According to much repeated startup lore, every successful team needs three key characters to succeed: a hipster, a hacker, and a hustler. The hacker builds the product, the hipster makes it look pretty, and the hustler gets in out there in the world.

That's all fine and good, but according to top VC Mark Suster, this holy trinity of startup success in missing one more equally essential character -- the accountant.

Broke companies don't build cool things. 

Keeping a careful eye on the numbers isn't as glamorous as designing and building great products, nor if it as much fun as hyping them in the market, but all of those activities depend on having enough money to keep the lights on, a fact way too many startups gloss over in Suster's experience.

In a tweetstorm recently he explained how common it is for him to encounter teams that lack basic financial savvy, and just how big a problem that can be.

"It's critical to stay on top of cash flow, burn rate, cash-out date. Also understand accruals, balance sheet, liabilities. Finance 101," he goes on to say, warning that saving money isn't an excuse for financial cluelessness. 

"I know you were told to keep your teams lean & you want people who can 'produce' but if you can't manage cash/debt you're out of business," he cautions founders, so "if you don't understand: gross margin, contribution margin, COGS, CAPEX or how to tie IS to CF - make sure you have a leader who does." 

Where to find financial skills 

Suster's comments kicked off a long discussion among fellow VCs and others in the startup community about the problem, with some suggesting various incubators and universities could do more to bring together those with an engineering and business background. 

Others pointed to services like Hivemetric and myStartupCFO that can help founders get a handle on the financial aspects of their businesses well before the point that they're ready to hire a CFO. (If you do happen to be ready to hire a CFO, Suster has some advice on how to do it.) 

But whatever the particulars of how you keep track of your financials, Suster's bottom line advice to founders is this: "I get that innovation is driven by amazing engineers / product people. I started my career as a programmer. But manage a 'business' too."

Is Suster right in your experience? Do too many startup teams lack essential finance and accounting skills?

Published on: Oct 17, 2017