How to Prepare Your Startup’s Financial Reporting for a Fundraising Round

When a startup enters a fundraising round, investors look at more than just the product, market, and team. They check how well you understand and control your numbers. If your financial reporting is messy, your chances of closing the round drop — no matter how strong your pitch is.

Below is a straightforward guide to getting your financial house in order, explained at the level of a first-time founder.

1. Cap Table: One Simple Table That Shows Who Owns What

The cap table is just a spreadsheet — Excel or Google Sheets — that clearly shows who owns which shares, in what proportions, and how ownership will look after options and investments are taken into account.

Why it matters:
Investors want to see the real ownership structure. If you say you own 80% but after options and SAFEs it’s actually 52%, trust drops immediately.

What to do:
Create a table with the following columns:

• Shareholder name
• Number of common shares
• % ownership (common)
• % ownership excluding option pool
• Number of shares for investment instruments (e.g., Series A, SAFE)
• % ownership for these instruments
• Total number of shares
• Total % ownership after everything

Include founders, employees with options, and investors. Use actual numbers — not estimates.

Example:
You’re the founder with 80%. You promised 10% to a key employee via options. You also signed a SAFE with an investor for $500,000, which will convert into 20% equity.

• You: 64%
• Employee: 8% (within the 10% pool)
• Investor: 20%
• Remainder: 8%

If this isn’t reflected in the cap table, it will surface during due diligence — and not in your favor.

The cap table must be up to date. Old versions or missing instruments like SAFEs signal disorganization. Investors view the cap table as the single source of truth for ownership.

2. Financial Model: Accuracy Matters Less Than Understanding

Your financial model is not a crystal ball. Investors know forecasts rarely match reality. They’re looking for something else:

• Do you understand your revenue drivers?
• Do you understand your cost structure?
• Can you calculate burn rate — how fast you spend cash?
• Is there logical growth in revenue and expenses?
• Can you adjust if the market shifts?

Minimum:

• Revenue forecast for 12–18 months
• Expenses by category
• Monthly burn rate
• Cash runway — how many months before you run out of money

Example:
You have €300,000 in the bank. Your burn rate is €50,000 per month. Your runway is 6 months. If expenses increase, the runway must be recalculated accordingly.

If you can calmly explain any number in your model, it’s a strong signal. If you can’t explain your own calculations, investors won’t trust you.

Don’t worry if reality diverges from your forecast later. Investors are testing your financial command, not your ability to predict the future.

3. P&L: Income and Expenses Without the Fog

P&L (Profit and Loss) is a monthly table of all revenues and expenses.

Why it matters:
Investors need to see what you earn, what you spend, and the trend line. It’s the foundation of financial transparency.

Minimum:

• Revenue — clients, subscriptions, contracts
• Cost of goods / services — direct costs
• Operating expenses — salaries, rent, marketing, legal, etc.
• Taxes
• Monthly profit or loss

Example:
You run a SaaS with 10 clients paying €1,000/month = €10,000 revenue.
Servers and support: €3,000
Salaries and rent: €5,000
Marketing: €2,000
Net: €0

If these numbers are scattered in notes instead of one clear table, investors waste time deciphering them. That signals a lack of financial control.

4. Cash Flow: A Basic Forecast That Shows You’re Counting

Cash Flow is a monthly table of actual cash movements — money in, money out, and what remains in the bank. This is not theoretical revenue, but real cash flow.

Why it matters:
Investors assess how long your company can survive on current funds, how fast you’re burning cash, and whether your growth plans are realistic.

Minimum:

• Cash inflows
• Cash outflows by category
• Burn rate (monthly cash spent)
• Cash runway (months of runway at current burn)

Example:
You have €300,000 in the bank. Burn rate is €50,000/month. Cash runway is 6 months. If expenses rise, adjust the runway immediately.

Investors check this carefully. If the math doesn’t add up, trust disappears. Even a simple table is better than nothing. If you’re not tracking cash flow, you’re not running the company — you’re drifting.

5. Contracts, Debt, and Obligations: Basic Order, No Bureaucracy

At the early stage, investors don’t expect a perfect legal system. They expect no chaos.

What to do:

• Save every signed contract or agreement as a PDF
• Create a “Company Documents” folder on your laptop or in the cloud
• Organize it: clients, suppliers, loans, taxes
• Replace old versions when things change, don’t keep duplicates
• Keep it current — any document should be accessible in 10 seconds

You don’t need a Data Room yet. A clean folder structure is enough. Investors want to see that you’re in control, not hunting contracts through email chains.

Typical Case: Lost Round Due to Disorder

A French HealthTech startup entered seed negotiations for €1.2M. The product was strong, traction was good. But:

• The cap table was outdated
• The financial model didn’t match actuals
• Client contracts were scattered across personal emails
• Tax filings were delayed

Due diligence dragged on for 6 weeks. The fund withdrew: “Corporate and financial risks are too high.”
9 months later, after cleaning up, the startup returned to the market — but on worse terms.

Note: This scenario is anonymized and based on recurring real DD failures at pre-seed/seed stage in Europe.

Conclusion

“Clean” financial reporting is not fancy accounting. It’s proof that you control your company. Investors will tolerate product imperfections — not financial chaos.

Minimum checklist:

• Up-to-date cap table
• Logical financial model
• P&L
• Cash flow table
• Structured document storage

This is enough to pass basic investor checks and avoid losing time fixing chaos during the fundraising process. It’s the foundation. Without it, no pitch will save you.