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Latin America's tech hubs are leading a wave of transformation, driven by innovation and a surge in global investment. From the fintech powerhouse of São Paulo to Santiago’s strides in clean energy, these cities are shaping the future of technology in the region. For founders seeking to tap into these growing ecosystems, opportunities for funding, talent, and growth are abundant. Discover how these hubs are positioning Latin America as a force in global innovation. Discover VCs investing in LATAM on our Connect investor database. Related resource: 7 Best Venture Capital Firms in Latin America in 2024 1. São Paulo, Brazil São Paulo is the largest and most dynamic tech hub in Brazil, serving as the heart of Latin America's innovation ecosystem. With a massive market, supportive infrastructure, and increasing international investment, São Paulo offers a fertile ground for startups and established tech companies alike. Key Sectors: Fintech: São Paulo is a fintech powerhouse, hosting numerous startups that are revolutionizing digital banking, payments, and financial services. E-commerce: The city's vast consumer base drives the growth of online retail platforms and logistics innovation. Healthtech: Innovations in telemedicine, healthcare access, and medical technology are thriving. Agritech: Advanced agricultural technology solutions help optimize Brazil's significant agricultural output. Notable Startups and Companies: Nubank: One of the world's largest digital banks, Nubank has reshaped financial services with its user-friendly banking solutions. MercadoLibre: The e-commerce giant dominates online retail in Latin America and continues to expand its fintech services. Gympass: A global platform offering corporate wellness solutions, Gympass connects employees to fitness options worldwide. Creditas: A leading digital lending platform providing secured loans and financial solutions to consumers. Top VCs in São Paulo, Brazil: Check out the full list of VCs located in São Paulo, Brazil. 1. Canary Ventures About: Canary provides the first venture capital round, seed or Series A, to tech companies that operate in Brazil. We are an entrepreneur-friendly and well-connected partner that will be by your side, helping in impactful matters, as your startup takes off. 2. Valor Capital Group About: Valor Capital Group is the pioneer cross-border Venture Fund operating at the intersection between innovation & regulation and technology & innovation and bridging the US, Latin American and Global technology markets. 3. Monashees About: The firm serves entrepreneurs starting with their very first movements, supporting their growth through its expansion funds. With a human-values-first approach, monashees helps founders challenge the status quo and improve people’s lives through technology. 4. Redpoint eVentures About: Redpoint eventures, the first Silicon Valley fund on the ground in Brazil, focuses on early-stage internet investments. 5. Bossanova Investimentos About: Bossanova is the most active VC in Latin America ; We invest in startups at the pre-seed stage; B2B or B2B2C companies with scalable and digital business models that are operating and making money. 2. Mexico City, Mexico Mexico City has solidified its status as a leading tech hub in Latin America, often referred to as the "Silicon Valley of Latin America.". Mexico City stands out as a vibrant tech hub strategically positioned for growth in Latin America. Its large population, expanding middle class, and proximity to the U.S. create a thriving ecosystem for innovation. Key Sectors: Fintech: Mexico City is a leading fintech hub, with over 200 startups securing more than $600 million in venture funding, accounting for over 20% of venture funding in the country. E-commerce: The city's vast consumer market has led to the rise of successful e-commerce platforms. Software Development: A growing pool of tech talent supports a robust software development industry. Notable Startups and Companies: Kavak: A used-car marketplace that has become one of Mexico's prominent startups. Clip: A fintech company simplifying digital payments, contributing significantly to financial inclusion. Bitso: A cryptocurrency exchange platform facilitating digital asset transactions in Latin America. Albo: A neobank offering digital banking solutions to Mexican consumers. Top VCs in Mexico City, Mexico: Check out the full list of VCs located in Mexico City. 1. COMETA About: COMETA is a venture capital firm that invests in early-stage technology companies targeting Spanish speaking markets. Thesis: The first fund, VARIV I, which started making investments in 2013, was focused on e-commerce and its enablers, namely, payments and logistics. Over 10 investments were made in those categories expanding the geographic scope from Latin America to Spain. In 2015, the Firm raised a second fund, VARIV II, to capture the emerging opportunities in fintech, marketplaces, and first-generation enterprise businesses founded by local entrepreneurs. Pepe Bolaños, who joined the Firm as Principal in 2014, became Partner in 2017. Throughout the four-year investment period, sixteen companies were added to the firm’s portfolio and the scope broadened to include the US. 2. Jaguar Ventures About: Jaguar Ventures is a venture capital firm that seeks to invest in firms operating in the technology sector. Traction metrics requirements: Companies should have at least US$50k in monthly revenues, growing at more than 10% per month. Thesis: Focused on early stage ventures in Latin America. 3. Hi Ventures About: Hi Ventures invests in Latin American founders and is an early-stage venture capital fund based in Mexico. Thesis: Hi’s investment thesis participates deeply and actively in the Fintech, Future of Commerce, Human Capital and Smart Cities sectors, which are all experiencing a strong acceleration shift at a regional level.Across four portfolios, the fund has invested in 40+ innovative and successful companies led by founders who share our vision to democratize access to services and fix large inefficient industries throughout the region. 4. Smart Impact About: Smart Impact is a launching platform for hardware and circular economy startups that use technology and the internet to create meaningful change. Thesis: At Smart Impact you will discover, develop, experiment, prototype, test and launch your business. 5. Dalus Capital About: Investing in the best entrepreneurs developing scalable solutions for significant problems in LATAM. Sweetspot check size: $ 4M Traction metrics requirements: We are focused on early-stage financing rounds, in startups that have a validated product and client traction. Thesis: Dalus Capital invests in tech companies with scalable solutions to address significant problems in Latin America, in four investment themes: Inclusion (Fintech, Edtech, Healthtech, HRtech), Climate Innovation, Business Productivity (SaaS, etc.) and Digital Consumer (D2C, marketplaces). 3. Buenos Aires Buenos Aires stands as Argentina's premier tech hub, renowned for its rich talent pool, entrepreneurial spirit, and significant investment growth. The city accounts for more than 50% of the country's tech startups, with over 3,000 startups calling Buenos Aires home. Key Sectors: Software Development: Buenos Aires is a major player in the LATAM software development industry, featuring more than 50,000 software developers. Agtech: The city is home to numerous startups and investors focusing on agricultural technology, contributing to the sector's growth in Argentina. Blockchain: Buenos Aires hosts a vibrant blockchain community, with companies like Ripio leading the way in digital finance platforms. Notable Startups and Companies: Mercado Libre: Founded in Buenos Aires, MercadoLibre is the largest e-commerce platform in Latin America, with 668 million visits per month across 18 countries. Ualá: A fintech company based in Buenos Aires, Ualá offers a mobile banking app and has over five million users across Argentina, Mexico, and Colombia. Globant: A global IT and software development company headquartered in Buenos Aires, Globant provides services to clients like Google and Spotify. Top VCs in Buenos Aires: Check out the full list of VCs located in Buenos Aires. 1. Kaszek Ventures About: Kaszek is a venture capital firm that partners with exceptional entrepreneurs to build lasting, high-impact technology-based companies whose main focus is Latin America. In addition to capital, Kaszek offers significant strategic guidance, hands-on operational support and access to local and international networks. The firm is industry and stage agnostic, investing mainly in seed, series A and series B. Thesis: Our core is technology: We are big believers in the fabulous impact that new technologies can have over humankind. Therefore, we invest in any industry where technology and innovation, in any form, offer a chance of significant disruption and value creation. So far, we have invested in industries such as financial services, education, healthcare, ecommerce, marketplaces, enterprise software, and SaaS, among others. 2. NXTP Ventures About: NXTP Ventures backs early-stage technology companies led by extraordinary entrepreneurs throughout Latin America. Sweetspot check size: $ 1M Thesis: We predominately invest in B2B companies in pre-seed stage and seed-stage companies, usually becoming the first institutional check into the business. We also invest at the Series A stage, although a little less frequently. Our typical check size for Seed rounds ranges from $500k to $3M USD and we like to lead or co-lead rounds. Sometimes, we invest as followers with a lower initial check, but with the optionality to invest more later on. For Series A investments, the typical investment size ranges from $2-5M. 4. Bogotá, Colombia Bogotá is rapidly establishing itself as a key player in Latin America’s tech ecosystem, driven by a combination of supportive government policies, a thriving startup culture, and a robust educational framework. With initiatives like the Ministry of Information and Communication Technologies (Ministry of ICT) promoting digital transformation and innovation, the city fosters an environment where fintech, healthtech, and edtech startups can flourish. This synergy between public and private sectors, combined with a skilled talent pool and increasing investor interest, positions Bogotá as a hub for technological advancement and entrepreneurship. Key Sectors: Fintech: The city is home to a growing number of fintech startups focusing on financial inclusion and digital banking solutions. Healthtech: Innovations in healthcare technology are improving patient care and access to medical services. Edtech: Educational technology companies are enhancing learning experiences and accessibility. Notable Startups and Companies: Rappi: A leading on-demand delivery platform that has expanded its services across Latin America. Platzi: An online education platform offering courses in technology and business, aiming to upskill the Latin American workforce. Laika: An e-commerce platform specializing in pet care products and services, showcasing innovation in niche markets. Top VCs in Bogotá, Colombia: Check out the full list of VCs located in Bogotá, Colombia. 1. Polymath Ventures About: Polymath Ventures is a Digital Venture Group that builds from scratch and scales disruptive tech ventures for Latin America's middle class. 5. Guadalajara, Mexico Guadalajara has established itself as a leading technology hub through a strong emphasis on innovation, talent development, and international collaborations. The city's transformation into a tech powerhouse has been driven by a combination of government initiatives, educational excellence, and the presence of global tech giants. Key Sectors: Electronics: Guadalajara is a major producer of electronic components, contributing significantly to Mexico's electronics exports. The city hosts manufacturing and R&D facilities for companies like Intel and Jabil. Software Development: With a large pool of skilled software developers and engineers, Guadalajara has become a hub for software design and IT services, attracting companies such as IBM and Oracle. Internet of Things (IoT): The city fosters innovation in IoT, with startups and established firms developing cutting-edge solutions in this rapidly growing field. Notable Startups and Companies: Kueski: A prominent fintech startup based in Guadalajara, Kueski provides online loans, offering financial services to underserved populations in Mexico. Wizeline: A global product development company with a significant presence in Guadalajara, Wizeline partners with businesses to build high-quality software solutions. Intel: Maintaining a substantial operation in Guadalajara, Intel focuses on research and development, contributing to the city's status as a tech innovation center. Top VCs in Guadalajara, Mexico: Check out the full list of VCs located in Guadalajara, Mexico. 1. Poligono Capital About: We invest in early-stage startups to develop possibilities for success through technology. Non-bank financial organization that believes in exponential capital growth through portfolio diversification and innovative vision. 2. Redwood Ventures About: Mexican venture capital fund, industry agnostic, investing in technology-based startups. Sweetspot check size: $ 200K Traction metrics requirements: Not a static number but products or services that already have product/market fit defined as a growing user base and revenues Thesis: Founded in 2017, Redwood Ventures is a venture capital fund, based in Mexico. The firm focuses primarily in seed, early-stage, and Series A investments in high-impact tech companies. The firm seeks to invest in companies that are based in North America 3. Arancia International About: In addition to our operating companies, we seek to invest in sectors that we consider to have growth potential, technology and those related to our area of ​​interest. For this reason, we have investments in various companies with high potential and international prestige. 6. Santiago, Chile The Chilean government's proactive approach, exemplified by initiatives like Start-Up Chile, has been instrumental in fostering this environment. Launched in 2010, Start-Up Chile is a seed accelerator that has supported over 3,000 startups from more than 85 countries, providing equity-free funding and a robust support network. Key Sectors: The Chilean fintech ecosystem comprises approximately 179 startups, representing a 60% increase since 2019, driven by government efforts to position the country as a fintech hub. Agritech: Agriculture remains a cornerstone of Chile's economy, and Santiago hosts numerous agritech startups innovating to improve yields and combat climate change. Technologies such as drones, artificial intelligence, and nanobubbles are being utilized to revolutionize the agricultural sector. Clean Energy: Chile's commitment to renewable energy is evident, with 45% of the country's electricity generation coming from renewable sources, including over 19% from solar photovoltaic. This focus on clean energy has spurred the growth of related technologies and startups in Santiago. Notable Startups and Companies: Betterfly: A prominent fintech startup offering a platform that combines insurance, wellness, and social impact, incentivizing healthy habits among users. Instacrops: An agritech company providing a virtual assistant that allows farmers to monitor their fields in real-time, optimizing water usage, fertilizers, and detecting pests, thereby enhancing crop yields. INTI-TECH: A clean energy startup specializing in autonomous, water-free cleaning solutions for photovoltaic plants, improving the efficiency and maintenance of solar panels. Top VCs in Santiago, Chile: Check out the full list of VCs located in Santiago, Chile. 1. Taram Capital About: We invest in teams that are transforming their industries with B2B technological solutions for SMEs and large companies, with an emphasis on SaaS and the eCommerce, Fintech, Data Driven Solutions and Web3 sectors. We focus on early-stage companies, investing in Late Seed and Series A, in startups with a presence in Chile and international projections, whose solutions address cross-cutting problems faced by companies around the world. Thesis: We invest in founders from the Andean Region (Chile, Peru, Colombia & Ecuador) leading early-stage B2B recurrent revenue companies with $0.5M - $4M ARR, primarily vertical SaaS implementing digitalization, AI and Web3 related applications. 2. Start-Up Chile About: Start-Up is a public startup accelerator created by the Chilean Government for global entrepreneurs to bootstrap their startups. 3. Impacta VC About: We help impact startups fulfill their purpose. At Impacta VC we invest in Impact Startups, which with the help of Mentors and our Co-investors grow to raise their next round of capital. Thesis: We invest in impact startups in Latin America. Impacta VC launched a U$10MM Seed Fund in the US to fund tech companies aligned with the SDGs across LATAM that leverage the partner’s network of top regional founders and VCs to achieve future financing rounds in the impact space. 