Question 1

How often is this page updated?

Accepted Answer

The tax and statutory answers carry the month they were checked and are reviewed periodically. If you are acting on one of them, confirm the current position with your CA, because rates, thresholds and deadlines change.

Question 2

Can I ask a question that isn't here?

Accepted Answer

Yes. Send it through the contact page or on WhatsApp. Questions that come up more than once usually end up on this page or become an article.

Question 3

What is the difference between pre-money and post-money valuation?

Accepted Answer

Pre-money is what the company is valued at before the new investment. Post-money is pre-money plus the amount raised. If a company is valued at ₹45 crore pre-money and raises ₹15 crore, the post-money value is ₹60 crore and the investors own 25%. Term sheets can quote either, so always check which one a number refers to before agreeing to it.

Question 4

How much should we raise?

Accepted Answer

Enough to reach the milestone that makes the next round or break-even achievable, plus the months the next raise will take, plus a buffer for things running late, less the cash you already have. Work it out month by month from a real plan, then check what it costs in dilution at a realistic valuation.

Question 5

When should we start fundraising?

Accepted Answer

Work backwards from runway. Raising takes months, often longer than founders plan for, and negotiating with little cash left weakens your position. The common guidance is to begin preparation when you still have nine to twelve months of runway.

Question 6

Why is our round taking so long?

Accepted Answer

Usually because the process has more stages than founders expect, and each one can stall: first meetings, partner meetings, diligence, investment committee, term sheet, legal documentation and closing. Most delays happen in diligence, and most diligence delays are about evidence rather than the business itself.

Question 7

What do investors actually check before funding?

Accepted Answer

Whether what you said can be verified. Financials that reconcile to the bank, metrics that can be rebuilt from raw data, documentation that exists, and a business story the numbers support. Diligence rarely fails on the business. It fails on the evidence for it.

Question 8

Do we need a fundraising consultant or a finance adviser?

Accepted Answer

A consultant or banker gets you in front of investors and is usually paid partly on the money raised. A finance adviser makes the numbers survive what those investors check. If meetings happen but stall after the first data request, your problem is readiness, not access.

Question 9

What goes in a startup data room?

Accepted Answer

Corporate documents, cap table and past round paperwork, financial statements and monthly MIS, tax and statutory filings, customer contracts, employment and ESOP records, and the key metrics with their definitions. Build it as you go rather than in the three weeks after a term sheet.

Question 10

What is a quality of earnings review?

Accepted Answer

A financial due diligence exercise that tests whether reported earnings are real, recurring and backed by cash. It adjusts EBITDA for one-off and non-market items, reconciles revenue to the bank, and looks for liabilities that behave like debt, such as unpaid statutory dues or unprovided gratuity.

Question 11

Does an ESOP pool created before the round dilute founders more?

Accepted Answer

Yes. A pool created or topped up pre-money comes out of the existing shareholders' ownership, which mostly means the founders. The same pool agreed post-money is shared with the incoming investors. It is one of the most expensive details in a term sheet and one of the least negotiated.

Question 12

What is the difference between ARR and revenue?

Accepted Answer

ARR is the annualised value of live recurring subscriptions at a point in time, and it is a metric rather than an accounting number. Revenue is what your books recognise as delivered in a period. They should reconcile, with differences explained by timing, one-off fees and currency.

Question 13

What should a monthly investor MIS include?

Accepted Answer

A summary page, the P&L against plan, cash and runway, the operating metrics that drive your business, working capital and statutory dues, headcount, and short commentary that explains the variances rather than describing them.

Question 14

What is burn multiple?

Accepted Answer

Net cash burn divided by net new ARR over the same period: how many rupees you spend to add one rupee of recurring revenue. Commonly cited guidance treats below 1 as very efficient and above 2 as a signal to look closer, though it varies by stage.

Question 15

What is a good CAC payback period?

Accepted Answer

It depends on how long customers stay. Guidance often quoted for software sold to smaller businesses is under about a year, with longer accepted for enterprise contracts with very low churn. Calculate it fully loaded, including sales salaries, and adjust for gross margin.

Question 16

What is contribution margin, and why is gross margin misleading?

Accepted Answer

Gross margin in most startup P&Ls leaves out costs that scale with each sale: payment fees, commissions, delivery, onboarding and support. Contribution margin puts them back, which is why a business can have healthy gross margin and thin contribution.

Question 17

What numbers should a founder actually track?

Accepted Answer

Few enough to remember, and the ones that move the business: revenue and its main driver, contribution margin, cash and runway, and one or two operating metrics specific to how you earn. Twenty metrics in a dashboard usually means nobody is watching any of them.

Question 18

When do spreadsheets stop being enough?

Accepted Answer

When the same numbers are maintained in more than one place, when a monthly close depends on one person's memory, or when the file takes longer to update than to interpret. Until then, a well-built spreadsheet beats a tool nobody has configured properly.

Question 19

Why is cash tight when we are profitable?

Accepted Answer

Because profit and cash are different. Growth ties up money in receivables and stock, GST and TDS go out on fixed dates, equipment gets bought, and tax is paid in instalments. A bridge from profit to bank balance usually makes the cause obvious within an hour.

Question 20

How many months of runway should we keep?

