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In a recent webinar, our Director of Startup Banking, Rob Burnett, hosted a conversation with Jazz Parker of DNA (Digital Niche Agency), exploring how investment crowdfunding is opening new doors for startup founders. Together, they unpacked what founders need to know about this growing capital-raising strategy, the strategic advantages it offers over the traditional venture capital route, and how to use it effectively.

What Is Investment Crowdfunding?

Investment crowdfunding lets startups raise capital by selling shares directly to the public – often their customers, fans, and online followers. Instead of relying on a handful of big investors, founders can build a diverse base of smaller investors who are deeply invested in the company’s success.

“Think of it as turning your customers into owners,” Jazz said. “They’re financially invested in your success, and they become one of your best marketing engines.”

Rob added context by comparing equity crowdfunding to other common approaches:

• Bootstrapping: Self-funding growth through revenue or savings.
• Debt Financing: Borrowing capital, typically through loans.
• Equity Financing: Selling shares to accredited investors or VCs.
• Equity Crowdfunding: Selling shares to retail (non-accredited) investors through regulated online platforms.

“This is a great option for entrepreneurs who aren’t yet a fit for venture capital or bank financing,” Rob explained. “It’s a powerful way to validate your market while building community ownership.”

What Founders Need to Know Before Launching

While the barrier to entry is lower than VC, investment crowdfunding still requires serious prep. According to Jazz, success depends heavily on marketing and building an audience early.

“This is not Field of Dreams,” Jazz said. “You don’t just post a campaign and get funded. You need a plan to drive traffic and tell your story.”

Authenticity is key. Rob and Jazz agree that founder-led content, such as behind-the-scenes glimpses, honest stories, and product demos connects best.

“It doesn’t have to be polished,” Rob noted. “People don’t want a corporate ad; they want to see the person behind the brand.”

Jazz agreed: “Founders who share their journey, their values, their ups and downs – they build trust. That’s what converts followers into investors.”

Build Your Audience Before You Need It

One of the biggest mistakes founders make when launching a crowdfunding campaign is waiting too long to start engaging their audience. Just like preparing your financials or crafting your pitch, building a loyal following needs to happen well before you go live.

Ideally, founders should begin marketing 9 to 10 months before going live. That means showing up consistently on platforms like TikTok (Jazz’s top pick for organic reach), engaging early fans, and experimenting to see what resonates.

“If you wait until launch to start creating content, it’s already too late,” Rob cautioned.

They also touched on influencer marketing, advising founders not to lean too heavily on borrowed audiences. “You need to own your message,” Jazz said. “Otherwise, the attention you buy won’t convert.”

How Much Can You Raise?

Understanding the legal limits and requirements of different crowdfunding paths is critical to choosing the right strategy for your startup. The structure you choose, whether it’s Reg CF, Reg A+, or Reg D, will shape how much you can raise, what kind of investors you can bring in, and what kind of preparation and compliance is required. Planning ahead with this in mind allows founders to set realistic goals and allocate resources more effectively.

Jazz broke down the legal limits of various crowdfunding options:

• Reg CF (Regulation Crowdfunding): Raise up to $5 million/year from both accredited and non-accredited investors.
• Reg A+ (Mini IPO): Raise up to $75 million/year, with more regulatory requirements.
• Reg D: Raise unlimited capital from accredited investors only.

For Reg CF campaigns, founders need reviewed or audited financials depending on the raise size. They also typically use a Special Purpose Vehicle (SPV) to simplify the capitalization table.

Even with the right legal framework in place, executing a successful raise requires upfront investment, especially in marketing. Rob asked about budget expectations, and Jazz recommended founders allocate 10–25% of their target raise toward marketing efforts. Campaigns typically last 3 to 6 months and follow a three-phase arc:

1. Pre-launch (2+ months): This phase is all about building your audience well before the campaign goes live. Founders should focus on growing awareness, engaging with early supporters, and creating meaningful connections that will form the foundation of their crowdfunding community.
2. Live campaign: Once the campaign launches, it’s important to start strong and maintain momentum. Founders need to prepare for the “hard middle”, or the period where enthusiasm may dip. They must stay consistent with outreach and engagement to keep the campaign moving forward.
3. Closing phase: During the closing phase, fundraising usually accelerates rapidly, creating a “hockey stick” curve. This increase is largely driven by fear of missing out (FOMO), as potential investors act quickly to avoid missing out before the deadline.