7. Lima, Peru Lima's tech ecosystem is experiencing significant growth, characterized by a strong entrepreneurial spirit and expanding infrastructure that supports innovation. The city's startup scene is thriving, attracting investors and talent from across the region. Key Sectors: Edtech: Lima has become a hub for educational technology, with startups like Crehana offering online courses to upskill the Latin American workforce. Fintech: The fintech sector is leading the way in investment, accounting for 58% of total investments in 2025. Startups such as Rextie provide secure and convenient currency exchange services. Logistics Technology: Startups like Chazki are developing innovative solutions to improve logistics and delivery services in the region. Notable Startups and Companies: Crehana: An online education platform offering courses to upskill the Latin American workforce. Rextie: A fintech company providing secure and convenient currency exchange services. Chazki: A logistics startup optimizing delivery services with efficient technology solutions. 8. Santo Domingo, Dominican Republic Santo Domingo is rapidly emerging as a significant tech hub in the Caribbean, leveraging its strategic location and a strong emphasis on digital transformation. The city's proximity to major markets and its commitment to technological advancement have fostered a conducive environment for innovation and entrepreneurship. Key Sectors: Fintech: The Dominican Republic's fintech sector has experienced significant growth, with the number of fintech companies increasing from 6 in 2018 to 65 by 2024. This expansion positions the country as the eighth largest fintech ecosystem in Latin America and the leader in Central America and the Caribbean. Tourism Tech: Given the Dominican Republic's robust tourism industry, there is a growing focus on integrating technology to enhance tourist experiences and streamline operations within the sector. Innovations in this area aim to boost the country's appeal as a premier travel destination. Software Development: Santo Domingo boasts a growing tech scene with many skilled developers. The city has an impressive number of developers, and, according to the EF EPI Index, their English proficiency ranks 55 out of 113 countries. Notable Startups and Companies: AlterEstate: Provides a comprehensive cloud platform designed to streamline operations for real estate agencies, enhancing sales and property management efficiency. TagShelf: Offers an innovative AI platform that automates repetitive tasks, enabling businesses to streamline their operations by intelligently identifying and classifying various document types without human intervention. Uepa Pay: Provides an online payment management platform with a versatile API for seamless integration with various e-commerce platforms, simplifying transactions and streamlining operations for businesses. 9. Montevideo, Uruguay Montevideo has emerged as a leading tech hub in Latin America, renowned for its political stability, innovation-friendly policies, and rapidly expanding technology sector. The city's strategic location and supportive business environment have attracted startups and established tech companies, fostering a vibrant innovation ecosystem. Key Sectors: Fintech: Uruguay's fintech industry has experienced remarkable growth, with the number of fintech companies increasing from 6 in 2018 to 65 by 2024. This expansion positions the country as the eighth-largest fintech ecosystem in Latin America and the leader in Central America and the Caribbean. Agtech: Leveraging its strong agricultural heritage, Montevideo has become a hub for agtech innovation, with startups developing solutions that integrate technology into agriculture to enhance productivity and sustainability. Gaming: The city's creative industries, including video game development, have gained international recognition, contributing to Montevideo's reputation as a diverse and dynamic tech hub. Notable Startups and Companies: dLocal: A fintech company providing payment solutions for emerging markets, dLocal became Uruguay's first unicorn in 2020 and went public on NASDAQ in 2021, reflecting the country's growing fintech sector. Bankingly: Founded in 2015, Bankingly offers digital banking channels for financial institutions, enabling them to improve customer experience and expand their digital services. MooveIt: A software engineering company specializing in the design, development, and implementation of technology applications across various sectors, including education, health, fintech, entertainment, and telecommunications. 10. Medellín, Colombia Medellín has transformed into a prominent tech hub in Latin America, driven by strategic investments in innovation and a commitment to technological advancement. The city's focus on sectors such as healthtech, the Internet of Things (IoT), and artificial intelligence (AI) has been instrumental in this growth. Key Sectors: Healthtech: The healthtech sector in Colombia has experienced significant growth in recent years. As of 2023, Colombia hosts approximately 25 digital health startups, reflecting a compound annual growth rate (CAGR) of 5.6% from 2019 to 2024. Internet of Things (IoT): Medellín hosts a passionate tech community focused on advancing the IoT ecosystem. Organizations like IoT Medellín promote learning, collaboration, and innovation in data-driven technologies. Artificial Intelligence (AI): In September 2024, the World Economic Forum announced the establishment of a Centre for the Fourth Industrial Revolution in Medellín. This center aims to position the city as a leading AI innovation hub, fostering collaboration among business, government, and civil society to develop inclusive and sustainable AI strategies. Notable Startups and Companies: La Haus: An online real estate marketplace that has attracted significant investment, including a US$100 million funding round in 2021, co-led by Acrew Capital and Renegade Partners. Tributi: A Y-Combinator-backed fintech company headquartered in Medellín, automating tax filing for individuals in Latin America and offering curated financial services based on user data. Sempli: A fintech startup providing financial solutions to small and medium-sized enterprises (SMEs) in Colombia. In 2022, Sempli secured investment from CAF, reflecting confidence in Medellín's growing fintech ecosystem. Connect with LATAM Startup Investors with Visible Latin America's emerging tech hubs are driving innovation across sectors like fintech, healthtech, agritech, and more. Each hub benefits from a dynamic ecosystem supported by government policies, talent pools, and investor interest. To connect with the right investors in each city, leverage Visible’s Connect investor database. Simplify your fundraising journey and discover VCs ready to back your startup's growth. Building and nurturing strong investor relationships is crucial for your startup’s success. With Visible, you can streamline your investor updates, manage fundraising, and maintain clear communication with your stakeholders—all in one place. Give it a free try for 14 days here. Related resource: 14 FinTech Startups Shaping the Future of Finance Related resource: The Top VCs Investing in Community Driven Companies

Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days. Venture capital is relatively new. In the 80s and 90s venture capital was simply capital available to “tech” companies (e.g. silicon chips in the 90s). At the time, capital was enough of a differentiator for a VC fund to stand out. Since then, the market, and funding options available to startups, have exploded. Y Combinator launched in the mid-2000s and began transforming the space. Since then name-brand VC funds have popped up throughout the country and the globe. Now, founders are looking for more from their investors (hiring help, future capital, leadership skills, technological help, etc.). Related Resource: Seed Funding for Startups 101: A Complete Guide One of the popular funding options and resources that has popped up over time is the incubator. As put by the team at Investopedia, “An incubator firm is an organization engaged in the business of fostering early-stage companies through the different developmental phases until the companies have sufficient financial, human, and physical resources to function on their own.” Related resource: Accelerator vs. Incubator: Key Differences and Choosing the Best Fit for Your Startup What Do Incubators Do? While different incubators will likely specialize in different aspects of business building, they generally help in all of the ways below. Related resource: 10 Top Incubators for Startups in 2024 Provides Feedback & Assistance With Business Basics Incubators are generally suited to extremely early product ideas or businesses. One of the areas they are the best fit to help is by providing feedback and covering business basics. This might include things like establishing your business, brand, distribution strategy, and more. Introductions to Other Startups & Networking Opportunities Generally, incubators have cohorts or classes of startups. This means that they are seeing hundreds of startups throughout their lifecycle. Incubators are a great way to find introductions to other startups, founders, and partners they might have worked with in the past. Includes Necessary Equipment – Including High-Speed Internet Historically, incubators have a physical office space for startups to leverage. This is an opportunity for startups to save on office rent and leverage the equipment and tools they need to succeed — internet, conference rooms, desk space, etc. Access to Investors Once you’ve worked your way through an incubator, chances are you are ready to hit the ground running on your business. One of the common ways to do this is by scaling strategies you worked on during the incubator. To help with this, many incubators have demo days or a network of investors they will be able to introduce you to for a future round of financing. Related Reading: All Encompassing Startup Fundraising Guide Connections to Strategic Partners & Other Service Providers Another benefit of an incubator is the partners and service providers that they work with. Oftentimes, incubators work closely with large organizations or have individuals present with their expertise. For example, an incubator might bring in someone that is an expert in product-led growth and can help you set up your process and make introductions to potential hires. On the flip side, they generally offer discounts to service providers to help you get things started. Types of Business Incubators Incubators tend to be a proving ground for different startup ideas and products. Due to this, different types of businesses and organizations have incentives to launch an incubator. Check out some of the most common types of incubators below: Academic Institutions One of the most common types of institutions that use incubators is academic institutions — generally large universities. This is a great way to allow current undergraduate and graduate students to pursue different ideas and businesses they might have in mind. Universities can tap into their network of experienced professors to help students with all aspects of business building. Additionally, universities also offer a massive network of alumni. Non-Profit Organizations Another business that leverages incubators is non-profit organizations. Non-profits are generally trying to solve large problems that impact people across the globe. Because of this, the space generally requires innovation and new ideas to help tackle these problems. Non-profits turn to incubators to help fuel innovation in the space and uncover the next entrepreneurs suited to help. Related Reading: Impact Investors and Fund Managers to Know For-Profit Corporations Of course, for-profit corporations are very common in the incubator space. Corporations are likely looking for growth and innovation in their market and space. While they likely have teams dedicated to this in-house they also look outside their organization for areas where they can innovate and expand. Corporations will use incubators to search for new ideas and products from entrepreneurs that are in the space and can help their business grow even further. Venture Capital Firms Another common business that uses incubators is venture capital firms. VC firms are dedicated to investing in startups. Because of this, they are incentivized to help the earliest stage startups incubate their idea. This allows them to invest at a later date and get a head start on the diligence process. VC firms also have built out networks and partners that help their VC fund portfolio companies which translates well to helping the companies in their incubator. Related Reading: The 12 Best VC Funds You Should Know About What’s the Difference Between an Incubator and an Accelerator? Incubators and accelerators have both become synonymous with the startup space. While you might think they are similar or the same, they do have a number of differences. An incubator is built to help the earliest stage ideas develop their business expertise and determine if they have a viable business. Related Reading: Why Most Accelerators Fail…and Why Yours Doesn’t Have To An accelerator is best suited to help businesses that are a step further. As put by the team at TechTarget, “A startup accelerator is a business program that supports early-stage, growth-driven companies through education, mentorship and financing. Startups typically enter accelerators for a fixed period of time and as part of a cohort of companies. While accelerator programs can provide beneficial resources to organizations at all stages of development, most focus on those that are pre-revenue.” This means that these companies already have a business model and product in place and are ready to hit the ground running on their revenue growth and product development. Top Incubators for Startups 1. 1871 One of the largest tech incubators globally, 1871 supports over 400 startups through mentorship, educational programming, and networking opportunities. It offers a collaborative space and access to investors and corporate partners​​. 2. Betaworks Betaworks invests, accelerates, and builds companies and projects from scratch — our focus right now is on AI and Augmentation, LLM's, NLP, web3 rails and applied machine learning. 3. Antler Antler is a global startup generator and early-stage VC that is building the next big wave of tech. With the mission to turn exceptional individuals into great founders, Antler aims to create thousands of companies globally. 4. Entrepreneur First Entrepreneur First stands out by prioritizing investment in individuals rather than established startups. This incubator gathers skilled talent from across the globe, helping them form teams and launch new ventures from the ground up. In 2024, Entrepreneur First remains a trailblazer in redefining the conventional incubator model, emphasizing a talent-first strategy that drives innovation right from the inception of a company. 5. DMZ A global startup ecosystem, DMZ at Toronto Metropolitan University equips the next generation of tech entrepreneurs with the tools needed to build, launch and scale highly impactful startups. By providing connections to customers, coaching, capital and a community, DMZ’s world-leading incubator programs help innovators reach the next milestone in their entrepreneurial journey – whatever that might be. Through its award-winning programming, DMZ has helped 800+ startups raise $2.69 billion in capital and create 5,100+ jobs. Headquartered in Toronto, Canada, with globally-accessible programming, DMZ has a widely-recognized international presence with offices in Vietnam, India and the U.S., and partnerships across North America, Latin America, Africa and Asia. Learn more at dmz.to. 6. Idealab Idealab is a business incubator providing capital, resources and advice for tech startups. Idealab continues to explore a range of technology frontiers. New models for improving the search experience are at the core of several companies currently growing inside of Idealab. Moving beyond the Internet, we have spawned companies with breakthrough technologies in robotics, renewable energy and automotive design and production among others. Idealab also continues to partner with leading venture capital firms and other strategic investors to provide the resources to maximize the potential of these companies. 7. TechNexus We build ecosystems by finding, funding, and accelerating technology ventures in collaboration with entrepreneurs and enterprises. We invest globally in early stage companies through vertical focused funds backed by leading corporate partners and leverage those unique enterprise relationships post-investment to drive accelerated venture development. Is an Incubator Right for You? Incubators aren’t for everyone. If you’ve got an understanding of your business model and product, you are likely ready to skip over the incubator and hit the ground running on your business. To learn how you can take your business to the next level, subscribe to the Visible Weekly – we search the web for the best tips to attract, engage and close investors, then deliver them to thousands of inboxes every week. Subscribe here.

