Sava360 Interview with Sandeep Shroff, CEO and Co-Founder, myStartUpCFO

Who is Sandeep Shroff?

CEO and co-founder of myStartUpCFO Sandeep Shroff is making a name for himself and his startup… and, as you can see, it’s all in the name! myStartUpCFO essentially provides small businesses with on-demand full-stack CFO support. We all know that in the early stages of starting a business, there is so much focus on growth that sometimes the most critical pieces of business operations and financial controls get lost. That’s exactly why Shroff helped start myStartUpCFO – so small companies can get the much needed CFO office support without sacrificing already limited resources.

Added to its core operational mission is Shroff’s own socially conscious mission to have myStartUpCFO support and empower women and help close the gender gap in the workplace. In their 3+ years of existence, they have worked with hundreds of clients, from unfunded dreams operating out of a garage to companies that generate millions of dollars in monthly revenues. We’re especially happy to have Shroff offer his support for Sava360 and participate in our next exclusive ‘Day in the Life Of’ interview series.

[S360]: What’s your take on some of the biggest tech company PR fails in the news recently (i.e. Uber)? Is this, at least in part, a function of growing too big too fast without the necessary infrastructure in place?

[SS]: I wouldn’t call Uber a fail just yet! But yes, fast growth can kill. More than infrastructure and processes, failure is a result of founders’ / management’s mindsets and attitudes NOT changing. Do your kindergarten learning / functioning skills work in high school or college. Self-induced evolution is hard to do…but it is necessary for any successful entrepreneur.

[S360]: Take us a on quick 30 second high level journey through your career to this point, culminating in the launch of myStartupCFO.

[SS]: I have changed fields of work every ten years or so, but I’ve always included the previous experience to enrich the next. My first ten years were as a hands-on computer programing geek in Silicon Valley startups. The second ten years were analyzing tech companies on Wall Street (which I did not like much!) and working in finance roles in tech companies. The third ten years are a culmination of tech, finance, and previous 20 years of nonprofit work in the women and children’s literacy field in India. myStartUpCFO is a financial services startup providing services to other startups. All this while employing women who are working from home, which allows us to stay nimble as an organization, and also provide a stable, challenging career to women who want a healthier work-life balance.

Read more …

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Are You Smarter Than A Fifth Grader?

After speaking with hundreds of CEOs, I realized that burn rate isn’t as Startup101 as I had thought. There are still a lot of things that founders understand incorrectly when it comes to being a #BurnRateZombie. But before we get into it…

Let’s take a pop quiz!

Once upon a time, there was a CEO running a very promising startup. The company was all set to join the ultra-exclusive Unicorn club. It was valued at $900M, and this is how their cash inflows and outflows looked:

(FYI, Singapore fifth-graders’ are expected to take one minute to answer that.)

Thinking $62M? Well, your math is as good as the fifth graders, but you should know better.

Jason realized after all this burn that he doesn’t have a business model. His company had become a #BurnRateZombie, so he sold all inventory, cut the staff, and finally offloaded the company for a special clearance price of $15M. Jason hems for a living now.

Burn Rate is very complicated. See if you understand this.

Burn rate = Money that comes in — Money that goes out

No, don’t mock. It’s tougher than it looks. In fact, I’ve had this talk with so many founders that I created this burn rate calculator to better illustrate my examples.

You can run your numbers at this link: BURN RATE CALCULATOR

Don’t know what numbers to fill in? You need to talk to us.


Jason wasn’t paying attention to the red flags. But here is what you should be doing:

  1. Sit regularly with your accountant and deep-dive into your numbers (I hope you have an accountant!). Beyond the bean counting (what’s coming in and what’s going out), you should have an overall sense of your financials. One thing about numbers — they don’t lie. Know your top five buckets of expenses and analyze them for patterns. Look out for unexplained numbers and unusual variations in expense lines. Grill your accountant on and make sure she/he knows the stuff.
  2. Ruthlessly track KPIs. Track your Key Performance Indicators and tweak your strategy based on what they are telling you. Do not forget that B2B and B2C businesses track different KPIs. For example, as a SaaS company, do you track your company’s magic number? A lot of disciplined operating KPI tracking goes into this number. But once you have the systems in place, the resulting insight for your business are priceless.
  3. Keep your eyes and ears open. Keep an eye out on the market indicators for funding. For example, if the market is down, raising funds might take longer than what you’d earlier accounted for. If you are not prepared for it, that could be fatal. Don’t die mid-keystroke. Die trying. But above all, avoid dying at all.

“If you can just avoid dying, you get rich. That sounds like a joke, but it’s actually a pretty good description of what happens in a typical startup.” — Paul Graham, Y Combinator

4. Know your burn, track your burn, control your burn. Question the expenses you’re committed to. Just because you have okayed something in the past, doesn’t mean you don’t track it’s ROI. The money you spend on networking events is a classic example of doubtful ROI. Constantly trim the fat.


Survival stories are boring. Who wants to hear about the company that didn’t die? Only our client founders, their investors, and us.

