Question 1

How often is this page updated?

Accepted Answer

It is rebuilt whenever the library has moved far enough that it stops routing to all of it, and it was last rebuilt on 24 September 2026 to cover every article, template and calculator on the site. The tax and statutory answers carry the month they were checked. 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 is not 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, and several of the answers above started as a founder asking something nobody had written down properly.

Question 3

Are these answers specific to India?

Accepted Answer

Yes, deliberately. The statutory detail is Indian and dated, the financial year runs April to March throughout, and the worked examples use rupees at amounts an Indian startup would recognise. Where a benchmark comes from outside India, the answer says so rather than presenting it as local.

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

Are we ready to raise?

Accepted Answer

The test is whether your numbers survive someone else rebuilding them. Reliable monthly accounts, a model whose assumptions are visible, unit economics you can defend by segment, and a clean cap table. Weakness in the numbers costs time and terms rather than a refusal, which is why it is worth knowing before you start.

Question 7

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 8

What do investors actually check before they fund you?

Accepted Answer

The difference between what you said and what is true. They rebuild revenue from raw data, test retention by cohort, recalculate unit economics with costs you may have left out, and check compliance history. They are not mainly deciding whether the business is good; they are looking for gaps.

Question 9

What goes in a startup data room?

Accepted Answer

Corporate documents, cap table and instruments, financial statements and management accounts, the model, customer contracts, revenue data by customer, HR and payroll records, tax and statutory filings, and IP. The checklist matters less than being able to produce each item without a week of preparation.

Question 10

How long before a raise should we build the data room?

Accepted Answer

Before the process starts, not during it. Preparation done ahead is cheap and unhurried; the same work under a live deadline is expensive and happens while your position weakens. Most of it is assembling documents that already exist, which is exactly the work that expands to fill whatever time it is given.

Question 11

What is a quality of earnings review?

Accepted Answer

An independent rebuild of your reported earnings to establish which parts are genuinely repeatable. One-offs are stripped out, missing costs are added back, and recognition is normalised. It is standard in larger transactions and increasingly common at Series A and above.

Question 12

What finance setup do we need after raising a seed round?

Accepted Answer

A monthly close that happens on a date, a reporting pack in a fixed format, a thirteen-week cash forecast, and someone accountable for producing all three. Investor reporting obligations usually start immediately, and the shareholders' agreement will say what they are.

Question 13

Do we need an audit after raising?

Accepted Answer

Every Indian private limited company needs a statutory audit annually from its first financial year, regardless of turnover or whether it has raised anything. What changes after a round is scrutiny: investors read it, and provisions you skipped in earlier years tend to surface all at once.

Question 14

Should we raise a bridge round or cut burn?

Accepted Answer

Decide by asking what the money buys. A bridge is worth raising when a specific milestone within reach would make the next round materially easier and existing investors will lead it. Cutting is right when there is no such milestone or when the cut itself reaches break-even. Most companies that get this right do both.

Question 15

How do we explain a bad month to investors?

Accepted Answer

Send it on the normal date, lead with the number, give the reason in one paragraph, say what you are doing about it and what you expect next month. Investors have seen many bad months and few founders who handle them well, so the handling is what gets remembered.

Question 16

What do we do if we gave investors a wrong number?

Accepted Answer

Correct it in writing as soon as you are sure, before anyone asks. Say what it was, what it should be, why, what else it affects, and what you have changed. An error you disclose is a process story. The same error found by someone else is a trust story.

Question 17

How do we run a board meeting?

Accepted Answer

Send the pack at least three days ahead and do not present it in the room. Spend the time on two or three decisions you genuinely need help with, each with options and a recommendation. Circulate minutes within a week, and open the next meeting with them.

Question 18

Do we need a fundraising consultant or a finance adviser?

Accepted Answer

They do different jobs. A fundraising consultant runs a process and makes introductions. A finance adviser builds the model, the data room and the analysis behind them. The material does not raise the round on its own, and no amount of process compensates for numbers that fall apart in diligence.

Question 19

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 check which a number refers to.

Question 20

Should the ESOP pool come before or after the investment?