Raising capital through crowdfunding isn’t just about choosing the right regulation—it’s about building a strategy that aligns with your growth goals, resources, and audience. By understanding the rules, budgeting wisely, and committing to the full lifecycle of a campaign, founders can turn compliance and marketing into powerful tools for momentum. With the right preparation, your raise can be more than a funding event—it can be a brand-building moment that attracts long-term supporters and propels your startup forward.

Raising Capital Is Sales – Own It

The biggest takeaway from the webinar? Fundraising isn’t just about numbers—it’s about storytelling, relationship-building, and persistence. At its core, raising capital is a sales process. And like any good sales effort, it requires strategy, consistency, and confidence.

“You’re not just funding a company-you’re selling a vision,” Rob said. “Founders need to be comfortable pitching, closing, and asking for the investment.”

Jazz pointed out that some founders hesitate to act like salespeople. However, successful entrepreneurs embrace the grind. “Content. Ads. Conversations. You need to show up and do the reps,” he said. “Your 100th video will be way better than your first, but you have to start.”

In other words, fundraising isn’t a one-time ask—it’s an ongoing campaign. The more you practice and refine your pitch, the more natural and effective it becomes.

Why Grasshopper Cares

Rob closed the session by reminding founders: investment crowdfunding isn’t for everyone. But for those building early traction, it’s a powerful, viable path that requires grit, patience, and willingness to be uncomfortable. 

“At Grasshopper, we want to help founders make informed decisions and access the right capital at the right time,” he said. “We’re not just a bank – we’re your partner in building something great.”

Stepping outside your comfort zone challenges you to learn new things, adapt, and develop skills you didn’t know you had. It’s part of the growth journey every founder faces, and it can be daunting. That’s why Grasshopper is committed to consistently showing up – not just as a bank, but as a partner who supports you through the growing pains and cheers you on every step of the way.

Keep the Momentum Going

The conversation doesn’t stop here! Whether you want to revisit key takeaways or explore the tools mentioned in more detail, we’ve got you covered. Access the full webinar recording on-demand or connect with Rob Burnett and Jazz Parker directly on LinkedIn. And don’t worry – more founder-focused webinars are on the way! If you’re not already a Grasshopper client, be sure to sign up for our newsletter so you never miss an update.

The post Beyond Venture Capital: Why More Founders Are Turning to Investment Crowdfunding appeared first on Grasshopper.

In a recent webinar, our Director of Startup Banking, Rob Burnett, sat down with Jeff Erickson, Director of Strategic Partnerships at Forecastr, to talk through the essential financial practices every founder should master. From understanding key metrics to building investor-ready models, they shared practical guidance for turning financial data into business decisions.

From Founder to Financially Fluent CEO

As Rob Burnett pointed out, there’s a big difference between being a founder and being a CEO. Founders build products. CEOs build companies – which means mastering the numbers.

“You can have a great product and still struggle if you don’t understand how your financials work,” Rob said. “Investors, lenders, even partners – they all want to see how your business performs and how you plan to grow.”

Jeff echoed that sentiment, emphasizing that a strong financial model is more than a spreadsheet. It’s a blueprint for decision-making. “Accounting tells you where you’ve been. Finance tells you where you’re going,” he said. “A model helps you understand your burn rate, plan for hiring, and most importantly, figure out how much you need to raise and when.”

What Founders Need to Track

So what numbers matter most? Jeff shared a quick crash course on the metrics every founder should be fluent in:

• MRR (Monthly Recurring Revenue): The predictable, recurring revenue your business earns every month. This is especially important for SaaS and subscription-based startups, as it helps gauge growth, stability, and scalability over time.
• Churn Rate: The percentage of customers who cancel or stop using your service during a given period. A high churn rate signals issues with product-market fit, user experience, or retention strategy.
• Burn Rate: The rate at which your company is spending money, usually monthly, before generating positive cash flow. It’s a critical measure of how quickly you’re using your funding or cash reserves.
• Runway: The amount of time your company can continue operating at its current burn rate before running out of cash. It’s essentially your countdown clock for raising your next round or reaching profitability.