Accepted Answer

Enough to still have choices. Above 18 months you decide when to raise. Between 9 and 12, preparation should start. Below 6, cash timing and the cost base matter more than anything you do on growth.

Question 21

Cash runs out next month. What do we do first?

Accepted Answer

Measure the gap week by week for the next eight weeks before cutting anything. Then protect salaries and statutory dues, collect what you are owed, defer honestly what can be deferred, and talk to investors early with a plan. Some cuts cost cash before they save it.

Question 22

What does an employee really cost in India beyond salary?

Accepted Answer

Employer PF and admin charges, gratuity accrual, ESIC where gross pay is ₹21,000 a month or less, plus insurance, equipment and hiring costs. For a typical salaried role, employer cost often runs 10% to 15% above gross salary before one-time hiring costs.

Question 23

Should we accept 90-day payment terms from a big customer?

Accepted Answer

Only if you can fund the gap and the price reflects it. Ninety days from invoice acceptance usually means four to five months from starting work, and GST on the invoice goes out long before the customer pays. Check whether the MSME payment rules apply to you first.

Question 24

Is the GST we collect on sales our money?

Accepted Answer

No. It is collected on the government's behalf and paid over, usually by the 20th of the following month for monthly filers. Treating it as available cash is one of the most common reasons a business is short in the third week of the month.

Question 25

How do we extend runway without raising?

Accepted Answer

Collect faster, bill earlier or in advance, review pricing, cut spending that does not serve the next milestone, and phase hiring against evidence rather than hope. Each of these is slower than a raise and entirely within your control.

Question 26

Do we need a CFO, a finance manager or an accountant?

Accepted Answer

An accountant keeps the books and files returns. A finance manager runs the monthly rhythm. A CFO, full time or fractional, brings judgement to decisions. Most companies below Series A need the first two and part of the third, not a full-time CFO.

Question 27

What does a fractional CFO actually do?

Accepted Answer

Plans, forecasts and reviews performance, prepares the numbers behind decisions, runs investor reporting, and makes sure cash is understood before it becomes urgent. Not bookkeeping, not compliance filings, and not a full-time presence.

Question 28

What should CFO support cost?

Accepted Answer

It varies with scope and seniority, and published ranges differ widely. The more useful question is what is being handed over each month, who does the work, and what you would be able to run without them afterwards.

Question 29

What do the numbers need to show before opening another location?

Accepted Answer

What the first location really earns after the founder's own time and a fair share of central costs, how long your openings take to break even, how much cash a new site needs until then, and what happens to company runway if it ramps at half speed.

Question 30

When should we stop a product that is not working?

Accepted Answer

When it does not cover the costs that would disappear if it stopped, the metric that matters is not improving, and the people on it would be worth more elsewhere. Agree the test before the review, not during it.

Question 31

Will a new product line pay back, and when?

Accepted Answer

Count everything it costs to build, launch and maintain, use contribution rather than revenue, subtract what it cannibalises, and draw the cumulative curve. Then halve the adoption rate and draw it again, because that is the version you need to be able to fund.

Question 32

Should we raise our prices?

Accepted Answer

Work out how much volume the rise can afford to lose first. At a 40% contribution margin, a 10% price rise can lose 20% of volume before total contribution falls. Then look at which customers would leave, because losing the least profitable ones can leave you better off.

Question 33

Is GST charged on healthcare services?

Accepted Answer

Health care services by clinical establishments, authorised medical practitioners and paramedics are exempt. The consequence is that GST paid on rent, equipment and software cannot be claimed back and becomes a cost. Some related services, such as certain non-clinical support and platform fees, are taxable.

Question 34

Do restaurants charge 5% or 18% GST?

Accepted Answer

Most restaurant services are taxed at 5% without input tax credit. Restaurants in specified premises, broadly hotels with room tariffs above ₹7,500 a day, charge 18% with credit. Orders through delivery aggregators are taxed by the aggregator under section 9(5).

Question 35

Is software exported from India zero-rated for GST?

Accepted Answer

Exports of services are zero-rated when all five conditions in the IGST Act are met, including payment in convertible foreign exchange. Most companies export under a Letter of Undertaking, which has to be filed for each financial year, and claim accumulated input credit as a refund.

Question 36

Does the MSME 45-day payment rule apply to us?

Accepted Answer

It protects suppliers registered as micro or small enterprises under Udyam. Buyers must pay within 15 days without a written agreement and within 45 days at most with one, or owe interest at three times the RBI bank rate. Medium enterprises are not covered.

Question 37

What changes in our first audit after raising?

Accepted Answer

More people rely on the accounts, the shareholders' agreement usually sets a deadline, and the money raised can take the company past the thresholds that exempted it from CARO reporting. Expect closer attention to ESOP accounting, gratuity provisions and revenue recognition.

Question 38

What should we set up in finance after raising seed?

Accepted Answer

Complete the round properly and record it, set approval limits and a cash policy, check payroll registrations against your hiring plan, then build a monthly close, an MIS and a plan for the runway you raised. Leave ERPs and full-time CFOs for later.

Question 39

Why do GST credit mismatches surface in due diligence?

Accepted Answer

Because diligence teams reconcile the credit in your books, the credit you claimed in GSTR-3B and the credit available in GSTR-2B. Gaps become potential liabilities with interest, and they also say something about how well the finance function is run.

The questions founders actually ask.

Raising money