Accepted Answer

Term sheets say pre-money almost without exception, and that means the existing shareholders pay for all of it rather than sharing the cost with the incoming investor. On a round where the investor takes 20%, a 12% pre-money pool costs founders roughly two to three points more than a post-money one would.

Question 21

How much does a round actually cost us in ownership?

Accepted Answer

More than the investor's percentage, because the ESOP top-up usually comes out of your side too. The way to know is to build the cap table from the three terms that matter: pre-money valuation, money raised and the pool target. The free cap table template does it round by round.

Question 22

Which term sheet terms actually cost you money?

Accepted Answer

The ESOP pool and the liquidation preference routinely cost more than several crore of valuation, and both are settled in a single line. Anti-dilution costs nothing until a down round and then costs several points. Valuation matters and is the term most often traded away for something more expensive.

Question 23

What does a 1x non-participating liquidation preference mean?

Accepted Answer

At an exit the investor takes the greater of their money back or their ownership share, not both. It is the founder-friendly standard. Participating changes the word or to and, so they take their money back first and then share what remains, which on a modest exit can absorb most of the proceeds.

Question 24

What does anti-dilution protection actually do?

Accepted Answer

Nothing at all unless you raise at a lower price than a previous round. Then it issues extra shares to earlier investors, diluting whoever is not protected, which is mostly founders and the option pool. Broad-based weighted average is the market standard; a full ratchet can issue nine times as many extra shares.

Question 25

What does our convertible note convert into?

Accepted Answer

Whichever of the valuation cap and the discount gives the note holder the better price, plus any accrued interest. In a round priced well above the cap, the cap decides everything and the discount never applies. Under the usual pre-money method those extra shares dilute you rather than the incoming investor.

Question 26

Why do Indian rounds use CCPS rather than equity shares?

Accepted Answer

Compulsorily convertible preference shares are the standard instrument for priced rounds in India, and they are where liquidation preference and anti-dilution provisions sit. Early convertibles are usually compulsorily convertible debentures, which carry interest. Which instrument suits your round is a question for a lawyer, and the conversion arithmetic is separate.

Question 27

How much should founders pay themselves after raising?

Accepted Answer

Enough to remove money as a distraction and no more, set deliberately rather than by default. Paying nothing understates the real cost base and diligence will add it back. Review it at each round, write down the reasoning, and have it approved properly under the articles.

Question 28

What is the difference between ARR and revenue?

Accepted Answer

ARR is a run rate at a point in time: contracted recurring revenue annualised. Revenue is what you earned over a period, recognised as you delivered it. In a growing business they never match, and the gap is growth timing plus non-recurring fees pushing the other way.

Question 29

What counts as ARR and what does not?

Accepted Answer

Contracted recurring subscription value from active customers who have not given notice. Implementation fees, training, professional services, usage above a committed minimum and unsigned commitments are all revenue or pipeline, and none of them is ARR. Counting them is the most routine adjustment a diligence team makes.

Question 30

What does net revenue retention have to be?

Accepted Answer

Above 100% means your existing customers are worth more each year without a single new sale. There is no India-specific benchmark; global surveys of private B2B software put medians around 100% with gross retention in the high eighties. Report gross retention alongside it, because expansion from a few accounts can mask heavy churn.

Question 31

How do we work out our retention numbers?

Accepted Answer

From an ARR bridge: opening ARR, plus new, plus expansion, less contraction, less churn. Gross retention is what you kept before expansion; net retention adds it back. The gap between the two is exactly your expansion rate, which is a useful check that the arithmetic is right.

Question 32

How do you read a cohort retention chart?

Accepted Answer

Group customers by the month they joined and follow each group forward separately. Read down a column to compare recent cohorts against older ones, and across a row to see where a cohort's curve flattens. Build it on revenue as well as customer counts, because the revenue version shows expansion.

Question 33

What numbers should founders actually track?

Accepted Answer

Fewer than most dashboards contain. Cash and runway, revenue against plan, contribution by segment, the acquisition cost and payback of a customer, and one retention measure. Five numbers reviewed monthly beat twenty reported and ignored.

Question 34

What should a monthly investor MIS include?

Accepted Answer

Performance against plan, cash and runway, the operating metrics for your business, receivables and statutory dues, and written commentary explaining what moved and why. The same format every month, so the series can be compared. The free template sets out the sections.