These aren’t just buzzwords, but they’re indicators of a startup’s health and growth potential. When founders can speak confidently about these numbers, they build trust with investors and make sharper decisions internally.

Rob added that from a banking perspective, projections matter just as much as historicals. “We review your past performance, but what we’re really looking for is your vision for the future; how you plan to grow, and how prepared you are for different scenarios,” he said.

The Value of Building Financial Habits Early

Understanding your metrics is step one. Step two? Building the discipline to track them consistently. Rob emphasized that financial habits formed early can make or break a startup’s ability to scale or secure funding down the line.

“Banks often look backwards when considering loan applications, reviewing a couple of years’ worth of financial statements. Even if you don’t anticipate needing debt financing soon, having your financials in order now can save significant effort later.”

He continued: “Building the habit of creating annual projections and comparing them against actual results develops critical muscle memory for entrepreneurs. This ongoing practice not only strengthens your financial management skills but also builds credibility.”

This discipline pays off when it’s time to raise capital: “When lenders or credit officers underwrite your loan, they’re betting on your future performance. Being able to present a consistent track record of projections and outcomes, along with clear forward-looking projections, demonstrates your ability to repay debt and manage your business effectively. This skill takes years to develop, so starting early is invaluable.”

This mindset of proactive financial management is a key differentiator for startups seeking capital, whether through debt or equity.

Moving Beyond the P&L

Later in the session, Jeff warned against relying solely on the profit and loss statement (P&L). “You can be profitable on paper and still run out of cash. That’s why Forecastr helps startups build three-statement models: income statement, cash flow, and balance sheet. Together, they give a clearer picture of your financial health and help you spot trouble before it hits.

Beyond just tracking numbers, a three-statement model helps founders see how different parts of their business impact each other. For example, profits reported on the income statement don’t always translate to cash on hand, which the cash flow statement reveals. Meanwhile, the balance sheet shows how investments, debts, and retained earnings build up over time.

As Jeff explained, “Your income statement shows earnings, cash flow reveals the movement of cash, and the balance sheet captures your financial position at a moment in time.” This level of financial visibility is key not just for internal planning, but for proving to investors that you understand how your business runs and scales.

He also broke down how to build a marketing-driven revenue model. If you know your ad spend, click-through rate, and conversion rate, you can forecast how many customers you’ll acquire and what revenue you can expect.

Blending strong financial modeling with marketing insights helps founders turn strategy into results. It’s not just about tracking spend – it’s about understanding how spend turns into growth. That kind of clarity signals to investors that you’re not just hoping for scale; you’re planning for it.

Expert Support, Not Just Software

Building a startup is tough enough without trying to become a spreadsheet expert overnight. For founders looking to stay focused on growth while still keeping their numbers in check, the right financial partner can be a game-changer.

That’s where Forecastr comes in. More than just another tool, it combines intuitive software backed by hands-on analyst support to help you build a clear, reliable financial roadmap. “We want founders to focus on running their business, not wrestling with spreadsheets,” Jeff explained. 

With ready-to-use templates, dashboards, and dedicated analysts, Forecastr helps startups stay on track and make smarter decisions. And if you’re a Grasshopper client, you’ll unlock added benefits like a 20% discount in your first year and 10 free hours with a Forecastr analyst. 

“It’s a powerful way to get CFO-level guidance without the full-time cost,” Rob noted.

Helping Founders Build Better Businesses

Rob closed the session with a reminder that Grasshopper is here for more than just banking. “We’re in this to help founders succeed. Whether you’re raising your first round or scaling fast, we want to be your partner, and not just your bank.”

With the right tools and mindset, your financials can become one of your startup’s greatest assets. Understand them. Use them. Build with them.

Keep the Momentum Going

The conversation doesn’t stop here! Whether you want to revisit key takeaways or explore the tools mentioned in more detail, we’ve got you covered. Access the full webinar recording on demand, reach out to Rob Burnett and Jeff Erickson directly on LinkedIn, or dive into the exclusive perks available to Grasshopper startup clients in our marketplace. Perks can be easily claimed through online or mobile banking. 

