Technology Commercialization

Post-Funding

Congratulations! You got funded … Now what?

Congratulations. This is a huge step and your team deserves a celebration.  However, if you’ve never done this before, you can’t imagine how fast time and money will “fly” post-funding.  In reality, you must remain in fund-raising mode for the foreseeable future, and you need to make significant progress before the next round of financing.

An expression in the investor world: “Cash makes you stupid”...


In other words, some CEOs get a bit giddy after they have raised a significant round of funding, and start spending money unwisely.

 

Burning cash

Remember, if this is your first time running a company you will likely have one or more Board members who will assign themselves the task of monitoring your spending. Get used to it, and try not to be defensive.

You should spend this money with the same prudence as you spend your own money (assuming, of course, that you spend your own money wisely). But, you should also spend your time wisely. Don’t spend several days looking for used office furniture to save a few hundred dollars, when that time could be better spent developing your product or talking to prospective customers.

Also, while entrepreneurs need to perform many tasks, you don’t need to do everything. Assess your skills and those of your team. If you’re spending six hours every two weeks processing payroll, perhaps you should outsource this task. This is strongly advised anyway, since there are negative tax consequences if this is not done properly.

You must also be aware of various legal obligations that come with employees, from posting state-mandated employee notice posters, to having workman’s compensation insurance in place. You might want to consider hiring a human resources consultant who will make sure all such legal requirements are met, and can advise you on issues associated with hiring and firing.

Board Meeting Preparation
For a quick review of the role and duties of a BOD, including matters typically requiring Board approval, see What is the role of the BOD, and at what level are they involved in running the company? 

Your Board of Directors will now want to meet regularly, perhaps as frequently as monthly in the beginning, and you will be expected to report on various areas as suggested by the Chairman.

iStock_000048253036_LargeOnce settled into more routine quarterly Board meetings, it will be the CEO’s responsibility to propose and calender a schedule of the meetings, and to prepare each quarter a briefing package (booklet) that would be delivered to the Directors 2-3 days in advance of the meeting. Keep in mind as you prepare these information packages (and make sure all Directors are aware of) any obligations you may have incurred with investors regarding Board Observation privileges.

The information booklet would lead with an agenda, which you should attempt to follow closely, and would include a draft of the previous meeting minutes. The Directors will be asked to approve these minutes, which will then be maintained as an official record of your meetings.

Other items on the agenda will be somewhat determined by the significant events of the current quarter, and key documents that may require significant review time should be included in the pre-meeting package. The following are selected categories of information, which are typically of interest to all Directors.

Areas of interest for Board members may include:

  • Product development status
  • Potential customer interactions and competition
  • IP prosecution milestones
  • Marketing efforts
  • Important employee matters, including hiring and firing
  • Other matters requiring Board approval
  • Financials!!

In your financial presentation, be sure to present all financial statements, including the Balance Sheet, Cash Flow Statement, and Profit/Loss stock-photo-79327031-red-calculator-close-upStatement, if relevant. You should also comment on the company’s current “burn rate” and projected “runway,” or number of months before the company either needs additional funding or will be cash-flow positive. Projected capital expenditures above a specified amount must also be disclosed for approval.

Officers and Advisors Participation
It is generally suggested that you also invite key Advisors from your BOA who are relevant to areas of importance on your agenda, particularly those involving your technology and product development progress. And, you should inform Advisors that they will be present for only a portion of the meeting, generally prior to the review of financials and discussion of internal issues.

Your Directors will expect participation of your staff (minimally Officers) in the presentation of information relevant to their area of expertise and responsibility, and horsejockeypicthose employees should be coached to be open in their discussions with Board members. Transparency with Directors is key in building their trust and confidence in you and your team. Keep in mind that your most experienced investors (some of whom will also be Directors) have placed their bets, not so much on your technology “horses”, but rather on you and the other “jockeys” on your team.

About The Proof of Concept Institute, Inc.

The Proof of Concept Institute, Inc. is a California 501(c) (3) non-profit corporation, whose mission is to develop educational materials and programs for research scientists, clinicians, and engineers that will facilitate more efficient transfer of public-funded (university and federal laboratory) technology and intellectual property to the private sector, where products and services can be developed for the common good and to support U.S. global competitiveness.

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