Question 35

Why do our auditor and our management accounts disagree?

Accepted Answer

Six ordinary reasons: cut-off, provisions the auditor requires such as gratuity and expected credit losses, depreciation policy, revenue recognition, reclassification, and prior-period adjustments. Build the reconciliation once a year. A difference that recurs every year is a reporting problem rather than an audit finding.

Question 36

Why do our numbers always arrive too late to use?

Accepted Answer

Almost never the accounting. It is missing bills and claims, no agreed cut-off, reconciliations left until month end, and everything happening in sequence. Set a close date, fix the three or four inputs that hold it up, and allow estimates for what will never arrive in time.

Question 37

How do we close the books faster?

Accepted Answer

Move work before month end: chase bills against a stated cut-off, reconcile up to the 25th, and build the pack template in advance. Then run the close day by day rather than task by task. Most companies reach the fifth working day without changing accountants or software.

Question 38

When do spreadsheets stop being enough?

Accepted Answer

When the same numbers exist in three places and disagree, when one person is the only one who can update the model, or when producing the monthly pack takes days rather than hours. The trigger is reconciliation effort rather than company size.

Question 39

Revenue is growing. Is the business actually getting better?

Accepted Answer

Growth alone does not answer it. Look at whether contribution per customer is improving, whether retention is holding, whether the cost to acquire is rising, and whether cash is following the revenue. A business can grow for four quarters and be worse at the end of them.

Question 40

Why is our financial model wrong when the maths is right?

Accepted Answer

Because the arithmetic is rarely the problem. Models break on assumptions: a conversion rate that has never been tested, a ramp that ignores how long hires take to produce, costs that are held flat while volume triples. Check the assumptions against the last six months before using a model to look forward.

Question 41

What should our chart of accounts look like?

Accepted Answer

Detailed enough to produce the management reporting you want without rebuilding it by hand, and aligned to what your auditor needs. Split gross salaries, employer contributions and gratuity separately, keep recruitment with people cost, and put delivery costs in cost of sales if you sell services.

Question 42

How many months of runway should a startup keep?

Accepted Answer

Enough to reach the next milestone plus the time a raise takes plus a buffer, which in practice means starting a raise at around nine to twelve months. The figure that matters is cash collected less dues you already owe, divided by real burn rather than your best month.

Question 43

Why is cash tight when we are profitable?

Accepted Answer

Profit is earned and cash is collected, and the two happen at different times. Revenue invoiced but not paid, stock bought before it sells, statutory dues collected and not yet deposited, and annual costs paid up front all sit between the two. A profitable month can still be a negative cash month.

Question 44

Why was our best month so hard on cash?

Accepted Answer

Because growth consumes cash before it produces it. A record month means more delivery cost paid now against revenue collected in sixty days, plus the working capital the extra volume ties up. The faster you grow, the further ahead the spending runs.

Question 45

Why does growth need more cash than it produces?

Accepted Answer

Because the cash tied up in receivables and stock scales with revenue. If your cycle holds 54 days of revenue, growing monthly revenue by ₹24 lakh absorbs roughly ₹43 lakh before you spend a rupee on the growth itself. Work it out before the plan is signed off.

Question 46

How do we extend runway without raising?

Accepted Answer

In order: collect what you are already owed, bill what has been delivered and not invoiced, stop spending that does not serve the next milestone, then look at pricing, and only then at the cost base. Most companies find three to six months without a single redundancy.

Question 47

Our cash runs out next month. What do we do?

Accepted Answer

Work out the real position first: cash less dues already owed, and what is genuinely committed to arrive. Then take the fast levers, which are collections, unbilled work and discretionary spending. Do not fund payroll by deferring TDS or the employee share of provident fund; that money is not yours.

Question 48

What is late payment actually costing us?

Accepted Answer

Revenue a day multiplied by the days customers actually take. For a company collecting in 68 days on 45-day terms, that is usually a couple of months of revenue sitting outside the business, a third of it past the terms you agreed. Expressed as months of payroll, it tends to change behaviour.