A well-maintained cap table is one of the most critical tools for startup founders navigating the complex world of equity and ownership. As a startup grows, managing and understanding equity distribution becomes essential for making informed decisions, attracting investors, and maintaining transparency. A clear cap table can help founders visualize ownership, anticipate dilution, and ensure accurate fundraising. Whether you’re preparing for investment rounds, employee stock options, or future exits, having a reliable cap table is crucial for your startup’s financial health and long-term success. What Is a Cap Table (i.e., Capitalization Table)? A cap table, or capitalization table, is a detailed spreadsheet or document that outlines a startup's equity ownership. It provides a breakdown of all the company’s securities, including common and preferred shares, options, warrants, and convertible instruments. Each entry typically includes details such as the type of security, the number of shares issued, the names of shareholders or stakeholders, and their ownership percentage. Cap tables also help illustrate how ownership evolves over time, especially after significant events like fundraising rounds, employee stock option grants, or equity transfers. A comprehensive cap table allows founders, investors, and employees to understand who owns what portion of the company and how that ownership could be diluted in future scenarios. Related resource: Emerging Fund Managers You Want on Your Cap Table What Is the Difference Between a Cap Table and a Term Sheet? While both a cap table and a term sheet play crucial roles in a startup’s equity management and fundraising, they serve distinct functions and provide different types of information. Cap Table:A cap table is a current snapshot of a company’s ownership structure. It details all the securities issued, such as shares, options, warrants, and convertible notes, and specifies who owns them. The cap table evolves with each new investment, equity issuance, or employee stock grant. It helps founders and investors understand who owns what percentage of the company, track dilution, and plan for future fundraising. Term Sheet:A term sheet is a forward-looking proposal provided by an investor during a funding round. It outlines the terms and conditions of a potential investment, such as the amount of capital being invested, the company’s valuation, equity percentage, liquidation preferences, voting rights, and other key terms. A term sheet is non-binding (except for certain confidentiality or exclusivity clauses) and serves as the basis for negotiating and drafting the final investment agreement. In summary: The cap table is a snapshot of the company’s current equity structure. The term sheet sets the groundwork for future changes to the cap table based on agreed-upon investment terms. Both documents are critical during fundraising, but they address different aspects of the process- one tracks equity, and the other negotiates terms. Related resources: 6 Components of a VC Startup Term Sheet (Template Included) Navigating Your Series A Term Sheet Why Is a Cap Table Important for Startups? A cap table is essential for maintaining transparency, managing equity, and making informed business decisions as your startup scales. It provides a clear view of who owns what, how ownership changes over time, and the potential impact of future investments or stock option grants. For founders, a cap table helps protect against excessive dilution and ensures strategic equity allocation. It offers investors insight into the company’s ownership structure and potential risks. Without an accurate and up-to-date cap table, startups can face challenges during fundraising, audits, or key financial decisions, making it a foundational tool for growth and sustainability. Understanding the Ownership Breakdown of Founders, Investors, and Employees Founders must always be aware of what their cap table means for ownership of their company. Understanding ownership is critical as the company grows and develops. Cap tables tell investors who owns what part of a company. Current investors want to see who has control. They also want the ability to forecast potential payouts and dilution under specific scenarios based on the ownership split. The breakdown of ownership in a startup can affect the company's overall value for future fundraising rounds, as well as who needs to be at the table for certain critical company decisions. Related Resources: How to Fairly Split Startup Equity with Founders Understanding Contributed Equity: A Key to Startup Financing Monitoring Equity Value and Tracking Company Valuation Monitoring equity value and tracking company valuation are crucial for both employees and investors. An up-to-date cap table provides a transparent view of how much the company is worth and how each stakeholder’s equity is affected by funding rounds, option grants, or changes in ownership. A well-maintained cap table helps all stakeholders understand how ownership changes, ensuring alignment and confidence in the company’s growth trajectory. By consistently monitoring equity value, startups can facilitate fair and transparent equity management, essential for long-term success. For Employees: Employees who hold equity, such as stock options, need to understand the potential value of their shares. A detailed cap table helps them see how their ownership stake evolves over time, providing clarity on the potential value of their equity and how it may be diluted with new investments. This transparency can also increase motivation and align their interests with the company’s growth. For Investors: Investors rely on the cap table to evaluate their ownership percentage, potential returns, and dilution risk. By tracking the company’s valuation over time, investors can assess whether their investment is growing in value and determine how future funding rounds will impact their stake. Accurate valuation data also informs strategic decisions during follow-on investments or exit planning. Facilitating Fundraising Rounds with Transparency and Accuracy In addition to current investors utilizing a cap table for forecasting and dilution predictions for different investment outcomes, potential investors and future fundraising can also be affected by cap tables. By viewing a cap table, potential investors can evaluate how much control and leverage could be maintained during negotiations. Historical insight provided in a cap table can affect negotiating current valuation for new funding raises. Additionally, an existing shareholder can easily determine what percentage of the company to give to the new investors in exchange for the capital contributed. Preparing for Financial Audits and Regulatory Compliance Maintaining an accurate and up-to-date cap table is essential for startups to ensure compliance with legal and regulatory requirements. Regulatory authorities and auditors often require companies to present their cap tables annually, ensuring adherence to legal standards and facilitating processes such as capital rounds and ownership changes. A well-maintained cap table provides a transparent record of the company's equity structure, which is crucial for: Regulatory Filings: Accurate cap tables are necessary for filings with regulatory bodies, such as the Securities and Exchange Commission (SEC), to comply with securities laws and regulations. Tax Reporting: Proper documentation of equity ownership and transactions ensures compliance with tax obligations and helps avoid penalties and legal issues. Investor Relations: Transparency in equity distribution builds trust with investors, demonstrating responsible management and adherence to legal standards. Why Do Investors Want to See the Cap Table? Investors want to review a startup’s cap table because it offers a comprehensive snapshot of the company’s ownership structure. This transparency is crucial for assessing risk, understanding equity dynamics, and making informed investment decisions. A well-maintained cap table helps investors evaluate several key aspects: Equity Distribution: Investors can see how ownership is split between founders, employees, and previous investors. This helps them gauge how much control the founding team retains and identify any potential risks related to future decision-making authority. Dilution Risk: The cap table reveals how new investments might dilute existing ownership. Investors need to understand how their stake may change in future funding rounds and whether the current equity structure leaves room for sustainable growth. Investor Rights and Preferences: A detailed cap table shows who holds preferred shares, warrants, or convertible instruments. This helps investors understand potential liquidation preferences and voting rights, which can affect exit strategies and return on investment. Potential Red Flags: A cap table can highlight any irregularities, such as over-diluted founders or complicated equity structures that might hinder future fundraising. What Does a Cap Table Look Like? A cap table typically takes the form of a spreadsheet or specialized software-generated table that organizes the company's equity information clearly and structured. It generally includes stakeholders in rows and types of equity details in columns, making it easy to see who owns what and how much. For more complex startups, the cap table can include additional details like option pools, convertible notes, and transaction history. Key components of a cap table often include: Shareholder Names: Lists founders, employees, investors, and other stakeholders who hold equity in the company. Number of Shares: The total number of shares each stakeholder owns. Type of Security: Categories like common shares, preferred shares, stock options, warrants, or convertible instruments. Ownership Percentage: Each stakeholder's proportional ownership of the company based on their share count. Investment Date: The date each stakeholder acquired their shares or invested in the company. Valuation Details: Information on the price per share and company valuation at each investment round. Image source Does a Cap Table Show Debt? A cap table does not typically show debt. Rather, it is specifically designed to track a company's equity ownership structure, detailing shares, options, warrants, and other equity instruments. Its primary function is to outline who owns portions of the company and how ownership is distributed among stakeholders like founders, employees, and investors. However, while debt is not shown on a cap table, certain debt-related instruments might be included if they have the potential to convert into equity. For example: Convertible Notes: These are debt instruments that convert into equity at a later stage, often during a future funding round. Convertible notes are generally tracked on the cap table because they will eventually affect ownership percentages once converted. SAFEs (Simple Agreements for Future Equity): Similar to convertible notes, SAFEs are agreements where investors provide funding in exchange for the right to future equity, and they typically appear on the cap table before conversion. Traditional loans or other forms of debt (e.g., bank loans, lines of credit) are tracked separately in the company’s financial statements, such as balance sheets, rather than on the cap table. This separation helps maintain clarity between the company’s equity structure and its liabilities. Related resources: The Startup's Handbook to SAFE: Simplifying Future Equity Agreements SAFE Fundraising: When to Consider & Benefits Information to Include in a Cap Table There is no fixed format for a cap table, but a comprehensive cap table should include key components that provide a clear picture of the company's equity structure. These components ensure transparency for founders, investors, and employees, helping to avoid misunderstandings and potential errors during fundraising, audits, and strategic planning. Here are the essential elements to include: Shareholders and Stakeholders: A list of all individuals and entities that hold equity in the company, including founders, employees, angel investors, venture capital firms, and advisors. This helps identify who owns portions of the company and their respective roles. Equity Details: Information on the type of equity held, such as common shares, preferred shares, stock options, warrants, and restricted stock units (RSUs). Each entry should specify the number of shares issued and any associated terms. Valuation and Ownership: Details on the company's valuation at different stages (e.g., pre-money and post-money valuations) and the percentage of ownership each stakeholder holds. This helps illustrate how equity is distributed and how ownership changes with new investments. Option Pool: The number of shares allocated for current and future employees as part of an equity incentive plan. The option pool is important for understanding potential dilution and planning for new hires. Related resource: The Essential Guide to Option Pools: Definition, Purposes, and Benefits for Startups Convertible Instruments: Any convertible notes, SAFEs (Simple Agreements for Future Equity), or other instruments that may convert into equity in the future. These should include details such as the conversion terms, amounts, and potential dilution impact. Transaction History: A record of all equity-related transactions, including issuance dates, purchase prices, investment rounds, and transfers. This historical data is crucial for maintaining accuracy and demonstrating compliance during audits. Restrictions and Agreements: Information on any restrictions or agreements related to equity, such as vesting schedules, buyback rights, or shareholder agreements. This helps stakeholders understand the conditions attached to their equity and any limitations on transferring shares. How Do You Make a Cap Table? Cap tables can be created and managed in a variety of ways. Typically, it is common for new startup founders to build their initial cap table in a spreadsheet. However, as your startup grows and the valuation and stakeholders get more involved and complex, a simple cap table design in a program like Excel won’t work. Some companies will use tools like CapShare or Carta, to build and manage their cap tables. These tools are typically more dynamic and less manual than managing via Excel. They can be easier to utilize to share out and circulate with employees and investors. In other scenarios, it might make the most sense to outsource the production and management of a cap table. When founders choose to self-manage their own cap table, they are susceptible to risks. Some of these risks include miscalculating valuations, which can lead to giving up too much equity and over-diluting shares in new investment rounds. Additionally, there might be tax consequences or legal issues arising from the mismanagement of a cap table. By outsourcing the production and management of a cap table. Typically, this management is outsourced to a legal team to ensure accuracy and compliance. Outsourcing is more expensive than managing with a software but can be much less expensive at the cost of major mistakes or miscalculation of value. How to Use a Cap Table? When using a cap table, it’s important to understand the following formulas: Post-Money Valuation = Pre-Money Valuation + Total Investment Amount Price-Per-Share = Pre-Money Valuation / Pre-Money Shares Post-Money Shares = Post Money Valuation/ Price-Per-Share Investor Percent Ownership = Investor Shares / Post-Money Shares These formulas are essentially what will be laid out in a cap table so understanding them is crucial. These formulas can also be used to update the cap table as it grows more complex via different significant financial rounds. The more investment rounds or other significant financial changes on the table, the more complex the cap table gets. This breakdown essentially showcases the additional steps and participants who are stakeholders in the startup. Founders round – this is the simplest version of the cap table and will typically showcase the simple split of equity between the founders of the company. Seed round – this introduces investors to the table who now own a portion of the company along with the founders and have given cash to the startup altering the overall value. Options pool round – when options are provided for new employees, this changes the value and breakdown of the company as represented by the cap table. Overtime, as more employees are hired and more options are granted, the more complex the cap table gets. VC round(s) – With any additional funding rounds taken on by the startup, the valuation drastically changes as does the list of stakeholders on the cap table. All of these events or rounds are significant and will change the breakdown and complexity of the cap table. How Do You Keep a Cap Table Updated? With the array of cap table management tools on the market, updating and keeping tabs on your cap table is easier than ever before. Generally, founders need to stay on top of their cap table management. If you raise a new round, offer new employee grants, terminate an employee, etc., you need to make the changes as soon as possible to avoid future headaches. If you put off updating your cap table in real-time, it could end up being a costly mistake as you need a lawyer to update and correct the table. To make your life as easy as possible, we recommend using software to manage and update your cap table. There are countless options, but we recommend Pulley. You can learn more about cap table management (and Pulley) in our Founders Forward Podcast with Pulley CEO and Founder Yin Wu here. Cap Table Examples/Templates Instead of starting from scratch, many founders will use a template to build out a cap table. Check out these templates below: 1. S3 Ventures Template S3 Ventures offers a template in Excel that they recommend for their portfolio companies. 2. Eqvista Template Eqvista's template includes ownership structure and the capital committed. 3. Cap Board Template Cap Board's template is a basic cap table on Google Spreadsheet, with formulas included, that can be used for any early-stage startup. 4. CFI Template CFI’s has many free excel templates. The spreadsheet below contains two sections – valuation and ownership. All numbers in blue are hard-coded assumptions and all numbers in black are formulas. Manage Your Stakeholders Effectively with Visible Effectively managing your cap table is essential for maintaining transparency, building investor confidence, and making informed decisions. With Visible, you can streamline your stakeholder communication by centralizing key data, sharing investor updates, and tracking interactions- all in one platform. Visible makes it easy to keep investors informed and engaged while helping you stay organized and focused on growth. Ready to simplify stakeholder management? Give it a free try for 14 days here.