And if you’re hungry for more insights like these, more founder-focused webinars are coming soon, so be sure to subscribe to our newsletter so you can stay informed and take advantage of future opportunities.

The post Know Your Numbers: The Financial Foundation Every Startup Needs appeared first on Grasshopper.

As the founder of a fintech startup, you’ll need a startup checking account that can keep up with the fast pace of the fintech industry and support you in managing your funds effectively. Here are some of the best things to look out for when searching for the right bank account for your fintech startup:

1. An innovative mindset

You want to choose a bank that understands your fintech startup and what it needs. Fintechs are all about revolutionizing the financial world. Your bank should understand that desire to look toward the future. Grasshopper prides itself on being built for the business and innovation economy, constantly looking for ways to revolutionize our products and services to optimize the banking experience for our clients.

2. A seamless banking experience

Startups move quickly, so they need a bank that can keep up. It’s important to have digital banking tools that can help to streamline the banking experience. Grasshopper utilizes several banking tools that make banking more convenient for our startup clients, including:

• Contactless debit card
• Online bill pay
• Wire transfer services
• Seamless integrations into accounting software, such as Autobooks or Quickbooks
• eStatements
• & much more!

Having these kinds of innovative tools help make for a more frictionless and convenient banking experience. When your money can be moved easily and efficiently, your fintech can focus on continuing to push forward rather than being left behind.

3. Ability to grow

A startup is meant to expand and grow. You need a bank account that can support you as you scale up. One of the ways that Grasshopper aids in your startup’s growth is through easy access to financing options, such as venture capital investments. With Grasshopper Connect, Accelerator Checking clients can gain access to a list of investors within the Grasshopper network, carefully curated by our Fund & Sponsor Banking team. 

4. Strong digital security

As a fintech, cybersecurity should be one of your top concerns. When your money is put into a startup bank account, you need to know that it’s safe. With an Accelerator Startup Checking account, you can rest assured that your online banking is properly protected, thanks to features such as:

• A secure onboarding experience: Protection of your startup and its funds begins at onboarding. When you apply for a startup banking account with Grasshopper, our team takes extra security measures when needed to validate your identity and your business. 
• Fraud monitoring: Grasshopper’s experienced fraud monitoring team works hard to spot any suspicious activity on your account.
• FDIC insurance: By partnering with a trusted sweep network, Grasshopper can strategically spread your deposits across multiple banks to expand your FDIC coverage. You’ll be able to receive extra peace of mind without the hassle of managing multiple banking relationships. Plus, you can access all of your deposits at any time.
• Two-factor authentication: With two-factor authentication, protection of your account goes beyond the traditional username and password. Logging into your account will require a combination of two authenticators, such as an account password and a one-time code. Having this dual authentication further assures that your account is secure and your funds are properly stored.
• Support services: If trouble does arise, you need to know there’s support available. Grasshopper’s client services team is made up of real humans with real experience who are dedicated to giving your startup the personalized attention it deserves.

Bottom Line

As a proud fintech partner, Grasshopper understands what a fintech startup needs. With Accelerator Startup Checking, you can gain access to the tools necessary to run a startup, with the support of experts that can guide you along the way. Apply for an account today in as little as 5 minutes.

The post 4 Things a Fintech Startup Needs From a Bank appeared first on Grasshopper.

We’ve outlined some of the key things you need to know when approaching a term sheet in order to secure the best investments for your startup.

What is a term sheet?

A term sheet is a summary of the proposed key terms of an investment in your startup. The terms outline the conditions between your company and your investors and serve as a blueprint for the formal legal paperwork later drafted by lawyers. Typically, with a term sheet you agree to confidentiality and not to enter into negotiations with multiple investors at the same time.

If you’re creating a term sheet of your own, you may want to consider using a template. The National Venture Capital Association (NVCA) can be a great resource for finding a general term sheet template depending on your situation. If you’re specifically interested in a Series A term sheet template, Y Combinator offers a term sheet that covers everything in a shortened format that is more user-friendly. 

