Keeping investors satisfied is a big, important undertaking for any company that’s funded by outside sources. If your organization is backed by venture capital (VC) equity, that probably means having regular board meetings with key VC stakeholders.
That can be a daunting proposition, but it also presents an opportunity. At the board meeting, you’ll have experts gathered in the room ready to guide your business. When well-prepared, the VC board meeting becomes an invaluable resource.
What, then, does proper preparation entail? You need to be ready to tell your investors a story through numbers. When it comes to VC firms, that usually means preparing some specific financial documentation.
To help CFOs prepare, we have some guidance. Let’s start with an overview of what happens at VC board meetings so you can better understand your role and what you need to contribute.
What happens at the VC board meeting
The board meeting brings together all of the VC’s board members, along with your company’s founder, their right-hand people, and, in many cases, their general counsel. As a key player in the organization’s C-suite, that often means the CFO will be in attendance.
People in the company’s finance function or attached to it (outside accountants, for example) are often there only as observers. That doesn’t mean that you should be prepared to coast, though. Your contribution to the meeting starts well in advance of the actual meeting minutes. And you should be prepared to speak to any financial reporting you bring to the table.
Usually, what you bring won’t get addressed up top. Instead, most VC board meetings move through the following structure:
- Introductory summary: First, the company’s founder often opens the meeting by providing investors with a summary of what’s happened since the board last met. This is a broad, usually quick overview meant to bring investors up to speed.
- Focus on customers: Next, the meeting transitions to what’s usually its largest section — provided your company has already brought its product or service to market (if not, the next section is usually longer). During this part, the founder (and potentially a key stakeholder from the sales function) discusses the company’s customer base with the board. That means highlighting new customers, along with any movement in key accounts. Here, investors might contribute by identifying potential marketing and sales tactics and customers. They may even offer to make introductions to those prospects. While this doesn’t apply specifically to you as the CFO, we’ll note it because it’s important for your company as a whole: If investors offer to make introductions, your team should be prepared to report back on what happened after that introduction was made at the next board meeting.
- Focus on the product/service: Once current and potential customers have been sufficiently covered, the meeting shifts its focus to the company’s product or service offering. In the company’s early stages, this part of the meeting usually informs investors about the status of R&D efforts. Once the product/service is launched, it might cover new features or new products/services the company is exploring or developing.
- Strategic planning: At this point in the meeting, investors should feel like they’re fully abreast of the company’s current status. This enables them to work with the founder and other stakeholders to develop a strategy for the upcoming quarters. If the company needs to fill positions to grow, for example, this part of the meeting might focus on staffing. Investors might even suggest good candidates. If the founder is still fulfilling a lot of roles, this section might focus on which hats they hand over when and to whom.
- Financial metrics snapshot: This is your time to shine. The VC fund may specify which financial reports it wants to see at each board meeting. Those will almost definitely include your balance sheet, income statement, and cash flow statement. Additionally, most investors want to see a single document that overviews the company’s financial standing (more on that below).
- Board member aside and final feedback: Toward the end of the meeting, the board members often ask the founder and their team to leave the room so they can have a private conversation. They formulate guidance, then invite the founder’s team back so they can share that, along with action items before the next board meeting.
What to prepare for the meeting
Obviously, your team will want a slide deck to cover all of the above pieces. Here, though, we want to focus on what you need to deliver as the CFO. That means getting your financial metrics ready for board members’ eyes.
We recommend having the following documentation prepped:
- Income statement
- Balance sheet
- Cash flow statement
- Financial snapshot
What’s included in that last piece might get dictated by the VC firm or individual investors. If they don’t provide guidance, we recommend creating a summary that looks at the last two quarters, the current quarter, and the four upcoming quarters.
For each financial period, include:
- Starting cash (actual or projected)
- Investments
- Financing
- Monthly recurring revenue (MRR)
- Additional revenue that’s not recurring (e.g., for one-off services)
- Total revenue
- Cost of goods sold (COGS)
- Gross profit
- Gross profit percentage
- Expenses, usually broken down as line items like:
- Sales and marketing
- General and administrative
- R&D and engineering
- Total operating expenses
- Operating income
- Ending cash
- Burn (change in cash)
Additionally, investors will most likely want to see your current and projected headcount. Usually, it’s helpful to have one line item for total full-time equivalent (FTE) staffing, with additional lines dedicated to specific categories like engineering, sales/marketing, and administration.
Here’s a sample financial snapshot that you might share:
Our big tip: Prep early
If you think you need to have your financial snapshot and statements (and the slide deck for the meeting) done the night before, think again. A lot of investors want to take time to review the information so they can speak to it at the meeting.
As a best practice, aim to get your financial documentation into VC board members’ hands at least one week before the scheduled meeting date.
We can help. For aid in collecting the information you need or building templates you can use for financial reporting at all future board meetings, contact our team.
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