Managing a high burn rate can be a make-or-break factor for startups. Without effective cost control, even promising ventures can quickly deplete their cash reserves, jeopardizing their long-term sustainability. Understanding what constitutes a healthy burn rate and how it affects your company’s financial runway is critical. In this article, we’ll explore eight actionable strategies for reducing burn rate, from cutting non-essential expenses to optimizing marketing efforts and leveraging automation. By implementing these techniques, you can extend your financial runway and ensure your startup maintains momentum on the path to growth. Related resouce: Burn Rate: What It Is and How to Calculate It What Is a Healthy Burn Rate? A healthy burn rate for a startup is the rate at which it spends its cash reserves before generating positive cash flow, tailored to its specific stage, industry, and growth objectives. Early-stage startups often experience higher burn rates due to investments in product development and market penetration, while later-stage companies typically aim for more controlled spending as they approach profitability. Industry norms also play a significant role. For instance, technology startups may have higher burn rates compared to service-based businesses, reflecting the capital-intensive nature of tech ventures. Market conditions further influence what constitutes a healthy burn rate. Investors might tolerate higher burn rates in bullish markets with abundant funding to accelerate growth. In contrast, during tighter financial climates, a lower burn rate becomes crucial for sustainability. Ultimately, a healthy burn rate aligns with the startup's strategic goals, ensuring sufficient runway to achieve key milestones without compromising financial stability. Regular financial assessments are essential to maintaining this balance, allowing startups to adapt their spending in response to evolving internal and external factors. How Does Burn Rate Impact a Company's Runway and Sustainability? A company’s burn rate determines its financial runway- the time it can continue operating before exhausting its cash reserves. The higher the burn rate, the shorter the runway, which puts pressure on the company to either increase revenue, secure additional funding, or cut costs to avoid running out of cash. Managing burn rate is crucial for long-term sustainability. A balanced burn rate allows startups to achieve key milestones, such as product development or market fit, without facing financial distress. Conversely, an unchecked burn rate can force premature fundraising or lead to insolvency. By aligning spending with strategic goals and maintaining adequate cash reserves, startups can extend their runway, weather market fluctuations, and position themselves for sustainable growth. Related resource: How to Calculate Runway & Burn Rate 8 Strategies for Managing and Reducing Burn Rate Controlling your burn rate is essential to ensure your startup's financial health and longevity. By implementing effective cost-saving measures, you can extend your runway, reduce financial stress, and create a more sustainable path to growth. The following eight strategies offer practical ways to manage spending, improve efficiency, and optimize your operations without compromising your momentum or key objectives. Related resource: The Standard Metrics to Collect for VC Portfolio Monitoring 1. Assess and Cut Non-Essential Expenses Through Regular Financial Audits Conducting regular financial audits helps startups identify non-essential expenses and eliminate wasteful spending. By systematically reviewing all outgoing costs, you can spot inefficiencies, redundant services, and underutilized resources that drain your cash reserves. For example, subscriptions to no longer-used software tools, unnecessary office perks, or overlapping vendor services can add up over time. Financial audits clarify where your money is going and help you make data-driven decisions to cut or reallocate funds. Implementing these audits quarterly or bi-annually ensures that spending aligns with business priorities, keeping your burn rate in check while maintaining operational efficiency. 2. Optimize Marketing Efforts by Focusing on Lower-Cost Channels With Long-Term Benefits Startups can reduce burn rate by prioritizing cost-effective marketing channels that provide sustained returns. Instead of investing heavily in paid ads, consider channels like content marketing, SEO, and email marketing, which offer long-term visibility without continuous spending. High-quality blog posts, guides, listicles, and case studies can drive organic traffic over time, building brand authority and attracting leads. Leverage social media marketing to engage with your audience directly. Platforms like LinkedIn, Twitter, Instagram, Quora, and Reddit allow you to share valuable content and connect with potential customers without significant ad spend. Additionally, referral programs and word-of-mouth marketing can generate new business through existing customers. By focusing on these lower-cost, high-ROI strategies, you create sustainable growth and reduce dependency on expensive, short-term campaigns, helping maintain a healthy burn rate. 3. Outsource Non-Essential Tasks Outsourcing non-essential tasks can significantly reduce overhead and operational costs for startups. Functions such as administrative work, customer support, bookkeeping, and IT maintenance can often be delegated to external agencies or freelancers. This approach allows you to avoid the expenses associated with full-time hires, such as salaries, benefits, and office space. By outsourcing, startups can also gain access to specialized skills and expertise without investing in extensive training or long-term commitments. This flexibility helps you scale operations up or down based on demand. Additionally, outsourcing enables your core team to focus on strategic priorities, like product development and customer acquisition, driving growth while keeping your burn rate manageable. 4. Delay Non-Essential Investments Prioritizing critical expenditures and delaying non-essential investments is a key strategy for managing your startup's burn rate. Focus on spending that directly supports product development, customer acquisition, and achieving key milestones. Investments in office upgrades, non-essential software, or secondary product features can often be postponed until your financial position is more secure. This approach helps preserve cash reserves and extends your runway, giving you more time to reach profitability or secure additional funding. Regularly assess potential investments through the lens of immediate impact and long-term value. By distinguishing between “must-have” and “nice-to-have” expenditures, you ensure that every dollar spent contributes to your startup’s core objectives. 5. Leverage Technology for Automation Leveraging automation and AI technology helps streamline operations, reduce labor-intensive tasks, and lower your startup's burn rate. Automation tools can handle repetitive processes like data entry, invoicing, customer onboarding, and email follow-ups. AI-powered solutions take this a step further by optimizing tasks such as customer support, marketing, and analytics through intelligent decision-making and data processing. For example, CRM platforms can personalize customer interactions and automate follow-ups, while AI writing tools can generate blog posts, social media content, and email campaigns quickly and efficiently. Chatbots powered by AI can handle complex customer inquiries, providing immediate responses and reducing the need for additional support staff. Additionally, Analytics platforms can offer actionable insights to enhance business strategies and improve operational efficiency. By integrating automation and AI, startups can increase efficiency, minimize human error, and free up team members to focus on strategic tasks. This not only reduces operational costs but also enhances productivity and competitiveness, helping maintain a lean and sustainable burn rate. 6. Establish Approval Policies for Purchases to Prevent Unnecessary Spending Implementing strict purchase approval policies helps maintain financial discipline by ensuring every expenditure is justified and aligned with your startup’s goals. Without a clear process, impulse spending or redundant purchases can quickly inflate your burn rate. Approval workflows require team members to submit purchase requests for review, giving managers or finance leads the opportunity to evaluate the necessity and impact of each expense. These policies can be tailored to your startup’s needs- for example, setting thresholds where low-cost items need minimal approval while larger purchases require multiple sign-offs. Using expense management software can streamline this process by providing transparency and real-time tracking of purchases. 7. Increase Your Cash Reserves Building and maintaining healthy cash reserves is essential for safeguarding your startup against cash flow challenges. A solid financial buffer provides flexibility during market downturns, unexpected expenses, or periods of slow revenue growth. Here are a few strategies to help increase your cash reserves: Monitor and Cut Unnecessary Expenses: Conduct regular financial audits to identify and reduce non-essential spending. Redirect those savings directly into your cash reserves. Negotiate Payment Terms: Work with suppliers and vendors to extend payment terms, allowing you to hold onto cash longer. Also, encourage clients to pay promptly or offer discounts for early payments to improve cash flow. Secure Recurring Revenue: Focus on building subscription-based or retainer models to ensure a steady income stream, reducing the risk of cash flow disruptions. Allocate a Portion of Profits: When your business is generating a profit, allocate a percentage directly to your reserves to steadily build a financial cushion. Consider Bridge Financing: Short-term financing options like lines of credit can serve as a backup to protect against cash shortages, though they should be used cautiously. 8. Consider External Funding Options Carefully When exploring external funding, it's crucial to evaluate options that align with your startup’s long-term objectives and financial stability. While venture capital, angel investments, loans, and grants can provide the necessary capital to extend your runway, each option comes with its own implications. Equity financing, such as venture capital or angel investment, dilutes ownership but can provide significant capital and strategic support. Ensure potential investors share your vision and growth goals to avoid conflicts down the road. In contrast, debt financing (like loans or lines of credit) allows you to retain ownership but requires regular repayments, which can strain cash flow if not managed carefully. Evaluate funding sources based on their impact on your burn rate, control, and repayment terms. Consider alternative options like revenue-based financing, where repayments scale with your income, or government grants, which don’t require repayment but may have specific conditions. Support Your Funding Efforts With Visible Reducing your burn rate is crucial for extending your financial runway and ensuring long-term sustainability. By cutting non-essential expenses, optimizing marketing, leveraging automation, and carefully managing investments and funding, your startup can operate efficiently and stay resilient in challenging markets. Visible can help you navigate your funding journey with ease. From managing investor updates to tracking your financial performance, Visible's platform streamlines the process and keeps your investors informed. Give it a free try for 14 days here. Related resource: Portfolio Data Collection Tips for VCs

Managing your startup's finances effectively can be the difference between thriving and running out of cash. One critical metric every founder should know is burn rate- the rate at which your company spends capital to stay operational. Calculating and controlling burn rate helps you forecast your financial runway, optimize spending, and avoid unexpected cash crunches. This guide will break down burn rate, how to calculate it, what a good burn rate looks like, and best practices for keeping it under control. Related resource: How to Reduce Burn Rate: 8 Cost-Saving Strategies for Startups What is Burn Rate? Understanding your startup's burn rate is crucial for effective financial management and long-term success. Burn rate refers to the pace at which a company consumes its cash reserves to cover operating expenses before generating positive cash flow. Monitoring this metric helps founders assess their financial runway- the time a company can operate before needing additional funding or achieving profitability. By keeping a close eye on burn rate, startups can make informed decisions about budgeting, scaling operations, and fundraising strategies. Gross Burn Rate Gross burn rate represents the total cash outflow a company incurs monthly to fund its operations, excluding any revenue generated. This includes all operating expenses such as salaries, rent, utilities, and other overhead costs. Calculating the gross burn rate provides insight into the company's spending habits and cost structure, serving as a baseline for evaluating financial health. Net Burn Rate Net burn rate accounts for the company's revenue, reflecting the actual monthly cash loss after subtracting total revenue from total expenses. This metric offers a clearer picture of how quickly a company is depleting its cash reserves, considering both income and expenditures. Monitoring the net burn rate is essential for understanding the sustainability of current operations and planning for future financial needs. By differentiating between gross and net burn rates, startup founders can gain a comprehensive understanding of their financial standing, enabling them to make strategic decisions to extend their runway and achieve long-term success. How to Calculate Burn Rate Now that you understand what burn rate is and why it’s crucial, let’s explore how to calculate it. There are two main types of burn rates to consider: gross burn rate and net burn rate. Both metrics help provide a snapshot of your startup’s financial health, but they serve different purposes. Gross burn rate focuses purely on expenses, while net burn rate factors in revenue. Here's how to calculate each type. Related resource: How to Calculate Runway & Burn Rate Calculating Gross Burn Rate Gross burn rate refers to a startup's total operating expenses within a specific period, usually calculated monthly. It includes costs such as salaries, rent, utilities, and other overhead expenses. This metric highlights how much cash the company spends to keep operations running, independent of any revenue. Understanding gross burn rate helps identify key cost drivers and assess operational efficiency. Source Calculating Net Burn Rate Net burn rate measures how quickly a company is depleting its cash reserves after accounting for revenue. It’s calculated by subtracting monthly revenue from monthly operating expenses. This metric reveals how much cash a startup needs to sustain operations each month. However, since revenue can fluctuate, it’s essential to monitor this variability. If revenue drops while expenses remain constant, the net burn rate will increase, potentially shortening the company's financial runway. Source What Is a Good Burn Rate for a Startup? Determining a "good" burn rate for a startup depends on several factors, including the company’s stage, industry, available funding, and growth objectives. Early-stage startups typically have higher burn rates as they invest in product development, marketing, and team expansion. Whereas, more mature startups might aim to control burn rates while focusing on achieving profitability. Key factors to consider: Startup Stage: Pre-seed and Seed Stage: Burn rates are often higher due to heavy investment in building and launching the product. Series A and Beyond: Companies might balance growth spending with a path toward profitability, making cash efficiency more critical. Industry Norms: Industries with longer development cycles, like biotech or hardware, may experience higher burn rates compared to SaaS or e-commerce startups. Funding Availability: Startups with recent funding rounds may sustain higher burn rates to accelerate growth. A common guideline is to ensure your burn rate allows for at least 12-18 months of runway between funding rounds. Growth Goals: High-growth startups might intentionally maintain a higher burn rate to capture market share quickly, while those focusing on sustainability may aim to keep burn rate low to extend their runway. Ultimately, a good burn rate balances growth ambitions with financial sustainability, ensuring your startup doesn’t run out of cash before achieving critical milestones. Related resource: Startup Metrics You Need to Monitor Best Practices for Managing Burn Rate Effectively managing your burn rate is essential to ensure your startup's financial health and longevity. By keeping your burn rate under control, you can extend your runway, make the most of your funding, and improve your chances of reaching key milestones. The following best practices will help you optimize spending, increase operational efficiency, and reduce the risk of running out of cash. Regularly Review and Adjust Budgets Frequent budget reviews are essential for keeping your startup's finances aligned with your current goals and market conditions. By revisiting your budget regularly- ideally monthly or quarterly- you can identify overspending, adjust for unexpected expenses, and reallocate resources to areas that drive growth. This practice helps you stay agile and responsive, ensuring your spending reflects your startup's strategic priorities. Consistent budget assessments also make it easier to anticipate financial challenges and adapt quickly, reducing the risk of depleting cash reserves unexpectedly. Optimize Operational Expenses and Identify Unnecessary Costs Streamlining your operational expenses is a key strategy for managing burn rate effectively. Start by analyzing all business expenses to identify non-essential costs that can be reduced or eliminated. Consider the following strategies: Negotiate Contracts: