As a CPA, I’ve been working with technology companies since 2010. It started out as something I did on the side, but it turned into a full-time business in late 2013. The tech industry is a unique animal, and I’ve learned a lot over the last decade.
As I’ve been reflecting on the lessons that I’ve learned through my journey as a service provider to tech startups, I distilled the following. If anyone’s thinking about entering into a professional field that means providing service to tech companies, you should know these six things before you walk down that path.
#1: There’s money in tech… eventually
It doesn’t pay well at the start, though.
To build a reputation in the New York City tech ecosystem, I started by working with companies that were at the pre-seed stage. Most founders at this stage are bootstrapping, so cash is extremely tight.
That doesn’t mean bootstrapping companies aren’t a great way to start. It’s worth mentioning, though, that the DIY mindset of founders at this point can lead to messy processes and mixed-up reporting (if it exists at all).
In accounting, that means a lot of year-end cleanup, missed/misfiled tax filings, and issues with employment laws (e.g., when employees are misclassified as independent contractors).
It’s also extremely high risk at this stage. Some companies do well and grow rapidly, while others go out of business in a blink of an eye.
There’s a major silver lining here. The advantage of serving companies at this stage is that you get to work very closely with the founders. For me, that meant helping them think through their financial assumptions, helping them avoid common tax pitfalls, and laying a solid financial foundation that can serve them as they grow.
#2: Tech is sexy, and everybody wants some
As tech’s tentacles permeate across other industries, everyone wants a piece.
This means there’s a ton of competition as service providers (in our world, accounting firms and CFO advisors) are all clamoring to get a slice of the pie.
How do you stake your claim? For our team at ShayCPA, shining through the work we do has helped us retain and grow our client base. Plus, the power of word of mouth goes a long way within the tech ecosystems around the country.
Early on, we found ourselves competing against pretty large firms. To differentiate ourselves, we focused on the level of personal attention that I was able to provide my clients. Going the extra mile won us a lot of that initial business and is still a huge part of our company culture and core values to this day.
As a service provider, offering personalized attention is one of the most powerful ways to stop yourself from being commoditized.
#3: Brace for a steep learning curve
Tech startups with dreams of being venture-backed have very unique tax and legal structures compared to other traditional small businesses. There is also a specific lexicon of startup jargon that you need to learn, and fast. Think: MRR, ARR, CAC, dilution, Cap Table, term sheet — just to name a few.
The legal structure for most technology companies is the Delaware C-corporation, which has its own quirks and nuances, too.
Beyond that, tech companies typically generate net operating losses. At the same time, though, they’re eligible for R&D tax credits that can help them save a ton on taxes, including payroll taxes, assuming they’re an eligible company.
All told, there’s a lot to wrap your head around if you want to be a service provider for tech companies. Start taking notes now.
#4: Most founders are wickedly smart
Companies that receive VC investment have founders that graduated from the top schools in the U.S and abroad. These founders have different traits — some of them are great at understanding unit economics and the finance side, some are excellent in consumer behavior and marketing, some are strong at leading and motivating their teams, and some excel at all of the above!
In the early days of my business, I quickly realized that founders have a strong B.S. meter. They’ve often done the research before they even ask you a question about it. Be ready for your advice to be challenged.
Thanks to tech ecosystems around the country/world (Y Combinator, Techstars, etc.), founders have extensive resources from which to get information, whether that’s from other founders, mentors, angel investors, VCs, incubator/accelerator programs, office hours, or, of course, the internet. As a result, it’s not uncommon for founders to seek information from other sources even if you’re their go-to guy or gal for a particular service.
#5: Scaling might look different for you
Once my CPA practice was established, and we hired a few employees, I quickly realized I couldn’t scale as fast as some of my clients. While I had just hired my first and second employees (read: part-time interns), some of my clients had already got to Series A and B and were well on their way to having 20+ full-time employees. Suddenly, their needs were outgrowing my tiny little firm.
At first, I would try to take on work that was way too much for me to handle, then get upset that clients would leave us for other larger firms or start hiring internal finance teams. But after a while, I came to accept that the accounting firm I was building would take a little more time to scale.
With that acknowledgment came the realization that there were ways we could augment and support these companies even if we thought we were too small. Partnering with other peers/professionals and supporting internal finance/ops teams was a great way to continue to serve my clients as they scaled.
Although tech startups can begin to hire and build internal teams, they invariably have to deal with high staff turnover. That can be a great opportunity for a service provider to fill the gaps.
Another thing we did to strategically scale centered on building our tech-savviness. Now, we can offer robust finance tech stacks because we put in the work to become experts at using services like Quickbooks Online, Bill.com, Gusto, and Carta, to name a few. Getting really good at automating and embracing technology helped us streamline our process and get away from being primarily driven by the billable hour.
We also take great pride in continuing education, which helps our firm stay on top of changing accounting and tax laws.
#6: Grow thick skin
As a service provider, you’re low on the pecking order. In the tech world, it’s:
- Founders. And their biggest priority is their customers and raising money from VC firms and angel investors at specific time periods in their growth. You might not even be on their radar.
- VCs and angels. VCs’ biggest priorities are to invest in scalable founders/companies, so a lot of their time is spent reviewing pitch decks and interviewing founders. VCs also need to stand out and many of them have an evolving investment thesis that drives what types of companies they back (e.g., fintech, crypto, biotech, deeptech). They also raise funds from time to time from their Limited Partners (LPs), and that means they have to deal with fundraising themselves and ensuring they are able to generate a return on capital.
- Early employees and top talent (e.g., developers).
- Tech incubators and accelerator programs. Think organizations like Y Combinator, Techstars, etc. There are also a significant number of incubator programs tied to universities and other educational institutions across the U.S.
- Service providers. This is us. It’s the banks, lawyers, accountants, marketing agencies, and HR/payroll providers. We’re at the bottom.
It was tough being brushed aside or dismissed when attending conferences and networking events. This reality bruised my ego initially, but it’s the way of the tech world. The sooner you stop taking it personally, the better off you’ll be.
Acknowledging my low spot on the pecking order taught me about the power of brevity: being direct to the point with founders who have no time and VCs who are tired of being pitched to. “Make it brief, son. Half short and twice strong,” as GZA from the Wu-Tang Clan once said.
Through the tough times of building my firm from scratch, we’ve been able to get to 10 employees and growing. We’ve also found a way to sustain ourselves in a niche space that’s extremely competitive. My greatest satisfaction comes from seeing founders work on novel technologies that can have groundbreaking potential to transform our planet and future. I take a huge amount of satisfaction in seeing them succeed and being a small part of their journey to success.
For our clients who don’t have rosy outcomes, it’s amazing to see how they pivot in their careers. Some get bit by the entrepreneurial bug and their past failings serve as a great springboard to launch for a second or even third time.
I’ve also found a huge amount of satisfaction in training the next generation of accounting and finance professionals that have come through our firm over the years. We’ve been extremely fortunate in being able to retain some really awesome humans that understand this is a people business first and foremost, no matter how much technology we embrace.