The terminology of term sheets

Most investors know that creating a win-win situation within a term sheet is best for getting a good return on capital. But there are some cases in which certain terms can be included that result in a founder unwittingly giving up more control than they desired. To avoid running into such situations, it’s good to have a clear understanding of the different aspects of a term sheet and the specific terminology that may be used.

Economics & Control

In a term sheet, economics and control refer to the percentage of your company that new investors will own. These percentages can vary based on the company’s valuation and the amount of money that’s being invested. Having these percentages clearly established can help to clarify who owns what and how much each shareholder can expect to get if the company sells.

Some terms to know regarding economics and control:

• Pre-money valuation is the value your startup holds before receiving funding. 
• Post-money valuation is the value that your startup holds after receiving venture capital investment.
• Liquidation preference defines the return an investor receives when you sell your company. 
• Conversion rights give investors the ability to convert shares of preferred stock into shares of common stock. Typically, when conversion rights are optional, an investor has the ability to convert shares of preferred stock into common stock, typically on a one-to-one basis. Mandatory conversion rights are negotiable and require the investor to automatically convert shares of preferred stock into common stock through a process called “automatic conversion”. 
• Employee Stock Option Pools (“ESOPs”) refer to the shares of stock reserved for employees. The ESOP is taken from the founder’s stock, specified as a percentage of the post-money valuation. Having a strong ESOP can help to attract top talent to your startup, with the chance for employees to earn stock once the company goes public. 
• Dividends are payments made up of a distribution of profits from a corporation to its shareholders. Dividends can either be cumulative or non-cumulative. 

Investor Rights & Protections

Some clauses of a term sheet are put in place to protect investors and their investments. Having these rights clearly established in a term sheet can help to ensure fairness in the investments and provide investors with greater security when investing in your startup.

Here are some examples of such protection clauses:

• Anti-dilution rights shield preferred investors in the event of a “down round”, or lower valuation than what they invested in. When a company’s valuation decreases from different rounds of financing, preferred shareholders are protected by receiving additional shares.
• Pro-rata rights give investors the option to participate in future financing rounds to keep their percentage ownership in the company that would otherwise be diluted. Pro-rata rights are typically given to larger investors in rounds and aren’t always enforced.
• Right of first refusal (ROFR) requires that current shareholders are notified and have the right to buy stock from an investor who is selling. This prevents secretive transfers of stock from occurring, such as an investor selling your stock to a competitor. 
• No-shop clause establishes that the founder agrees to not shop the deal while the VC investor agrees to get things done within a reasonable time period.   

Governance Management & Control

Term sheets also help to establish who is in control of the startup. This aspect of term sheets can include the following rights:

• Voting rights are the shareholder’s right to vote on company policy. 
• Protective rights give investors the right to block or veto certain actions.
• Board rights establish a Board of Directors to represent the shareholders’ interests in the company. Most companies strive to create a balance in which neither the investor nor the founders solely control the board.
• Information rights promise that you will be sharing the company’s financial status regularly with investors.

Exits & Liquidity

Lastly, term sheets should specifically describe what happens in the event of a sale and shareholder rights during the process. 

Terms you may need to know regarding exits:

• Drag-along rights prevent minority shareholders from blocking the sale of the company if it was approved by the majority shareholder or by a collective majority. 
• Tag-along rights protect the minority shareholder by giving them the right to join in any action with the majority shareholder.
• Redemption rights give investors the right to demand redemption of stock within a certain amount of time. 

Getting the best term sheet for your startup

When it comes to establishing a term sheet with investors, you want to make sure you’re getting what’s best for your startup. In the early stages of establishing your investors and deciding on terms, make sure to talk to more than one VC. Being able to gauge the overall interest of investors can put you in a better negotiating position and make it possible to push for favorable terms. You and the VC are not going to agree on everything, so being able to prioritize certain terms and push for your needs is important. 

If it’s your first time creating a term sheet, it’s a good idea to work with an attorney with VC financing expertise. Working with an expert can provide you with the support and advice you need to be successful in your negotiations. It can also help you show VCs that you have the good sense to collaborate with experts despite your inexperience.

When looking for the right VC to invest in your company, Grasshopper is here to help. Grasshopper Connect is an exclusive platform that allows our startup clients to connect with a curated list of investors within our network. Open an Accelerator Startup Checking account today to gain access.