Review contracts with vendors, landlords, and service providers to secure better rates or more favorable terms. Embrace Automation: Implement tools and software that automate repetitive tasks, saving time and reducing labor costs. Remote Work Flexibility: If possible, reduce office space or shift to a remote-first model to cut rent and utility expenses. Monitor Subscriptions and Tools: Eliminate unused or redundant software subscriptions and services that drain resources without adding value. Diversify Revenue Streams to Reduce Reliance on External Funding Relying solely on external funding can leave your startup vulnerable to market fluctuations and investor sentiment. By developing multiple revenue streams, you create a more stable financial foundation and reduce the risk of cash flow gaps. Consider these strategies for diversification: Explore New Customer Segments: Identify additional markets or demographics that could benefit from your product or service. Offer Complementary Products or Services: Introduce new offerings that align with your core business to increase revenue potential. Adopt a Subscription or Recurring Revenue Model: If applicable, recurring models can provide predictable and steady cash flow. Create Strategic Partnerships: Partner with other businesses to cross-promote services, expand distribution channels, or bundle offerings. Monetize Existing Assets: Leverage data, content, or intellectual property to create new revenue opportunities, such as licensing or premium features. Monitor Cash Flow Projections Alongside Burn Rate Combining cash flow projections with burn rate analysis is essential for maintaining financial control and making informed decisions. While burn rate shows how quickly your startup is depleting its cash reserves, cash flow projections estimate future inflows and outflows based on current trends and planned activities. Together, these metrics provide a comprehensive picture of your financial health. Why it matters: Identify Potential Shortfalls: Projections help you foresee periods when expenses might outpace income, allowing you to take corrective action early. Plan for Fundraising: Knowing your projected runway helps you time fundraising efforts to avoid running out of cash. Adjust Strategies in Real-Time: By tracking both metrics, you can quickly adapt spending plans, delay non-essential expenses, or accelerate revenue-generating activities. Improve Decision-Making: Informed by data, you can confidently decide when to invest in growth initiatives and when to tighten spending. Track Your Key Startup Metrics with Visible Understanding and managing your burn rate is essential for keeping your startup financially healthy. Calculating gross and net burn rates, reviewing budgets, optimizing expenses, diversifying revenue streams, and monitoring cash flow projections can help you make informed decisions and extend your financial runway. Staying on top of these metrics also helps you avoid unexpected cash crunches and ensures you're prepared for growth. Tools and software are a great way to keep tabs on your finances. Track key metrics, send investor Updates, and track the status of your next fundraise with Visible. Give it a free try for 14 days here. Related resource: The Standard Metrics to Collect for VC Portfolio Monitoring

High Alpha, in partnership with OpenView, teamed up to explore pricing models, churn, AI adoption, financial performance, and more in the 2024 SaaS Benchmarks Report. Mike Fitzgerald and Blake Koriath of High Alpha joined us to dive into the report, highlighting key trends, data points, and themes. A couple of key areas we hit on: The makeup of the report Market stabilization and expectations in today's market vs. previous years Vertical vs. Horizontal SaaS performance Why GTM execution is keeping founders up at night How companies are balancing burn and growth And much more Download the full report to uncover other trends and benchmarks below:

Attracting top talent is a critical challenge for startup founders. Unlike large corporations, startups need creative ways to offer competitive compensation. One of the most effective incentives is offering employee stock options, which align employees' interests with the company's growth and success. There are two primary types of stock options: Qualified Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs). Each type offers benefits and tax implications that can impact employers and employees. Understanding these differences is crucial to selecting the right option strategy for your team. In this article, we’ll break down the key distinctions, tax considerations, and pros and cons of ISOs and NSOs to help you make informed decisions about equity compensation. What Are Qualified Incentive Stock Options (ISOs)? ISOs are employee stock options that allow employees to purchase company shares at a predetermined price, often called the strike price or exercise price. ISOs are designed to reward and retain key employees by offering favorable tax treatment, provided specific conditions are met. Unlike other forms of equity compensation, ISOs are restricted to employees only and must adhere to strict IRS guidelines. When employees exercise ISOs and hold the shares for a certain period, the resulting gains may be taxed at the more favorable long-term capital gains rate instead of ordinary income rates. This potential for tax savings makes ISOs valuable for incentivizing employees, which is critical to the company's success. However, ISOs come with eligibility requirements and time constraints that must be met to maintain their tax-advantaged status. If these conditions are not met, ISOs may be treated as NSOs for tax purposes. How Are ISOs Taxed? As mentioned above, ISOs are taxed at the capital gains rate. This means that ISO holders are subject to tax benefits as the capital gains rate is generally lower than the ordinary income rate. It is worth noting that ISOs are taxed at the time of selling the stock (not when vesting or exercising). When an employee (or person) is granted sock options there is a strike price (which is the value at the time of granting). Once an employee decides to exercise their options, they have the ability to sell their stock or hold on to the stock. If the same person sells their stock at (the fair market value) at a later date the difference between the strike price and fair market value is the profit — or what the employee is taxed on.Check out the long-term capital gains tax rates in 2024 (for the US) below: Forbes The Impact AMT Has on ISOs The Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure that taxpayers, especially those with higher incomes, pay at least a minimum amount of tax regardless of deductions or credits. When it comes to ISOs, AMT can be triggered during the year you exercise your options, even if you don't sell the shares immediately. Here’s how it works: When you exercise ISOs, the difference between the fair market value of the stock at the time of exercise and the exercise price (also known as the strike price) is called the bargain element. While this bargain element isn't taxed under the regular tax system until you sell the shares, it is considered taxable income under the AMT system. This can lead to an unexpected AMT liability, particularly if the spread between the exercise price and the FMV is significant. For example, if your strike price is $10 per share, and the FMV when you exercise is $50 per share, the $40 difference per share could be subject to AMT. The AMT calculation ensures you pay the higher amount between your regular tax liability and your AMT liability. If AMT applies, you’ll need to pay it in the year of exercise, even if you haven't sold the shares and realized the cash. However, when you eventually sell the shares, you may be eligible for an AMT credit, which can help offset future regular tax liabilities. Because of the potential AMT impact, it’s essential to plan the timing of your ISO exercises carefully. Consider consulting a tax professional to assess the potential AMT exposure and how it might affect your overall tax strategy. What Are Non-Qualified Stock Options (NSOs)? NSOs are a type of equity compensation that gives recipients the right to purchase company shares at a predetermined exercise price or strike price. Unlike ISOs, NSOs can be granted to a broader group, including employees, contractors, board members, and advisors. NSOs are more flexible than ISOs because they are not subject to the same IRS restrictions. However, this flexibility comes with different tax treatment. When NSOs are exercised, the difference between the fair market value (FMV) of the stock at exercise and the exercise price is treated as ordinary income. Later, if the shares are sold, any additional profit is subject to capital gains tax (short-term or long-term, depending on how long the shares are held after exercise). NSOs are popular among startups because they are straightforward to administer, offer flexibility in who can receive them, and provide potential tax deductions for the company when exercised. How Are NSOs Taxed? NSOs are taxed immediately upon exercise. The difference between the exercise price and the fair market value (FMV) at exercise is treated as ordinary income and subject to withholding taxes. When the shares are eventually sold, any further gains are taxed as capital gains (short-term or long-term, depending on how long the shares are held after exercise). The Impact AMT Has on NSOs As we mentioned earlier, an alternative tax minimum (AMT) is a potential downside of ISOs. Unlike their counterpart, NSOs are not subject to AMT. Key Differences Between ISOs and NSOs While both ISOs and NSOs allow recipients to purchase company stock at a predetermined price, they differ significantly in terms of eligibility, tax treatment, regulatory requirements, and reporting obligations. These differences can impact your company's approach to rewarding employees, advisors, and other contributors and the potential financial outcomes for recipients. Let’s break down the key differences to help you decide which option best aligns with your company's goals and your team's needs. Eligibility ISOs are reserved exclusively for company employees. They cannot be granted to independent contractors, board members, or advisors. This restriction makes ISOs a targeted tool for retaining key employees. NSOs are more flexible and can be issued to employees, contractors, board members, and advisors. This broader eligibility allows startups to reward internal team members and external contributors. Tax Treatment ISOs offer favorable tax treatment if specific holding periods are met. When you exercise ISOs, there is no immediate tax liability unless the alternative minimum tax applies. If you hold the shares for at least 1 year after exercise and 2 years after the grant date, gains are taxed as long-term capital gains, which typically have lower rates than ordinary income. NSOs, on the other hand, are taxed immediately upon exercise. The difference between the exercise price and the fair market value at exercise is treated as ordinary income. When you sell the shares, any further gains are taxed as capital gains (short-term or long-term, depending on the holding period). Regulatory Requirements ISOs are subject to stricter regulatory guidelines under the Internal Revenue Code. To qualify for favorable tax treatment, ISOs must meet the following requirements: Eligibility: Only employees can receive ISOs. Holding Period: Shares must be held for at least 1 year after exercise and 2 years after the grant date to benefit from long-term capital gains tax rates. Exercise Limits: The total value of ISOs exercisable in a calendar year cannot exceed $100,000 based on the grant date FMV. Plan Approval: The stock option plan must be approved by the company’s shareholders within 12 months before or after the plan is adopted. Expiration: ISOs must be exercised within 10 years of the grant date (or 5 years if granted to a 10%+ shareholder). In contrast, NSOs are subject to fewer regulatory requirements. They can be granted to employees, contractors, and board members without restrictions on exercise limits or holding periods. NSOs also don’t require shareholder approval and offer more flexibility in structuring the terms of the option grant. The stricter regulations for ISOs reflect their preferential tax treatment, while the flexibility of NSOs makes them easier for startups to implement broadly. Reporting and Withholding ISOs have simpler reporting and withholding requirements compared to NSOs. When an employee exercises ISOs, there is no immediate tax withholding because the exercise itself doesn’t trigger regular income tax. However, if the employee sells the shares in a disqualifying disposition (before meeting the holding periods), the employer must report the bargain element as ordinary income on the employee’s W-2 form. The company is not required to withhold taxes on ISO exercises, though it must track and report the income if the shares are sold early. NSOs, on the other hand, trigger immediate tax withholding at the time of exercise. The bargain element (the difference between the exercise price and the fair market value at exercise) is treated as ordinary income. Employers are required to: Withhold federal and state income taxes (if applicable). Deduct Social Security and Medicare taxes (FICA). Report the income on the employee’s W-2 form (for employees) or a 1099-NEC (for non-employees). Failing to account for withholding on NSO exercises can result in underpayment penalties for the recipient. Accurate reporting and timely withholding are essential for the issuer to avoid compliance issues. Pros and Cons of ISOs ISOs offer valuable tax advantages and can help retain key employees, but they come with strict rules and potential tax complexities. Here are the key benefits and drawbacks of ISOs: Pros Favorable Tax Treatment: Gains are taxed as long-term capital gains if holding period requirements are met (1 year after exercise and 2 years after the grant date). No Immediate Tax at Exercise: Exercising ISOs doesn’t trigger regular income tax, allowing employees to defer taxes until the shares are sold. Employee Retention: ISOs can help retain top talent, as employees must stay with the company to benefit fully. No Payroll Taxes: ISOs are not subject to Social Security and Medicare taxes (FICA) at exercise. Cons Complex Tax Rules: Strict IRS requirements and holding periods must be met to maintain tax benefits. Alternative Minimum Tax (AMT): The bargain element can trigger AMT liability in the year of exercise. Limited Eligibility: ISOs can only be granted to employees, excluding contractors and advisors. Exercise Limits: Only $100,000 worth of ISOs can be exercised per year based on the grant date value. Market Risk: Employees risk holding shares that may decrease in value before they sell. Pros and Cons of NSOs NSOs offer flexibility in who can receive them and simpler regulatory requirements, but they come with immediate tax obligations. Here are the primary advantages and disadvantages of NSOs: Pros Broad Eligibility: NSOs can be issued to employees, contractors, board members, and advisors. Simpler Administration: Fewer IRS regulations compared to ISOs. No Exercise Limits: No annual limit on the value of NSOs that can be exercised. Company Tax Deductions: Companies can deduct the bargain element as ordinary income when NSOs are exercised. Immediate Liquidity: Recipients can exercise and sell shares immediately for cash. Cons Immediate Tax Liability: The bargain element is taxed as ordinary income at exercise. Withholding Requirements: Employers must withhold federal, state, Social Security, and Medicare taxes. No Tax Deferral: Taxes are due upon exercise, regardless of when the shares are sold. Market Risk: If the stock price drops after exercise, recipients may owe taxes on a higher value than the shares are worth. Potential Financial Strain: Recipients need cash to cover taxes at the time of exercise. ISO vs NSO Which One is Right For You? Now that we understand the difference between qualified incentive stock options (ISOs) and non-qualified incentive stock options (NSOs) it’s time to understand how and when you should be using both. Both have expected use cases and their own set of pros and cons depending on the use. Related Reading: How to Fairly Split Startup Equity with Founders When to Choose an ISO Of course, most employees will likely want an ISO plan as it offers tax benefits. However, it is lesser used and should be reserved for high-value employees. As the team at Investopedia writes, “This type of employee stock purchase plan is intended to retain key employees or managers.” A few times for when you should choose a qualified incentive stock option for your employees: When offering stock options for an employee (ISOs are not eligible with individuals who are not employees) When trying to incentivize and retain a high-value employee — this might be a manager or executive that is closely aligned with your companies success. When your company is in a financial position to offer ISOs instead of NSOs When to Choose an NSO While they do not necessarily have the tax benefits of ISOs, NSOs are widely used and are more common than ISOs. Below are a few examples and pros of choosing an NSO instead of an ISO: When issuing stock options to non-employees. This could be consultants, board members, mentors, and more. From the team at Pasquesi Partners, “With NSO, companies are able to take tax deductions when the employee chooses to exercise their option in the stock. Because of the way they are structured, NSO earnings are viewed as income for the employee, hence the tax deductions.” When looking for a more simple option and straightforward stock option to offer employees Share Stock Option Information With Your Investors with Visible Equity compensation, whether through ISOs or NSOs, is a powerful tool for aligning your team’s interests with your company’s success. To build trust and maintain transparency with investors, employees, and other stakeholders, clear communication about your cap table and stock options is essential. Simplify your investor reporting and engagement with Visible. From raising capital to keeping investors informed, manage everything seamlessly in one platform. Try Visible free for 14 days.