Question 49

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

Accepted Answer

Sometimes, and price it first. Ninety-day terms on a large contract tie up real cash for the life of the relationship, and the cost is rarely compared against the margin. If you are a registered micro or small enterprise, the MSMED Act's payment periods give you a legitimate position to negotiate from.

Question 50

How do we bring collection days down?

Accepted Answer

Invoice on delivery rather than at month end, fix the disputes holding invoices up, call your five largest debtors rather than emailing, and escalate on a fixed schedule so chasing stops being a decision each time. Ten to fifteen days within a quarter is realistic without discounting anything.

Question 51

Are we default alive?

Accepted Answer

The question is whether you reach break-even on current growth before the money runs out, with costs growing as they actually have been rather than held flat. It is a different question from runway, and the answer frequently reframes a fundraising decision.

Question 52

How do we build a 13-week cash flow forecast?

Accepted Answer

Weekly rather than monthly, on receipts and payments rather than accruals, with each receipt marked certain, likely or hopeful. Put the statutory calendar in it, because GST, TDS and provident fund land on fixed dates. Update it every week, which matters more than the detail.

Question 53

Why do blended margins mislead?

Accepted Answer

Because an average across customers, products and channels that behave nothing alike hides the segment losing money, and that is usually the one growing fastest. Split by whatever actually differs, use contribution rather than gross margin, and check which segment your growth is coming from.

Question 54

Why is our gross margin falling?

Accepted Answer

It decomposes into exactly three things: mix, price and cost. Work out which one moved before investigating anything, because they have completely different fixes. Acting on the wrong one is how a company raises prices to solve a mix problem and loses the customers it wanted to keep.

Question 55

What is gross margin in a services business?

Accepted Answer

What a project earns after the fully loaded cost of everyone who delivered it, including their non-billable time. Two ratios explain almost all of it: utilisation, the share of paid hours that are billable, and realisation, the share of billable value you actually invoice.

Question 56

What does an hour of our team actually earn?

Accepted Answer

Less than the rate card suggests. Take fully loaded cost rather than salary, divide by billable hours rather than paid hours, then apply realisation to the rate. A firm at 62% utilisation and 82% realisation earns roughly half what its card rate implies.

Question 57

Should we raise our prices?

Accepted Answer

The arithmetic is more forgiving than it feels. At 60% contribution margin, an 8% price rise can lose about 12% of volume before total contribution falls, and most companies lose far less. Raise list prices for new customers first, where nothing already sold is affected.

Question 58

How should we price a fixed-price project?

Accepted Answer

Build it from estimated hours at fully loaded cost per billable hour, add the margin you intend, then add contingency sized from how wrong your estimates have actually been. If the work cannot be specified well enough to estimate, price a discovery phase rather than guessing.

Question 59

What is our real CAC payback period?

Accepted Answer

Fully loaded acquisition cost, including sales salaries and founder selling time, divided by the monthly contribution a customer produces rather than their revenue. Measured that way it is usually considerably longer than the version in the deck, and it is the number investors recalculate.

Question 60

How much do we have to sell to break even?

Accepted Answer

Fixed costs divided by contribution margin per unit. The same arithmetic tells you how much volume a price rise can afford to lose, and what a new fixed cost has to generate to pay for itself. Both are worth checking before a hiring or pricing decision.

Question 61

Which projects and clients actually make money?

Accepted Answer

Rarely the ones people assume. Retainers are usually the worst, because scope grows over years and the fee does not. The way to find out is margin by project after fully loaded delivery cost, alongside realisation against your rate card.

Question 62

Should we launch this new product line?

Accepted Answer

Work out what it has to sell to cover its own fully loaded cost, including the people, and how long that takes. Then ask what it costs the existing business in attention. Most new lines are evaluated on revenue potential and fail on payback period.

Question 63

When should we stop a product?

Accepted Answer

When it has stopped earning its share of attention rather than when it starts losing money. Look at contribution after the cost to serve, the engineering and support it consumes, and what those people would otherwise be doing. Sunk cost is not a reason to continue.

Question 64

Should we open another location?

Accepted Answer

Model the second one on what the first actually did rather than on what it does now, because the ramp is what decides the cash. Opening costs, the months to maturity and the working capital the new site ties up are the three things most plans understate.

The questions founders actually ask.

Raising money