The post Understanding Term Sheets as a Startup Founder appeared first on Grasshopper.

What is a pitch deck?

A pitch deck is a brief presentation used to give prospective investors, clients, or potential partners an overview of your startup and the products or services you’re looking to market. These presentations can be put together by using online software such as Powerpoint, Keynote, or Prezi, but are commonly presented in face-to-face meetings.

What should your pitch deck include?

Overall, your pitch deck needs to be answering the following questions: What is your product? What problem does it solve? What is your growth potential? These are the kinds of questions that investors need answers to when you ask for their financial support.

An effective pitch deck can be done between 10-12 slides. These slides should cover the following

1. Vision and Value Proposition

In one sentence, explain what your business is and the value you want to provide to customers. Think of this sentence as a tweet: it should ideally be under 150 characters in length. Some companies will create their value proposition by making comparisons to other similar, successful companies that are in the same industry or share similar interests. For example,

2. The Problem

Every startup should be aiming to solve a specific problem. In order to get investors on board with your startup, you need to be able to show that the problem is a real one that customers face in order to give your startup purpose. To effectively showcase the problem they’re trying to solve, many startup founders will use a relatable and engaging story detailing a scenario where the problem is present.

3. Target Market

Who is your primary customer? How large is the potential market? Investors will likely want to see consumer spending data and similar markets to determine the current market demand. Try to be as specific and realistic as possible with this information. It may be temping to stay vague in order to make your potential market seem much larger, but many investors want to be confident that you can realistically reach the primary market. Try to find quantifiable data to support the information you present in order to best showcase your understanding of the market.

4. The Solution

Once you’ve set the scene by detailing the problem at hand, you need to be able to detail how exactly your startup is going to solve such a problem. Specifically, you need to show how your product or service solves this problem better than any existing companies. This slide can be another chance for you to tap into your storytelling abilities, as you present your startup coming in to save the day.

5. Business Model

Once the idea behind your startup is properly illustrated, it’s time to get into the part that investors are truly interested in: the money. How is your product or service going to generate revenue? If you’re creating a content site and expect to make the brunt of your profits from advertisers rather than users, make sure you go into detail about how you’ll be acquiring these relationships.

6. Roadmap

This slide is a chance to show off what your startup has already accomplished, as well as where you want it to go from here. If you’ve already started making sales, talk about them! Investors want to see the proof that your solution is working. This slide could also be a chance to list out some milestones for your startup, including ones that you’ve already reached and those you aim to achieve in the near future. Presenting these goals can validate your product and demonstrate your vision for growth.

7. Market Strategy

Explain how exactly you plan to get your target audience’s attention and gain traction. Get into the specifics of your marketing plan and sales strategy. Winning customers can often be the most difficult part of starting out a new company, so it’s important to prove that you have a solid grasp of how you’re going to reach your target market. This is especially important if your market strategy differs from your competitors.

8. Your Team

A startup can’t grow without a solid team behind it. What makes you and your team the right fit to run your startup? Highlight the key members of your management team and describe the specific expertise that they bring to the company. This can also be an opportunity to mention any major investors, board of directors, and board of advisors that may be involved with your business. If you don’t have a complete team yet, make sure you identify the roles that you still need to fill and why those positions are necessary to your growth.

9. Financials

You need to have a slide dedicated to your financials or projections. Investors will expect to see a sales forecast, a cash flow forecast, and a profit and loss statement for at least the past three years, though you can also display projected financials. Don’t overwhelm your pitch deck with in-depth spreadsheets. Instead, try to limit this information to charts that are easy to read and make the data easier to digest.

10. Competition

No matter how unique your company may be, there will always be competition to contend with. Even if your startup is opening up a completely new market, your potential customers are still using alternative solutions to solve their problems today. Detail how your startup fits into the competitive landscape and what makes you different from the alternatives. What do you have that your competitors don’t? Why will customers choose you?

11. Use of Funds

End your pitch deck by detailing how much funding you need and what exactly these funds will help you achieve. This is arguably the most important part of your pitch, since it’s the whole reason that you’re meeting with investors in the first place. If investors are going to give your startup money, they need to know how that money is going to be used and how it’s going to help you to reach your goals.