Managing equity is one of startup founders' most strategic and challenging responsibilities. Many advisors, investors, and peers contribute valuable insights to a business in the early stages, often without direct financial compensation. For startups with limited cash flow, offering advisory shares becomes a creative and practical way to engage experts while preserving resources for growth. Advisory shares allow founders to attract and retain top-tier talent by providing equity in exchange for critical guidance. This article explores what advisory shares are, how they work, their benefits and drawbacks, and key considerations for offering them in your startup. What Are Advisory Shares? Advisory shares are a form of equity compensation provided to individuals who offer strategic guidance and expertise to a startup. Unlike traditional employee equity, advisory shares are typically granted to external advisors, such as industry experts, seasoned entrepreneurs, or key network connectors, who help the business grow and succeed. These shares often follow a shorter vesting schedule, reflecting the limited but impactful nature of the advisor's contributions. By offering advisory shares, startups can incentivize advisors to commit their time and knowledge, aligning their success with the company’s growth. Advisor Shares vs. Regular Shares (or Equity) Advisory shares and regular shares both represent equity in a company, but their purposes, recipients, and structures are distinct. Regular shares are issued to founders, employees, and investors to reflect direct contributions, whether through work or funding. Advisory shares, however, are explicitly granted to external advisors as compensation for their expertise and guidance, aligning their interests with the company's success without requiring financial or operational involvement. Related resource: CEO vs. Advisory Board: Key Differences in Leadership and Guidance How Are Advisory Shares and Regular Shares Similar? Despite their differences, advisory shares and regular shares share common traits. Both represent ownership in the company, incentivize recipients by tying their potential financial gains to its growth, and typically involve vesting schedules to ensure commitment. Issuing either type of share also contributes to equity dilution, affecting all existing stakeholders. Related Read: The Main Difference Between ISOs and NSOs How Do Advisory Shares Work? While advisory shares can take on different forms, they typically can be boiled down to a few similarities. Of course, these can change depending on your business. Exchanged for advice or expertise Typically offered as NSO stock options Follow a shorter vesting schedule Related resource: Everything You Should Know About Diluting Shares Learn more about how advisory shares typically work below: 1. Advisor Agreement Before granting advisory shares, the startup and advisor enter into a formal agreement that outlines the terms of their relationship. This agreement specifies the advisor’s role, including the scope of their contributions, such as strategic guidance, mentorship, or leveraging their network. It also details the advisor's responsibilities, expected time commitment, and deliverables. Importantly, the agreement defines the number of advisory shares the advisor will receive and the terms under which they are granted, such as the vesting schedule and any conditions tied to performance. By setting clear expectations, this agreement protects both parties and ensures alignment in achieving the company’s goals. 2. Grant of Shares After finalizing the advisor agreement, the startup grants the advisor the right to purchase a specified number of shares at a predetermined exercise price. This exercise price is typically set at the fair market value of the company’s stock at the time of the grant. This approach ensures compliance with tax regulations while offering the advisor an opportunity to benefit from the company’s growth. The grant also outlines the conditions under which the advisor can exercise these options, such as meeting vesting milestones or fulfilling specific responsibilities. By linking the grant to the advisor’s contributions, startups create a mutually beneficial arrangement that aligns incentives with the company’s success. 3. Vesting Period The advisor’s right to exercise their options is generally tied to a vesting period, which ensures their continued commitment to the startup over time. Vesting periods for advisory shares often span shorter durations than employee stock options but typically last one to four years. A common structure includes a one-year cliff, where no options are vested during the first year, followed by monthly vesting thereafter. This means the advisor gains the ability to exercise a portion of their options incrementally, as they fulfill their responsibilities and contribute to the company’s growth. Vesting schedules protect the startup by ensuring advisors earn their shares through sustained involvement and expertise. 4. Exercise of Options Once the vesting period is complete, the advisor gains the right to exercise their options. This involves paying the predetermined exercise price to purchase the shares granted under the advisory agreement. The exercise process typically requires the advisor to notify the company of their intent and complete the necessary paperwork. After the payment is made, the advisor becomes a shareholder in the company and holds equity outright. This step allows the advisor to benefit from any future increase in the company’s valuation, aligning their financial incentives with the startup’s long-term success. 5. Potential Profit If the company’s stock price appreciates over time, the advisor can sell their shares for a profit. Since advisory shares are typically granted at the fair market value at the time of issuance, any subsequent increase in the stock price represents a gain for the advisor. For example, if the exercise price was set at $1 per share and the stock price rises to $10 per share, the advisor can sell the shares at the higher market price, realizing a profit of $9 per share. This potential for financial gain serves as a strong incentive for advisors to contribute meaningfully to the company’s success and growth. Benefits of Advisory Shares Advisory shares come with their own set of pros and cons. Properly maintaining and distributing equity is a critical role of a startup founder so understand the benefits, and drawbacks, of offering advisory shares is a must. Related Resource: 7 Essential Business Startup Resources Learn more about the benefits of offering startup advisory shares below: Access to Expertise and Guidance Advisory shares are a powerful tool for attracting experienced professionals with specialized knowledge that can drive a startup’s growth. These individuals bring valuable insights in areas such as strategy, product development, marketing, or fundraising—critical components for scaling a business. By offering equity in lieu of cash compensation, startups can engage top-tier experts who might otherwise be out of reach financially. These advisors act as strategic partners, helping founders navigate challenges, seize opportunities, and build a strong foundation for long-term success. Related Resource: Seed Funding for Startups 101: A Complete Guide Strengthen Credibility and Network Associating with credible advisors can significantly enhance a startup’s reputation, signaling expertise and trustworthiness to the broader market. Advisors with established industry recognition lend their credibility to the company, boosting its appeal to potential investors, partners, and customers. Beyond reputation, advisors often bring extensive networks of valuable connections, opening doors to strategic partnerships, funding opportunities, and key client relationships. By aligning with respected professionals, startups can accelerate their growth while building trust within their industry. Cost-Effective Compensation As we previously mentioned, most businesses that benefit most from advisors are unable to offer them a salary or cash compensation. With advisor shares, startup founders are able to offer shares as compensation and conserve thei cash to help with scaling their business and headcount. Attract Long-Term Commitment Vesting schedules play a crucial role in fostering long-term commitment from advisors. By distributing equity over a set period, such as one to four years, advisors are incentivized to remain actively engaged with the startup for the duration of the vesting timeline. This structure ensures that advisors continue to contribute their expertise and resources while aligning their success with the company's growth. The gradual allocation of shares motivates advisors to stay invested in the startup’s achievements, creating a mutually beneficial relationship that drives sustained collaboration and progress. Drawbacks of Advisory Shares Of course, offering advisor shares is not for everyone. While there are benefits to offering advisor shares, there are certainly drawbacks as well. Weighing the pros and cons and determining what is right for your business is ultimately up to you. We always recommend consulting with a lawyer or counsel when determining how to compensate advisors. Diluted Ownership The biggest drawback for most founders will be the diluted ownership. By offering shares to advisors, you will be diluting the ownership of yourself and existing shareholders. As advisors are fully vested in 1-2 years, they will potentially not be invested in future success as other stakeholders and could be costly when taking into account the diluted ownership. Potential Conflicts of Interest Advisors might not have the same motivators and incentives as your employees and other shareholders. As their ownership is generally a smaller % and their shares vest early, they are potentially not as incentivized for the growth of your company as employees and larger % owners will be. Getting in front of these conversations and making sure you have a good read on any potential advisors before bringing them onboard is a good first step to mitigate potential conflicts. Extra Stakeholder to Manage Chances are most advisors are helping other companies as well. This means that their attention is divided and you will need to ensure you are getting enough value to warrant dilution. This also means that you are responsible for managing a relationship and communication with another stakeholder in your business — what can be burdensome on some founders. The 2 Variations of Advisory Shares Advisory shares are generally offered in 2 variations — restricted stock awards and stock options. Learn more about each option and what they mean below: Restricted Stock Awards Restricted stock awards (RSAs) are a form of equity compensation where shares are granted to an individual with certain restrictions, typically tied to a vesting schedule or performance milestones. Unlike stock options, RSAs represent ownership of the shares from the moment they are granted, though the recipient may not fully control or sell them until the restrictions are lifted. These shares often include voting rights and entitle the recipient to dividends, aligning their interests with the company’s long-term success. Restricted stock awards are commonly used to reward early contributors or advisors, ensuring their commitment while providing immediate equity ownership subject to conditions. Stock Options Stock options are a type of equity compensation that grants the recipient the right to purchase company shares at a fixed price, known as the exercise price, within a specified timeframe. Unlike restricted stock awards, stock options do not represent immediate ownership but provide the potential to acquire shares if certain conditions, such as vesting schedules or performance milestones, are met. The exercise price is typically set at the fair market value of the shares at the time of the grant. If the company’s valuation increases, the recipient can profit by purchasing the shares at the lower exercise price and selling them at the higher market value. Stock options are often used to align the recipient’s incentives with the company’s growth, encouraging active involvement and long-term commitment. Who Gets to Issue Advisory Shares? Issuing advisory shares is typically reserved for the founder or CEO of a company. Having a decision-making process and gameplan when issuing advisory shares is important. This might mean offering no shares at all, having an allocated amount of advisor shares from the get go, or something inbetween. Making sure your board of directors and other key stakeholders are on board is crucial to make sure that interest and strategy stays aligned for all stakeholders. Related resource: Is An Advisory Board Paid? What Startups Should Know How Many Shares Should You Give a Startup Advisor? Determining the number of shares to offer a startup advisor requires balancing sufficient incentives with managing equity dilution. The exact amount will vary based on factors such as the advisor’s experience, expected contribution, and time commitment. Advisors who bring extensive industry expertise or access to valuable networks may justify a higher equity allocation than those with a more limited role. According to guidelines referenced by Silicon Valley Bank, advisors are often granted between 0.25% and 1% of the company's equity, depending on the startup's stage and the nature of the advisory role. Structuring this compensation strategically- including a vesting schedule or performance milestones- helps ensure that the advisor’s contributions provide meaningful value while maintaining flexibility for the company. Let Visible Help You Streamline the Investment Management Process Managing equity and fostering investor relationships are critical for your startup’s success. Visible simplifies this process with tools for tracking advisory shares, managing fundraising pipelines, and keeping stakeholders informed through data rooms and investor updates. Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days.

