Business Advisory

Startup Finance: Building Operations Through Two Rounds of Funding

After several years as Director of Finance at a major entertainment studio for domestic TV production and distribution, I was excited to be hired for a startup finance position – as the first finance/accounting/back-office person and the company’s 12th employee. The company eventually became a multi-platform media destination offering Olympic and lifestyle sports programming on TV and online networks. During my tenure, I enjoyed being the big fish in a small pond. I wore many different hats as the acting CFO, treasurer, AP/AR/payroll clerk, human resources responsible for hiring/terminations and employee relations, health benefits/401k coordinator, and primary contact for stock options, banking, insurance, tax, audit, and most importantly, financial models for fundraising activities.

Remembering to balance the demands of the fundraising process while continuing to build operations is no small feat. While fundraising is a high-visibility priority, it’s just as important to ensure the ongoing business operations are set up to accommodate growth, address employee needs and benefits in a timely manner, and fully support the business from a financial perspective.

Identifying and Pursuing Strategic Partnerships

(a.k.a. Creative Fundraising for Startups)

In the early years, a company can grow exponentially by identifying and pursuing partners with whom there is a mutual benefit. Ongoing networking and relationship-building certainly played a meaningful role in opportunities presenting themselves when I was at the start-up.

The venture capital raise included a strategic partnership with a sports entity, which implemented and maintained a reliable online platform for pay-per-view programming. Being creative in identifying complementary partners allowed access to a plug-and-play solution to air our content, including World Cup and World Championship competitions, while allowing the owner to monetize the investment made to its online platform.

Another example included evaluating next-step and exit strategies. We considered (a) merging with a competitor to become a new company, (b) being acquired by another competitor, and (c) creating a strategic partnership with another major entertainment company. Ultimately, it was agreed that the strategic partnership would best elevate the fledgling business: we launched a TV cable network by multi-casting with one of their non-HD TV channels (i.e., two TV networks shared bandwidth so both channels were available on cable TV). We were also allowed to use their highly recognizable name and logo, and our Olympic and lifestyle programming was compatible with their programming.

Startup Finance Principles: Cash Management, Culture & Communication

(a.k.a. What do you mean my salary will be cut in half?!!)

One of the less glamorous aspects of working at an early-stage company is ensuring the most recent round of funding will sufficiently cover operational expenses until the next funding. Regular communication to the skeleton staff was imperative for everyone to understand where we were financially, even as they were doing whatever it took to grow the business. The President was especially intuitive in hiring those who were passionate about the vision of the company and who could work well together as a team to resolve challenges successfully.

During the Series C raise, we managed cash flow closely, spending as little as possible and pushing vendor payments WAY out. Eventually, we reached the point where staffing expense was the last area to examine. It wasn’t logical to do lay-offs. The business needed to grow to continue to make it attractive to investors while we were fundraising, so we looked at alternate ways to reduce salary pay in the interim. 

We ran the gamut of analyses, looking at different percentage reductions, eliminating executive pay, reductions for those over a certain dollar threshold and so on. Although reducing salaries was not popular, the open communication and thoughtful messaging helped those impacted to understand the situation and agree to stay the course. In the end, salaries over a certain threshold were reduced by 50% and the remaining balance was accrued with the intent to defer payment until the first Series C traunch was received. All but one managed to ride out the long six months, to which I attribute the close, family-like culture and environment of sharing and communication.

And yes, we were able to make good on paying the deferred salaries!

Wise Spending on Experts

(a.k.a. The Importance of Knowing What You Don’t Know)

I was lucky to join a team wise enough to understand and willing to shell out the big bucks when they knew we didn’t have the expertise internally, ensuring we received top-notch advice and service. Even though both co-founders were attorneys by trade, they engaged a top-tier law firm to review non-standard contracts, especially those with the Olympic sports International Federations (IF’s), and provide legal advice on subjects outside their expertise. 

We also selected a great Professional Employer Organization (PEO) for human resources and related legal compliance. They were instrumental in helping me through successful EDD audits; implementing, communicating and renewing annual benefits open enrollment; and being a resource I leaned on heavily for any technical, legal HR issues that arose over time.

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And in the End…

Looking back at this interesting, compelling time that coincided with the Great Recession is a reminder of lessons learned and how it benefited my subsequent career roles. Although the specifics may be different, these broad concepts of creative thinking, surrounding myself with the right internal and external team members, and communication with transparency will continue to benefit me and those with whom I work in the future.

It’s one of the things that brought me to 8020 Consulting, which has a team of 90+ Los Angeles-based consultants with a diverse range of skills and experiences. If you want to explore adding leverage or complementing your existing accounting or finance function, we invite you to contact us to learn more. You can also learn more about our services by clicking below:

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About the Author

Yasuko is a CPA with 25+ years of diverse finance and accounting experience across a variety of industries including entertainment, advertising, business services, telecom, retail and manufacturing in both private and public companies. She is a KPMG alumna who held leadership roles as Controller, VP of Finance and CFO at Fortune 500, middle market and entrepreneurial companies, including Sony Pictures Entertainment, Universal Sports, Senn Delaney (a Heidrick & Struggles company) and ZOO Productions (an All3Media company). Yasuko has provided financial leadership and management to accounting organizations including FP&A, budgeting and forecasting, financial modeling, post-acquisition finance integration, M&A transaction support and due diligence, managing internal and external financial reporting, process improvement and financial system implementations. Yasuko holds a BS in Business and Accounting from California State University, Long Beach.

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