Post Seed Funding Checklist

WRITTEN BY: UPSIDE PARTNERSHIP

You just closed a round of funding- now what? Here are the tactical things you need to know and do immediately after the money lands in your bank account. Approach this list in the general order shown below, from mission critical to less time sensitive post fundraising.

Order of Operations

- 01- Get founder credit cards from the bank
- 02 - Set up your legal team
- 03 - Complete city / state regulatory filing requirements

a. Comprehensive checklist:

i. EIN

ii. CA Qualification (file with the CA Secretary of State)

iii. Statement of Information (file annually with the CA Secretary of State)

iv. Register with the SF Tax Collector (Business Registration)

v. FBN with SF County

- 04 - Secure business insurance and health insurance

- 05 - Secure workers comp

- 06 - Plan out offered benefits, PTO, and 401k plan (whatever benefits you’re offering)

- 07 - Review the cap table and early exercise options with your counsel

- 08 - Set up cap table management

- 09 - Get your 409A done (the sooner the better)

- 10 - Set up bookkeeping or hire someone to manage that for you

- 11 - Set up payroll

- 12 - Set up a vendor billing system

- 13 - Set up expense / receipt tracking system

- 14 - Decide on a tax partner

- 15 - Mark important tax deadlines on your calendar

- 16 - Set up a budget to manage cash & burn

- 17 - Maintain budget to actuals for monthly variance analysis

- 18 - Send investors fully executed closing book

- 19 -Schedule regular check-ins with your lead VCs

- 20 - Establish cadence for investor updates

- 21 - Secure a domain name for the business and register it

- 22 - Set up Google Apps for your domain

- 23 - Connect with a real estate broker if you need office space

- 24 - Secure social media accounts if applicable

- 25 - Iron out your company’s mission and vision

- 26 - Create a hiring plan for next three hires

- 27 - Secure other insurance policies as needed

Documents

❏ For equity rounds, send the closing book (final executed docs) to your investors when you have a chance and save a copy for company records (wherever you keep company files- Box, Dropbox, etc). This is not super urgent, but you will likely be asked for them by your investors.

Some of the docs you may be asked to provide (by your investors, back office team, etc. For context, investor back office teams will request these docs for their records, typically right after a fundraise or around their quarterly reporting deadlines). Typically, you will be asked for a fully executed closing book, which includes all the documents that pertain to a funding round, such as:

❏ Company charter

❏ Fully executed signature pages

❏ Cap table or Pro Forma

❏ Stock Purchase Agreement (SPA)

❏ Board Consent

❏ Investors Rights Agreement (IRA)

❏ Management Rights Letter (MRL)

❏ First Refusal, Co-Sale, and Voting Agreement (ROFR)

❏ Stockholders Consent

Backoffice & Benefits

❏ Payroll- ex: Gusto, ADP

❏ Business insurance (what to get within the first 12 months (before you hire your first employee):

❏ Business Package Policy- this includes General Liability and should cover any requirements in your office lease. This covers bodily injury, property damage claims, as well as advertising and personal injury (libel, slander, etc). Business insurance should also cover business personal property (BPP), covering all physical assets of the company. This can also include non-owned and hired auto, as well as rented cars for company business. This policy generally runs about $1,500 per year.

❏ Workers Comp Insurance- This is required by law and pays for medical and indemnity when employees get injured on the job. Any 1099 people who work solely for the company must also be included. For tech companies, the premium is very inexpensive, as employees are often coded by insurers / brokers as software engineers. The rate for that is $.25 per $100 of payroll.

❏ Employee Benefits (Health, Vision, Dental, etc)- It is a misnomer that small companies cannot get quality benefits. For reference, Attivo typically sees companies offer 100% employee coverage and 80% dependent coverage, 401k, and unlimited PTO. A 35 year old male employee will have a monthly rate around $300. Any startup should look at this and workers comp numbers before signing up with a PEO. PEOs typically cost a company 25% more than using a payroll service and securing workers comp and benefits. Work with a broker, who can help sort out all the options.

Insurance to get within 12-18 months:

❏ Directors and Officers (D&O)- This includes Employment Practices Liability and will protect management, employees, and the board against suits alleging mismanagement or wrongful employee practices. These policies need to be negotiated and amended to make sure that the personal assets of the executives are fully protected. Premiums start around $4,000 annually for $1M of coverage and is rated on assets, sales, funding amount, and number of employees.

❏ Benefits- are you offering benefits aside from health, vision, dental, etc.

