- Chartered Accountants are invaluable to start-ups for their forecasting and valuation skills
- Creating a ‘cap table’, or share register, is crucial in attracting investors
- CA ANZ members can join the CA Catalyst community to receive exclusive invitations to events such as Small Firm Big Impact
Chartered Accountants Australia and New Zealand through its strategic program CA Catalyst is partnering with some of Australasia's premier start-up incubators and accelerators - The Icehouse, Fishburners and Stone & Chalk - to deliver insights to members on business disruption and transformation.
The sessions are an opportunity to hear from innovation communities on how they are shaping the future, and how CAs can connect with the next wave of business thinking to build value for themselves and their clients.
At the recent CA Catalyst Small Firm Big Impact event held at Fishburners Brisbane, the audience heard from a panel comprising a CFO from a start-up, a private equity analyst and the director of start-ups at a mid-sized accounting firm.
The focus was on how CAs can advise start-ups in securing the right kind of investors and the right terms for all parties.
One of the crucial areas in which the skills of a CA are invaluable is in forecasting and valuation and understanding investor expectations on returns.
Forecasting and valuation
Marc Orchard, the Director of Start-ups at BDO Australia, said CA forecasts set the basis of expectations for both entrepreneurs and investors, and were critical in then understanding current and projected valuations of young companies in cases where "you are often picking a number from the air".
"I think it really starts with forecasts, because your forecast is tied to your valuation," said Orchard.
"You're pitching to investors who see financials as opposed to something that is just through the roof, and forecasts are really important as they validate a certain valuation."
"Especially with seed investments, I think this is where CAs can be super helpful."
Orchard said it often made a big difference in meetings to have a CA, who was often a CFO, who was able to speak to the financial forecasts.
"At the end of the day, investors are investing on the return and I think that if they can point to one thing, they look at your financials."
A CFO who could answer these questions was critical, and they could often be the difference between winning or losing investors.
A clean 'cap table'
A second key area for CAs is in building a rigorous shareholder register.
Eden Lawrence, a private equity analyst at QIC, told the event that not getting this right could hold up investment and cost the start-up valuable time.
"Early on, you can get a lot of seed investment from mums and dads and friends and family, and you really need to clean that all up," she said.
It all came down to a "clean cap table" that clarified equity and equity compensation plans, and in this CAs were crucial to the funding process.
Co-ordinating the moving parts
A third area is in co-ordination, and while some of this work was the responsibility of lawyers, CAs and CFOs were also invaluable.
Natalia Florez has direct experience of start-up funding in her role as CFO of Red Eye Apps, and she said the journey involved "a lot of negotiations back and forth" that drew on the softer skills of the CA as well as technical knowledge.
"Even after we agreed on a term sheet there’s a lot of coordinating of the parties involved," she said.
"How do we coordinate four different law firms? And then meetings and follow-up phone calls. It was super demanding."
In this phase, there were demands for additional information and security to reassure all parties and get funding deals across the line.
Register for exclusive invitations
The Brisbane event with Fishburners was the first in the series, and other events will be rolled out to other locations in collaboration with strategic partners in Australia and New Zealand.
The next Small Firm Big Impact event will be held at Xero in Auckland on 6 June.
Register with the CA Catalyst community to receive exclusive invitations to events in your local area.