Canada is home to a diverse and rapidly expanding tech ecosystem, with innovation hubs emerging from coast to coast. Toronto is leading the charge with its dynamic mix of talent and financial infrastructure, while Vancouver blends creativity and sustainability in its thriving tech scene. Smaller cities like London and Winnipeg are proving that innovation isn't limited to metropolitan centers, driving advancements in fields like digital health and agritech. Meanwhile, Calgary is redefining its identity through clean energy innovation, and Edmonton is cementing its status as an AI powerhouse. Halifax offers a unique blend of academic excellence and government support, and Montreal and Ottawa shine as global leaders in AI, gaming, and cybersecurity. From east to west, these tech hubs are shaping the future of Canada’s startup landscape. Related resource: 10+ Venture Capital Firms in Canada Funding Startups in 2024 Toronto Toronto is more than just Canada’s largest city- it’s a powerhouse driving the country’s tech revolution. With a deep pool of skilled talent, a robust financial backbone, and a startup ecosystem bursting with energy, Toronto has carved out its place on the global stage as a top destination for innovation. The city’s dynamic mix of cultural diversity and cutting-edge technology makes it a magnet for startups and investors, setting the pace for Canada’s tech boom. Talent Pool The city's diverse and highly educated workforce forms the backbone of its tech industry. Institutions such as the University of Toronto, Toronto Metropolitan University, and York University produce a steady stream of graduates in science, technology, engineering, and mathematics (STEM) fields. Between 2018 and 2023, Toronto added 95,900 tech jobs, representing a 44% growth- the most significant job gain among North American markets during that period. Financial Infrastructure As Canada's financial capital, Toronto is home to major banks and the Toronto Stock Exchange, providing tech startups with essential access to venture capital and investment opportunities. In the first half of 2023, Toronto-based startups raised approximately $1.3 billion, marking a 120% increase compared to the same period in 2019 and 2020. Startup Ecosystem Toronto's vibrant startup scene is characterized by a collaborative culture and extensive support networks. Initiatives like the DMZ at Toronto Metropolitan University offer mentorship, resources, and incubation services to emerging tech companies. The city's multicultural environment fosters innovation by bringing together diverse perspectives, enhancing creativity, and driving technological advancements. Toronto's commitment to sectors like artificial intelligence is evident through institutions such as the Vector Institute for Artificial Intelligence, further solidifying its position as a global tech hub. Vancouver Vancouver isn’t just a stunning city with mountain views and a coastal charm- it’s a tech hub brimming with innovation and opportunity. Known for its vibrant culture, world-class digital entertainment industry, and trailblazing green technology sector, Vancouver has firmly established itself as a major player on the global tech stage. With its strategic location and a thriving ecosystem that blends creativity with sustainability, this West Coast city offers a unique environment for startups and investors looking to make their mark. Strategic Pacific Rim Location Vancouver's position on the Pacific Rim makes it a vital gateway for trade, enhancing its appeal to tech companies aiming for global outreach. The city's proximity to major Asian and U.S. markets facilitates international collaborations and market expansion. Vancouver's commitment to a vibrant lifestyle and health culture has also fostered the growth of numerous lifestyle brands, adding to its dynamic community. Thriving Digital Entertainment Industry Vancouver's digital entertainment sector is pivotal in strengthening its tech ecosystem. The city is North America's third-largest film and television production center, supporting approximately 20,000 jobs. It also hosts one of the world's leading video game clusters, with major publishers such as Electronic Arts (EA), Microsoft, and Nintendo establishing a presence. The digital entertainment and interactive industry generates over 40,000 jobs in Vancouver, contributing billions in direct GDP to the city's economy. Leadership in Green Technology Vancouver is at the forefront of green technology innovation, with a strong emphasis on sustainable practices and environmental responsibility. The city is home to numerous cleantech companies specializing in areas such as fuel cell solutions, power electronics, and waste treatment technologies. Supportive government policies and programs further promote innovation, making clean technology a major pillar of Vancouver’s green economy. Dynamic Startup Ecosystem Vancouver's startup ecosystem is vibrant and growing, ranking 30th globally in the 2023 Global Startup Ecosystem Report by Startup Genome. The city has over 1,000 tech startups and multiple unicorn companies, including Visier, AbCellera, and Trulioo. Vancouver's tech sector has experienced the fastest growth rate in North America, with a 69% increase in tech occupations over five years, totaling 111,000 tech jobs as of 2023. Supportive Infrastructure and Community Vancouver offers a supportive infrastructure for tech startups, including incubators and accelerators such as SFU Venture Labs, Innovate BC, and Entrepreneurship@UBC. The city also hosts events like Vancouver Startup Week, which foster collaboration and showcase groundbreaking ideas within the tech community. London, Ontario London may not yet have the global reputation as some of the other cities, but it’s quickly making waves as a rising star in Canada’s tech landscape. With booming industries in software development, cybersecurity, and digital health, this city is proving that innovation doesn’t just belong to major metropolitan centers. Software Development The city has experienced remarkable growth in its tech talent pool, with an 88.5% increase in tech employment between 2018 and 2023, reaching 16,400 tech jobs in 2023. This surge is complemented by a 26.7% rise in tech wages, reflecting the robust expansion of the software development industry. Cybersecurity London's tech ecosystem places a strong emphasis on cybersecurity, with organizations like the Ontario Health Cybersecurity Centre providing leadership and governance in this critical area. The city's focus on cybersecurity is further supported by educational institutions offering specialized programs, ensuring a steady pipeline of skilled professionals. Digital Health The digital health sector in London is thriving and strengthened by initiatives such as the London Innovation Challenge, which supports the development of sustainable technology solutions that address community challenges. Fostering Innovation London fosters innovation through collaborative spaces like Innovation Works, designed to encourage collaboration among entrepreneurs. The city's supportive infrastructure includes incubators and accelerators such as: TechAlliance Western Accelerator Leap Junction Calgary Calgary is shedding its reputation as solely an oil and gas powerhouse to become a beacon of innovation in clean energy and technology. With its unique blend of industry expertise, cutting-edge research, and a drive toward sustainability, Calgary is transforming into a vibrant tech hub. From pioneering clean energy initiatives to advancing digital solutions, the city is attracting entrepreneurs and investors eager to be part of this dynamic shift toward a more sustainable and tech-forward future. Transition to Clean Energy Innovation Building on its rich energy heritage, Calgary is at the forefront of clean technology advancements. The Energy Transition Centre, located in downtown Calgary, serves as a collaborative hub where industry leaders and academic institutions converge to develop sustainable energy solutions. This initiative exemplifies the city's commitment to leading the energy transition. Complementing this effort, the Digital Innovation in Clean Energy (DICE) program supports the creation of digital technologies aimed at reducing emissions within the energy sector. By fostering advancements in artificial intelligence, machine learning, and the industrial Internet of Things, DICE plays a pivotal role in modernizing energy practices. Advancements in Digital Technology Calgary's tech ecosystem is experiencing significant growth, extending beyond traditional energy sectors. The city is recognized as a top tech talent market in North America, offering a favorable environment for tech startups and established companies. Innovative firms like SensorUp exemplify this progress. They received $12 million in funding for their methane emissions management software, which integrates diverse data sources to optimize reduction strategies, highlighting Calgary's dedication to digital innovation in environmental management. Fostering Innovation Calgary actively cultivates innovation through initiatives that promote collaboration and commercialization. The Energy Transition Centre transforms downtown office space into an innovation hub, supporting the development of clean technologies and contributing to the city's economic diversification. Halifax Nestled on the picturesque East Coast, Halifax is leveraging its academic excellence, government backing, and thriving startup culture to carve out a unique space in the tech world. Academic Influence Home to esteemed institutions such as Dalhousie University, Saint Mary's University, and the Nova Scotia Community College, Halifax boasts a vibrant academic community. These institutions collectively enroll over 35,000 students, with a notable 25% increase in STEM program enrollment over the past decade. This surge has cultivated a steady pipeline of skilled graduates, strengthening the local tech industry. Government Support The Canadian government actively nurtures Halifax's tech startups through significant financial investments and infrastructure development. In October 2024, the Atlantic Canada Opportunities Agency (ACOA) announced over $4 million in funding to assist ten Halifax-based startups in scaling operations and accessing new markets. Additionally, innovation hubs like Volta have received substantial government backing, including a $3 million non-repayable investment from ACOA and $3.8 million from the Nova Scotia government, to enhance support for entrepreneurs. Startup Ecosystem Halifax's startup ecosystem is enriched by numerous incubators and accelerators, such as Volta and the Centre for Ocean Ventures & Entrepreneurship (COVE). These organizations provide mentorship, networking opportunities, and essential resources for startup growth. The Halifax Innovation District, located in the city's core, hosts over 2,100 companies across sectors like IT, life sciences, and cleantech, fostering a collaborative environment that drives innovation. Economic Impact The expansion of the tech sector has significantly impacted Halifax's economy. The city has experienced a 64.2% growth in tech employment over the past five years, with the sector contributing approximately $2.5 billion and employing over 26,000 individuals across Nova Scotia. This growth has attracted companies like Wattpad, which established a second headquarters in Halifax, citing the city's deep talent pool. Winnipeg Known for its deep agricultural roots and cutting-edge research, the city now thrives in agritech and biotechnology. With a collaborative ecosystem and a strong focus on sustainable growth, Winnipeg offers startups and investors a unique opportunity to lead advancements in industries critical to global health and food security. Agritech Innovation As Manitoba's agricultural epicenter, Winnipeg hosts numerous leading agribusiness companies and industry associations. The city boasts a mature agri-food research and development ecosystem, with booming sub-sectors such as ag-tech and plant protein, making it an ideal environment for agribusiness growth. Notable companies like Farmers Edge and JCA Technologies have thrived in Winnipeg's innovative tech landscape, while enterprises such as Manitoba Harvest Hemp Foods and Roquette are leading the way in plant protein development. The Enterprise Machine Intelligence & Learning Initiative (EMILI) plays a pivotal role in accelerating digital agriculture innovation. As an industry-led non-profit, EMILI collaborates with producers, industry, and academia to foster a sustainable and economically resilient digital agriculture sector. Their Innovation Farms, located on a 5,500+ acre seed farm near Winnipeg, provide a real-world setting for testing and validating agricultural technologies, thereby facilitating the adoption of intelligent technologies in agriculture. Biotech Advancements Winnipeg's biotechnology and health research sector employs approximately 4,200 individuals, accounting for 8% of Canada's biotech activity despite representing only 4% of the national population. The sector focuses on pharmaceutical and biopharmaceutical research and development, including specialty hyper-immune plasma and recombinant therapeutic products. Agricultural biotechnology is also prominent, with efforts to develop crop varieties with improved pest resistance and enhanced qualities. The city is home to significant research institutions, such as the National Research Council's Institute for Biodiagnostics, which specializes in developing noninvasive medical diagnostic technologies. The University of Manitoba also contributes to biotech research through its Faculty of Agriculture and Food Sciences and the Smartpark Research and Technology Park, which fosters university-industry partnerships in health and biotechnology. Supportive Community Initiatives Winnipeg fosters a supportive environment for startups through various community initiatives. Organizations like North Forge Technology Exchange offer incubation and acceleration programs, providing entrepreneurs with mentorship, resources, and collaborative spaces to develop their ventures. North Forge has helped over 60 companies access more than $180 million in financing, underscoring its impact on the local startup ecosystem. Edmonton Edmonton is fast becoming a powerhouse in the world of AI. Known for its groundbreaking innovations and strong collaborative network, the city has cultivated a unique ecosystem where academia, industry, and government converge. The Backbone of AI Success in Edmonton At the heart of Edmonton’s AI scene is the University of Alberta, a globally recognized leader in artificial intelligence research. Known for its breakthroughs in machine learning, deep learning, and reinforcement learning, the university has set the stage for Edmonton’s reputation as an AI powerhouse. Adding to this is the Alberta Machine Intelligence Institute (Amii), a driving force for turning cutting-edge research into real-world applications. Founded in 2002, Amii has worked with more than 300 companies, helping them integrate AI solutions into their operations. It’s also part of the Pan-Canadian AI Strategy, alongside Mila in Montreal and the Vector Institute in Toronto, which supports world-leading research and innovation. A Community Built for Collaboration What makes Edmonton unique is its collaborative spirit. The city is home to over 1,700 tech companies and eight post-secondary institutions, creating a perfect environment for startups to grow and thrive. Through partnerships between academia, industry, and government, Edmonton’s tech ecosystem fosters innovation at every level. Programs like the Pan-Canadian AI Strategy bring top talent to the city, ensuring a steady stream of experts to drive growth and breakthroughs. Accelerating Economic Growth Edmonton’s tech sector is growing at an incredible pace. Between 2021 and 2023, the ecosystem generated $1.5 billion in value- a 51% compound annual growth rate. In 2023 alone, venture capital investments reached $136.8 million, a staggering 324% increase from previous years. These numbers reflect the city’s rising status as a key player in Canada’s tech landscape. Montreal Montreal has firmly established itself as a vibrant tech hub renowned for its leadership in AI, thriving gaming industry, and supportive bilingual environment that fosters innovation and attracts tech startups. Artificial Intelligence Leadership Montreal is recognized as a global leader in AI research and development. The city is home to Mila, the Quebec Artificial Intelligence Institute, the world's largest academic deep-learning research institute. Mila collaborates with industry leaders to advance AI applications across various sectors. For instance, in September 2023, Ubisoft partnered with Mila and McGill University to create a research chair focused on responsible AI in video games, highlighting the city's commitment to ethical AI development. Thriving Gaming Industry Montreal boasts a robust gaming sector, hosting numerous innovative companies. Notable examples include: Double Stallion Games: An independent studio known for developing action-packed arcade games. Meta4.Games: An award-winning studio specializing in virtual reality experiences. Alice & Smith: Specializing in alternate reality games. Supportive Bilingual Environment Montreal's bilingual (French and English) environment enhances its appeal to a diverse talent pool and facilitates international collaborations. This linguistic duality enables startups to operate seamlessly in global markets and attract investments worldwide. The city's