Tips for perfecting your pitch deck

Pitch decks are a crucial aspect of launching a startup, so you want to make sure that you’re doing it right. Beyond including the information listed above, here are some additional tips to help you be more successful in your pitch:

• Grab attention at the start: Start your pitch deck in an engaging way in order to make a great first impression. Facebook’s pitch deck started with a quote from the Stanford Daily, which said “Classes are being skipped. Work is ignored. Students are spending hours in front of the computer in utter fascination. The facebook.com craze has swept through campus.” A quote like that has impact and captures investors’ attention right away.
• Tell a story: A great way to maintain your audience’s attention when presenting your pitch deck is through storytelling. Don’t just talk about facts.
• Be concise: Investors can see hundreds of pitch decks in a year, so you can’t take up a lot of their time. Less information is better than too much. Keep your slides simple, convey high-level ideas, and leave room for questions. Concise and straightforward presentations will always do better than ones that are overcrowded with bullet points.
• Find the right targets: Finding the right targets for your pitch is just as important as creating the pitch deck itself. When looking for investors to pitch to, make sure that you’re doing research into their area of interest, investment theses, targeted investment size, existing portfolio, and investment climate. Taking the time to find investors that align with your business goals can raise your chances of being successful in your pitch.

The post How to Create an Effective Pitch Deck for Your Startup appeared first on Grasshopper.

What is burn rate?

Burn rate is the speed at which an unprofitable company consumes its cash reserves. For a startup, burn rate refers to the rate at which venture capital is being spent to finance overhead before generating positive cash flow. Therefore, burn rate can be viewed as negative cash flow.

Startups and investors can use burn rate to track the amount of cash that a company uses monthly before it starts to generate its own income. Burn rate can be used as a measurement for a startup’s “runway,” or the amount of time that the company has before it runs out of money. Having an idea of your startup’s runway can help guide your business strategy and can also be a determining factor in the amount of money you’re able to get from investors. 

How to calculate burn rate

There are two forms of burn rate. The first, gross burn rate, refers to the total amount of operating costs that a startup incurs in expenses each month. Gross burn rate is simply expressed as: 

Total Monthly Operating Costs = Gross Burn Rate. 

For example, if a company spends $5,000 on office space, $10,000 on software, and $15,000 on salaries and wages each month, then their monthly operating cost would be $30,000. Therefore, their gross burn rate would be $30,000.  

The second form of burn rate is net burn rate. Net burn rate is the total amount of money that the startup loses each month. When calculating net burn rate, expenses and revenue are both taken into account. Net burn rate can be calculated by using:

(Monthly Revenue – Cost of Goods Sold) – Gross Burn Rate = Net Burn Rate

Let’s say that same company from before is generating a revenue of $20,000 a month with a cost of goods at $10,000 per month. Taking into account our gross burn rate of $30,000, we could generate their net burn rate by doing the following calculation:

($20,000 – $10,000) – $30,000 = -$20,000

Though the company is spending $30,000 a month, they’re only losing $20,000 a month thanks to their revenue. This can be an important distinction to make when calculating a startup’s runway. If this company had an investment of $100,000, and they were losing $20,000 a month, we can then say they have a runway of five months.

Generally, it’s recommended for startups to have 6-12 months of expenses on hand. Therefore, if your company has $100,000 in the bank, then a good burn rate would be between $16,667 (6 months runway) and $8,333 (12 months runway). 

Tips for managing your burn rate

Managing burn rate can be difficult, especially in the early stages of launching a startup. Here are some ways to keep your spending down and create a healthy burn rate for your business.

