your cost structures and revenue momentum) or around troubleshooting sales growth (driven by your pipeline and conversion rates). Naturally, these data will shift as your business matures.

The ability to extract the right data points from the business is critically important and more art than science. Your early finance talent should “speak” multiple languages of different business units; one of the biggest ROIs from hiring exceptional finance talent is their ability to translate what’s happening qualitatively on the ground into relevant, clear metrics for digestion by your executive team and your Board. By doing so, you’ll win not only the ability to control the narrative but the early indicators that inform strategic decisions. 

Hiring a fractional CFO

When to bring someone in 

Seek out at least some kind of fractional finance help as soon as you take on external capital (i.e. accounting, modeling, KPI reporting, etc). Not only will this prevent future headaches, but it’ll take financial tasks off your plate, allowing you to focus on higher-level work that will drive the company’s growth. This can be in the form of a strategic finance Advisor (a person), a fractional CFO (a person) or a specialized fractional CFO firm like Enduring Planet.

As well as helping you avoid fixed costs, hiring a fractional finance resource provides flexibility if your business needs to pivot – a full-time hire might not be a great fit for the next evolution of your company.

Fostering a relationship with your fractional CFO

As with your Board, a great relationship with your fractional finance resource is a core ingredient for success. Developing this relationship is all about setting the right expectations and maintaining full transparency that goes both ways. Respect their expertise, and give them the time and space they need to do their job. 

Trust, but in the early days, also verify; it can be helpful to have multiple sets of experienced eyes on financial metrics. Trust is built over (a very long period of) time. Bringing in a fractional finance resource at the pilot stage, before you start chasing serious cash, can act as testing ground for the relationship. Vet candidates that have the opportunity to grow with you over time.

How the CFO’s role shifts over time

At Series A, you’ll typically need at least a full-time VP of Finance who can drive strategic work and investor relationship building, alongside your back office accountants. Prior to Series B, the back-office finance function will serve as a jack of all trades, working across IT, HR, and accounting. After the Series B, approximately, any CFO role becomes far less generalist: It’s strategic as well as an operational role. By this stage of the business, the CFO has access to data that most people don’t have, and can harness this data to shape the direction of the business. CFOs will also lead the conversation around complex financing instruments, such as equipment finance, corporate debt, or project finance, where granular financial understanding and prior experience is marginally very additional alongside the CEO’s vision and storytelling.

Transitioning to a full-time CFO

With Series B funding, you’ll likely have enough investors and revenue to hire a CFO full time – the best ones aren’t cheap and will come in around $500k base. Finding the right person can be challenging – you’ll have to balance affordability and experience with the fact that chaotic early-stage startups just aren’t the right environment for everyone. Follow the maxim of ‘hire slow, fire fast’. And, if you find the right person at Series A, it’s often worth its weight in gold to find a way to hire them, even if that means staggering compensation to be back-weighted in future equity rounds. Often, a high-slope, hungry VP of Finance who can join at ~Series A and grow with the company into a CFO (by learning from advisors and mentors about what they don’t know they don’t know) can be a secret weapon.  

Navigating a shifting capital stack 

The capitalization process changes gears meaningfully as your startup matures stage by stage – the key is approaching every financing round with the next one top of mind, and being flexible with your options amid a contraction in capital markets and shifting investor sentiment across asset classes. 

This panel was facilitated by Dimitry Gershenson, CEO and co-founder of Enduring Planet. Speakers included Jill Macari, CFO at Veir; Austin Badger, Managing Director at HSBC; Natalie Volpe, Director at Wollemi Capital; and Mark Cupta, Managing Director at Prelude Ventures. Notes were taken by Adoley Swaniker.

Timing is everything in fundraising

Many founding teams underestimate how much fundraising dynamics have shifted in the current market. Right now, timing matters far more than the other fundamentals (team, TAM, tech). The moment has to be just right: investors are typically asking for commercial agreements and contracts much earlier than usual, and digging deeper into economic fundamentals even as early as the Pre-Seed.

Regardless, you have to know and meet investors’ expectations at every stage. In the beginning, they’ll look for technical validation and pipeline, while focus shifts to your revenue and exit strategies once you reach Series B. At every point, you need to show up with a concise, compelling narrative about your market opportunity, your team’s ability to execute, your unit economics, and capital efficiency. For more on this, check out our recent piece with Nare Janvelyan of Voyager.

Start as you intend to continue

How you begin your business matters – if you start with venture capital, you’re on that track for life and will have to bend to its demands (huge returns, very fast). It can also make it difficult to get off the fundraising train: PEs don’t like cash burning businesses. So, if being locked into VC isn’t for you, choose a different path.

Using safety nets when you’re short on runway

Be wary of bridge rounds

Bridge rounds can sometimes become necessary when the goalposts move while you’re striving to hit your milestones. However, they can be extractive because of the leverage these investors have. Make sure you understand what you’re signing up for, and that you won’t be left in a vulnerable position when the next round comes along. 

Non-dilutive funding

Non-dilutive funding like grants or debt function serve as both an alternative to venture capital and a safety net, helping you bridge a gap if your tech takes longer to commercialize or equity investor appetite cools. However, the grant ecosystem has taken a huge hit with the new administration. Other options between stages include going after private philanthropic money, or running a side business such as a consulting business – though this runs the risk of diverting your attention from your core business.

Venture debt

Venture debt is a useful fallback: during the draw period you can burn equity first, and the debt can provide a critical extension when you’re close to hitting milestones but almost out of runway, or when the market underreacts to your milestone. But remember, the goal isn’t just extending runway – you need to put every dollar towards the specific purpose of de-risking the business.

The process of taking on venture debt changes throughout your business’s stages: early on, the amount of capital deployed through a venture debt facility will be smaller, and is often allocated through a dedicated bank account with some covenants.

Generally the diligence focuses more on who your investors are at the Seed/Series A stage. Then, at later stages, the lender’s focus will shift from the CEO to the CFO, as conversations become more focused on metrics. Here, compared to the standardized/rapid approach in the early stages, the underwriting process becomes much more nuanced.

The relationship game

Remember, this is a people business: so at any stage in your journey, you need to be putting in time with the right ones. Cold emails will go unanswered. Instead, spend your time networking – and don’t overlook the power of relationships with other founders – or go through accelerators, which provide invaluable opportunities to get in front of the right people. It’s also important to know who you’re pitching to and why – for both the firms, where you should have strategic alignment, and the individual, as not everyone at a fund will work on every type of deal.

The relationship angle also applies to lenders: you need to build the relationship for as long as possible before you approach them for money, for one, by having had an account with them for years. Think of it like a kid’s birthday party: if you invite everyone early, numbers will be great, but if you leave it to the last minute no one will show up.

When you’re turned down

Ask investors who’ve rejected you for insights into why. But don’t take this feedback for granted, because it might not always be the real reason – only start to take it on board after you’ve heard it many times. By addressing the reasons they’ve rejected you, there’s always a chance the conversation will continue.