Avoid being a #BurnRateZombie by tracking your burn rate. Make your story boring again.

The best time to talk is now! Call us today.

 

Private Placements: What happens if you fail to file Form D (or file it late)?

Form D is a document that the SEC requires a company to file when it issues securities in a private placement under Regulation D. It must be filed with the SEC within 15 days of the first sale of a security in a private placement. In addition, for offerings made under Rule 506 (the most frequently used part of Regulation D), an issuer must also file a copy of Form D (along with a filing fee) with the securities administrator of each state in which purchasers of the securities reside within 15 days of the first sale within each state. Overall, Form D is a relatively simple document to complete and file; however, it’s very easy for a small company to overlook filing one, especially if it doesn’t use qualified legal counsel for its securities offering. I frequently get asked about what happens when an issuer fails to file Form D or if the issuer files it late. This post describes what consequences can and cannot occur.

The first consequence an issuer might be concerned about is losing the federal private placement exemption and consequently be in violation of securities laws by improperly selling unregistered securities. Thankfully, a failure to file a Form D does not result in the loss of the federal registration exemption. The SEC has issued guidance on this in Question 257.07 of the Securities Act Rules Questions and Answers of General Applicability. While filing Form D is a requirement for using a registration exemption under Regulation D, it is not a condition to qualifying for the exemption. Instead, the only potential consequence on the federal level is that the SEC could take action against the issuer and seek to have the issuer enjoined from future use of Regulation D under Rule 507. If the violation is willful, it could also constitute a felony.[1] Despite the fact that Form D is not a condition to being exempt under Regulation D, I would caution issuers to not take their responsibility to file Form D lightly. Often when an issuer is sued in court, the plaintiff will accuse the issuer of violating the federal registration requirements of the Securities Act. In such instance, the issuer will bear the burden of proof to prove that the securities offering met an exemption under Regulation D. While courts have explicitly stated that failing to file Form D does not create a private right of action, an issuer may be assisted in meeting its burden of proof that the securities were issued pursuant to an exemption under Regulation D by producing a properly filed Form D.[2] Therefore, while failing to file Form D may not result in the SEC seeking penalties against an issuer for selling unregistered securities, it could put an issuer at a disadvantage in civil litigation by eliminating one piece of evidence that an issuer can use to build their case that they substantially complied with Regulation D. In addition, the SEC may seek substantial penalties against an issuer who has failed to properly file Form D.

The other question an issuer may be concerned about is what are the consequences for failing to file Form D at the state level. Most Regulation D offerings are conducted through Rule 506. When an issuer makes use of Rule 506 to issue securities, those securities are considered “covered securities,” and state registration requirements are preempted. However, states are permitted to require that the issuer file a copy of the Form D (along with a filing fee) with the state securities administrator if the issuer has sold its securities to the state’s residents. Is the preemption of state securities registration requirements in a Rule 506 offering lost if the issuer fails to file with a state? The SEC’s position is that it is not. Under Question 257.08 of the Securities Act Rules Questions and Answers of General Applicability, the preemption is not conditioned on properly making a notice Form D filing with a state. One word of caution: some states take the opposite position. The Wisconsin Department of Financial Institutions for instance takes the position that if a Form D is filed late in Wisconsin, the issuer must find another exemption or register the security.[2] My personal opinion is that if the Wisconsin Department of Financial Institutions ever took the case to court and claimed that a Rule 506 offering needed to be registered because a Form D was late, Wisconsin would lose that case, as courts have repeatedly held that failure to make a notice filing does not strip the offering of the status of a “covered security.”[3] But taking such a case to court would be expensive. In addition, there can still be significant consequences on the state level beyond losing a registration exemption for an issuer who fails to make required notice filings. States can issue fines or even stop orders, preventing further sales of securities by an issuer. Arkansas, for example, is one state that has been particularly aggressive in issuing fines for late Form D filings.

The good news here is that if an issuer accidentally fails to file a required Form D when conducting an offering or files it late, that will not invalidate the private placement registration exemption, which would potentially be a catastrophic event for an issuer. However, the SEC and state securities administrators can still issue fines and prevent an issuer from engaging in future private placements, so issuers still need to be diligent in making all required securities filings when conducting private placements.

Footnotes

[1] See Hamby v. Clearwater Consulting Concepts, Lllp, 428 F.Supp.2d 915, 920 (E.D. Ark., 2006).

[2] In a court trial, the issuer would have to produce additional evidence to show substantial compliance with Regulation D, such as subscription documents that evidenced an inquiry into whether the investors were accredited or sophisticated.

[2] See http://www.wdfi.org/fi/securities/regexemp/exemptions/23_19_506.htm

[3] See for example Chanana’s Corp. v. Gilmore, 539 F.Supp.2d 1299 (W.D. Wash., 2003) for an example of a case where a court concludes that a late filing does not cause a security to lose its status as a “covered security.”

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© 2011 Alexander J. Davie — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Source: Strictly Business