• Stay focused: Know what stage of development you are in and stick to only the essential elements to that stage. It’s easy to get lured into investing heavily in marketing, sales personnel, or extra engineering, but these kinds of investments don’t make sense in the early stages of launching a startup when you don’t have an established client base. Trying to do everything all at once will only increase your burn rate and result in a reduced financial runway.
• Know your market: Taking the time to research your market and understand its dynamics and sales cycles can help you to have a better projection of your cash flows and minimize your burn rate.
• Keep your team small: Don’t rush into bringing in a large team for your startup. Bringing in additional hires can be expensive. Especially in the early stages, your team members should each be ready to put multiple hats on and carry out more than one function of the company. This way none of your hires are being underutilized and you can save yourself from needing to increase spending.
• Consider contract hiring: In the beginning of your startup, it’s recommended that you opt for contract staff rather than hiring directly. While it may be more expensive in the short term, you’re provided with more flexibility to increase or decrease the work force in case of exponential growth or sudden downtimes, which can help to optimize your costs.
• Avoid unnecessary expenditures: When starting out, try to rent or lease as many items as you can rather than purchasing. It’s often cheaper to do so, which helps with minimizing your overall expenses. 

The bottom line

Burn rate is an important metric for any company, but is particularly important for early startups that haven’t started generating revenue yet. Your burn rate can tell managers and investors how fast your company is spending its capital, which can have an impact on your business strategy and your potential to gain future investments.

Knowing how to properly manage your money is essential for keeping your startup alive. And it all starts with having the right startup bank account to back you up. Grasshopper’s Accelerator Startup Checking Account is equipped with tools that can help you to better manage your finances and better your financial runway.  

The post How to Manage Your Startup’s Burn Rate appeared first on Grasshopper.

Here, we’ve highlighted 4 of the most common bad financial habits that startup founders tend to have. By making yourself familiar with these habits, you’ll know exactly how to avoid them, making yourself into a more effective business owner!

Neglecting your bookkeeping

For many startup founders, getting books in order is a pretty low priority. More exciting business functions like fundraising, selling, or investing tend to be the main focus when managing a startup, especially within the early stages. However, bookkeeping is a crucial aspect of running any business. Without proper bookkeeping, all other aspects of the startup are at risk of falling apart. Balanced books are necessary for essential business operations, such as filing taxes or providing financials to investors. 

For some founders, bookkeeping can be a complicated or time consuming task. Because of this, it’s often recommended to outsource your bookkeeping or utilize bookkeeping software. With Grasshopper’s Accelerator Startup Checking, you can seamlessly integrate your account into your preferred accounting software, which can help to automate your bookkeeping. With your automated bookkeeping, you focus on other aspects of your startup with the peace of mind that your books are properly balanced.

Not having a good payroll system

Smaller startups with only a handful of employees oftentimes fail to have a proper payroll system in place. This may not seem like an issue initially, but is guaranteed to become a problem when it comes to filing quarterly payroll taxes. Without a payroll system, you’ll likely find yourself having to calculate tax withholding payments by hand, over complicating the process.

To simplify the payroll process for your startup, you should be setting up a proper payroll system with a payroll provider. Providers such as Quickbooks take away the stress of having to do your own calculations, and help to ensure that you’re staying organized.

Mishandling your taxes

Business taxes can be confusing, and mishandling them can lead to big trouble. There are several forms that you’ll need to be aware of as a business owner, and these forms can differ depending on the type of business you’re operating. All of these forms will need to be properly filed and submitted on time. To help you get your business properly prepared for tax season, check out our business tax guide.

To avoid making major mistakes with your taxes, it’s highly suggested that you work alongside a tax professional. If you do choose to handle your startup’s taxes on your own, make sure you’re referring to the IRS Business Taxes Guide to ensure that you’re not missing any vital forms.

Mixing personal funds with business funds

The biggest mistake that a startup founder can make is allowing your personal finances to get mixed up with your startup’s. When you commingle your expenses, you undermine the liability shield that you gain from incorporating. Without this liability shield, you become personally responsible for covering your company’s debts. Allowing your funds to overlap can also make taxes more difficult and may even cause you to owe the IRS more money than expected.

Once your startup is incorporated, you should immediately be opening a separate checking account for your startup’s expenses. This way you can avoid experiencing any unnecessary overlapping of your personal and business funds. Having a separate startup bank account can also gain you access to several financial tools that can help make it easier to operate your startup.With Grasshopper’s Accelerator Startup Checking, you can enjoy many banking features that are catered specifically to startup founders’ needs. Conveniently access financial tools such as bill pay, invoicing, mobile check deposit, and more – available through our online banking and mobile app, whenever you have internet access.

The post Bad Habits that Startup Founders Should Avoid appeared first on Grasshopper.