Insurance to get within 18-24 months and/ or pre-product launch and Series A:

❏ Tech E&O / Internet Liability - This protects the company and any employees from any 3rd party claims alleging the product or service caused financial damage to the 3rd party or customer. This coverage is very important. Since many tech companies derive their revenue from the internet, coverage also includes media exposures, such as libel, slander, and copyright infringement. Premiums generally start around $2,500 for the first $1M of coverage. It is rated off of estimated annual sales.

❏ Key Person Life - Term insurance for key executives. For a 40 year old male executive, the premium is around $1,600 per year for $1M of coverage.

❏ IP Insurance - This is optional and helps companies enforce or defend against allegations of patent infringement. Any company that feels they have a proprietary process or product should consider this coverage. Premiums generally start around $7,500 for the first $1M of coverage.

❏ Business registration (regulatory filing requirements)- You’ll need to register your business in the state / city in which you operate. For San Francisco, you can find more details here.

Legal

❏ Set up your legal team

❏ Corporate

❏ Confirm that you have a copy of all fully executed agreements. You will need these for the due diligence of your next fundraise
❏ Create a shared filing system for corporate counsel (Box, Dropbox, etc)

❏ General / Commercial

❏ Employment

❏ What do your employee & consulting agreements look like?
❏ Create an employee handbook if needed.

❏ Trademark

❏ Patent & trademark filing
❏ Run first level clearance before buying domain names

❏ Other

❏ Privacy Law
❏ GDPR

Bookkeeping & Accounting

❏ Get your 409A done

You should do this before issuing your first common stock options (typically to your first hire or advisor). You will also need a new valuation after raising your next round of venture financing, as the previous 409A becomes obsolete once the new round is raised. After that, you should get a new valuation every 12 months and/or when there is a material event which may impact the value of the company, to continue to take advantage of 409A IRS safe harbor.

❏ Cap table management- keep it clean and organized to avoid issues down the road. Carta is a great resource for this.

❏ Determine what your accounting and expense / receipt tracking system will be (ex: Expensify, Abacus, Tallie, Xero).

❏ Standardize the process- how are expenses paid and reimbursed?
❏ Set clear expectations: does your team know what is acceptable and what is not?
❏ Define roles: who is responsible for each step in the process?
❏ Security: are expense payments subject to sufficient scrutiny and oversight?
❏ Share ownership: is every member of your team familiar with the system?

❏ Get founder credit cards from your bank if you haven’t already.

❏ Set up a vendor billing system (Bill.com is great).

❏ Set up a billing / revenue recognition / sales reporting system (ex: Stripe, Recurly, SaaS Optics).

❏ Maintain budget to actuals for monthly variance analysis.

❏ Shares

❏ Review cap table with your counsel.
❏ Discuss early exercise options, for both founders and employees, with your counsel.

Taxes

❏ Identify and hire whoever will manage company taxes. Many times, this is the same person or firm helping with book keeping & accounting.

❏ Mark important tax deadlines on your calendar. See below for specifics- not all of these will necessarily apply to your business.

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Domain Names

❏ Secure a domain name for your company. Some good places to start are GoDaddy, Domainr, or Domize. Look for domains such as:

❏ www.get_____.com
❏ www._____.co
❏ www.use____.com
❏ www.____.com

❏ Register your selected domain name with GoDaddy or Namecheap.

❏ Once you have a domain, set up Google Apps on that domain (it’s free) to host your company name, email, calendar, etc.

Social Media

❏ Create company profiles on the networks you plan to use. Some examples:

❏ Facebook
❏ Instagram
❏ Twitter
❏ YouTube
❏ Medium
❏ LinkedIn

Investor Communication

❏ Establish the cadence for your investor updates (bi-weekly, monthly, etc).

❏ Optional: Create a listserv such as “investors@” for added efficiency when sending updates.

❏ Schedule regular check-in calls with your lead VCs.

Real Estate

❏ If you need office space, connect with a real estate broker.

Culture, Mission & Vision

❏ Create and document the company’s mission and vision.

❏ Identify the culture you want to build and the intentional steps you need to take to make that happen.
❏ Draft a Code of Conduct policy. Consult company counsel with any questions.

Hiring Plan

❏ Identify your next 3 hires and how you’re going to close them. If you happen to run into the right people tomorrow, you want to be able to make strategic hiring decisions based on your plan.

❏ Write job descriptions.

❏ Come up with your compensation philosophy / structure that aligns with your option pool budget.