multicultural atmosphere fosters creativity and inclusivity, essential elements for innovation in the tech industry. Collaborative Ecosystem The city's tech ecosystem is characterized by collaboration between academia, industry, and government. Initiatives like the International Centre of Expertise in Montreal for the Advancement of AI (ICEMAI) exemplify this synergy, promoting responsible AI development and positioning Montreal as a leader in ethical AI practices. Ottawa Ottawa has solidified its status as a prominent technology hub, leveraging strategic government partnerships, exceptional cybersecurity expertise, and a rich pool of skilled talent. Government Partnerships As Canada's capital, Ottawa benefits from strong government and tech industry collaborations. A notable example is Nokia Canada's initiative to transform its Ottawa facility into a leading sustainable research and development hub for information and communications technology (ICT) and cybersecurity. This project, supported by federal, provincial, and municipal governments, is expected to create over 340 high-value jobs and enhance Canada's tech ecosystem. Cybersecurity Expertise Ottawa is internationally recognized for its cybersecurity capabilities, housing more than 100 companies specializing in areas such as encryption, identity and access management, and vulnerability defense. The city's cybersecurity landscape is further strengthened by the presence of the Communications Security Establishment (CSE), Canada's national cryptologic agency responsible for foreign signals intelligence and protecting government electronic information. Access to Skilled Talent Ottawa's concentration of tech talent is among the highest in North America, supported by institutions like the University of Ottawa. Collaborations such as the uOttawa-IBM Cyber Range provide immersive cybersecurity training, enhancing the skills of both students and professionals. Additionally, partnerships with organizations like the Ontario Centre of Innovation (OCI) and IBM Canada support small and medium-sized enterprises in adopting and integrating cybersecurity technologies. Fuel Your Startup’s Growth with Visible Canada’s thriving tech hubs demonstrate the incredible potential for innovation and growth when startups are supported by vibrant ecosystems. To maximize your startup's potential, you need tools that keep you organized and help you build meaningful relationships with investors. That’s where Visible comes in. With Visible, you can streamline your investor updates, manage fundraising, and maintain clear communication with your stakeholders—all in one place. Give it a free try for 14 days here. Related resource: The Ultimate Guide to Startup Funding Stages Related resource: 11 Steps for Building a Successful Tech Company

Managing equity is one of startup founders' most strategic and challenging responsibilities. Many advisors, investors, and peers contribute valuable insights to a business in the early stages, often without direct financial compensation. For startups with limited cash flow, offering advisory shares becomes a creative and practical way to engage experts while preserving resources for growth. Advisory shares allow founders to attract and retain top-tier talent by providing equity in exchange for critical guidance. This article explores what advisory shares are, how they work, their benefits and drawbacks, and key considerations for offering them in your startup. What Are Advisory Shares? Advisory shares are a form of equity compensation provided to individuals who offer strategic guidance and expertise to a startup. Unlike traditional employee equity, advisory shares are typically granted to external advisors, such as industry experts, seasoned entrepreneurs, or key network connectors, who help the business grow and succeed. These shares often follow a shorter vesting schedule, reflecting the limited but impactful nature of the advisor's contributions. By offering advisory shares, startups can incentivize advisors to commit their time and knowledge, aligning their success with the company’s growth. Advisor Shares vs. Regular Shares (or Equity) Advisory shares and regular shares both represent equity in a company, but their purposes, recipients, and structures are distinct. Regular shares are issued to founders, employees, and investors to reflect direct contributions, whether through work or funding. Advisory shares, however, are explicitly granted to external advisors as compensation for their expertise and guidance, aligning their interests with the company's success without requiring financial or operational involvement. Related resource: CEO vs. Advisory Board: Key Differences in Leadership and Guidance How Are Advisory Shares and Regular Shares Similar? Despite their differences, advisory shares and regular shares share common traits. Both represent ownership in the company, incentivize recipients by tying their potential financial gains to its growth, and typically involve vesting schedules to ensure commitment. Issuing either type of share also contributes to equity dilution, affecting all existing stakeholders. Related Read: The Main Difference Between ISOs and NSOs How Do Advisory Shares Work? While advisory shares can take on different forms, they typically can be boiled down to a few similarities. Of course, these can change depending on your business. Exchanged for advice or expertise Typically offered as NSO stock options Follow a shorter vesting schedule Related resource: Everything You Should Know About Diluting Shares Learn more about how advisory shares typically work below: 1. Advisor Agreement Before granting advisory shares, the startup and advisor enter into a formal agreement that outlines the terms of their relationship. This agreement specifies the advisor’s role, including the scope of their contributions, such as strategic guidance, mentorship, or leveraging their network. It also details the advisor's responsibilities, expected time commitment, and deliverables. Importantly, the agreement defines the number of advisory shares the advisor will receive and the terms under which they are granted, such as the vesting schedule and any conditions tied to performance. By setting clear expectations, this agreement protects both parties and ensures alignment in achieving the company’s goals. 2. Grant of Shares After finalizing the advisor agreement, the startup grants the advisor the right to purchase a specified number of shares at a predetermined exercise price. This exercise price is typically set at the fair market value of the company’s stock at the time of the grant. This approach ensures compliance with tax regulations while offering the advisor an opportunity to benefit from the company’s growth. The grant also outlines the conditions under which the advisor can exercise these options, such as meeting vesting milestones or fulfilling specific responsibilities. By linking the grant to the advisor’s contributions, startups create a mutually beneficial arrangement that aligns incentives with the company’s success. 3. Vesting Period The advisor’s right to exercise their options is generally tied to a vesting period, which ensures their continued commitment to the startup over time. Vesting periods for advisory shares often span shorter durations than employee stock options but typically last one to four years. A common structure includes a one-year cliff, where no options are vested during the first year, followed by monthly vesting thereafter. This means the advisor gains the ability to exercise a portion of their options incrementally, as they fulfill their responsibilities and contribute to the company’s growth. Vesting schedules protect the startup by ensuring advisors earn their shares through sustained involvement and expertise. 4. Exercise of Options Once the vesting period is complete, the advisor gains the right to exercise their options. This involves paying the predetermined exercise price to purchase the shares granted under the advisory agreement. The exercise process typically requires the advisor to notify the company of their intent and complete the necessary paperwork. After the payment is made, the advisor becomes a shareholder in the company and holds equity outright. This step allows the advisor to benefit from any future increase in the company’s valuation, aligning their financial incentives with the startup’s long-term success. 5. Potential Profit If the company’s stock price appreciates over time, the advisor can sell their shares for a profit. Since advisory shares are typically granted at the fair market value at the time of issuance, any subsequent increase in the stock price represents a gain for the advisor. For example, if the exercise price was set at $1 per share and the stock price rises to $10 per share, the advisor can sell the shares at the higher market price, realizing a profit of $9 per share. This potential for financial gain serves as a strong incentive for advisors to contribute meaningfully to the company’s success and growth. Benefits of Advisory Shares Advisory shares come with their own set of pros and cons. Properly maintaining and distributing equity is a critical role of a startup founder so understand the benefits, and drawbacks, of offering advisory shares is a must. Related Resource: 7 Essential Business Startup Resources Learn more about the benefits of offering startup advisory shares below: Access to Expertise and Guidance Advisory shares are a powerful tool for attracting experienced professionals with specialized knowledge that can drive a startup’s growth. These individuals bring valuable insights in areas such as strategy, product development, marketing, or fundraising—critical components for scaling a business. By offering equity in lieu of cash compensation, startups can engage top-tier experts who might otherwise be out of reach financially. These advisors act as strategic partners, helping founders navigate challenges, seize opportunities, and build a strong foundation for long-term success. Related Resource: Seed Funding for Startups 101: A Complete Guide Strengthen Credibility and Network Associating with credible advisors can significantly enhance a startup’s reputation, signaling expertise and trustworthiness to the broader market. Advisors with established industry recognition lend their credibility to the company, boosting its appeal to potential investors, partners, and customers. Beyond reputation, advisors often bring extensive networks of valuable connections, opening doors to strategic partnerships, funding opportunities, and key client relationships. By aligning with respected professionals, startups can accelerate their growth while building trust within their industry. Cost-Effective Compensation As we previously mentioned, most businesses that benefit most from advisors are unable to offer them a salary or cash compensation. With advisor shares, startup founders are able to offer shares as compensation and conserve thei cash to help with scaling their business and headcount. Attract Long-Term Commitment Vesting schedules play a crucial role in fostering long-term commitment from advisors. By distributing equity over a set period, such as one to four years, advisors are incentivized to remain actively engaged with the startup for the duration of the vesting timeline. This structure ensures that advisors continue to contribute their expertise and resources while aligning their success with the company's growth. The gradual allocation of shares motivates advisors to stay invested in the startup’s achievements, creating a mutually beneficial relationship that drives sustained collaboration and progress. Drawbacks of Advisory Shares Of course, offering advisor shares is not for everyone. While there are benefits to offering advisor shares, there are certainly drawbacks as well. Weighing the pros and cons and determining what is right for your business is ultimately up to you. We always recommend consulting with a lawyer or counsel when determining how to compensate advisors. Diluted Ownership The biggest drawback for most founders will be the diluted ownership. By offering shares to advisors, you will be diluting the ownership of yourself and existing shareholders. As advisors are fully vested in 1-2 years, they will potentially not be invested in future success as other stakeholders and could be costly when taking into account the diluted ownership. Potential Conflicts of Interest Advisors might not have the same motivators and incentives as your employees and other shareholders. As their ownership is generally a smaller % and their shares vest early, they are potentially not as incentivized for the growth of your company as employees and larger % owners will be. Getting in front of these conversations and making sure you have a good read on any potential advisors before bringing them onboard is a good first step to mitigate potential conflicts. Extra Stakeholder to Manage Chances are most advisors are helping other companies as well. This means that their attention is divided and you will need to ensure you are getting enough value to warrant dilution. This also means that you are responsible for managing a relationship and communication with another stakeholder in your business — what can be burdensome on some founders. The 2 Variations of Advisory Shares Advisory shares are generally offered in 2 variations — restricted stock awards and stock options. Learn more about each option and what they mean below: Restricted Stock Awards Restricted stock awards (RSAs) are a form of equity compensation where shares are granted to an individual with certain restrictions, typically tied to a vesting schedule or performance milestones. Unlike stock options, RSAs represent ownership of the shares from the moment they are granted, though the recipient may not fully control or sell them until the restrictions are lifted. These shares often include voting rights and entitle the recipient to dividends, aligning their interests with the company’s long-term success. Restricted stock awards are commonly used to reward early contributors or advisors, ensuring their commitment while providing immediate equity ownership subject to conditions. Stock Options Stock options are a type of equity compensation that grants the recipient the right to purchase company shares at a fixed price, known as the exercise price, within a specified timeframe. Unlike restricted stock awards, stock options do not represent immediate ownership but provide the potential to acquire shares if certain conditions, such as vesting schedules or performance milestones, are met. The exercise price is typically set at the fair market value of the shares at the time of the grant. If the company’s valuation increases, the recipient can profit by purchasing the shares at the lower exercise price and selling them at the higher market value. Stock options are often used to align the recipient’s incentives with the company’s growth, encouraging active involvement and long-term commitment. Who Gets to Issue Advisory Shares? Issuing advisory shares is typically reserved for the founder or CEO of a company. Having a decision-making process and gameplan when issuing advisory shares is important. This might mean offering no shares at all, having an allocated amount of advisor shares from the get go, or something inbetween. Making sure your board of directors and other key stakeholders are on board is crucial to make sure that interest and strategy stays aligned for all stakeholders. Related resource: Is An Advisory Board Paid? What Startups Should Know How Many Shares Should You Give a Startup Advisor? Determining the number of shares to offer a startup advisor requires balancing sufficient incentives with managing equity dilution. The exact amount will vary based on factors such as the advisor’s experience, expected contribution, and time commitment. Advisors who bring extensive industry expertise or access to valuable networks may justify a higher equity allocation than those with a more limited role. According to guidelines referenced by Silicon Valley Bank, advisors are often granted between 0.25% and 1% of the company's equity, depending on the startup's stage and the nature of the advisory role. Structuring this compensation strategically- including a vesting schedule or performance milestones- helps ensure that the advisor’s contributions provide meaningful value while maintaining flexibility for the company. Let Visible Help You Streamline the Investment Management Process Managing equity and fostering investor relationships are critical for your startup’s success. Visible simplifies this process with tools for tracking advisory shares, managing fundraising pipelines, and keeping stakeholders informed through data rooms and investor updates. Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days.

Why the Chief of Staff is Important for a Startup Startup founders and practitioners are often debating the best actions to take and decisions to make in their early-stage companies. Determining the right hires has been a major part of this conversation. The hot topic on the table lately has been around hiring the role of Chief of Staff. There is a growing conversation about whether startup leaders and founders should hire a Chief of Staff (COS), and here at Visible, we believe it is one of the most important hires you can make. A Chief of Staff is essential for your startup because their role is designed to be an extension of the c-suite’s leadership and strategy. Their role allows companies to scale faster and more strategically. Between the Board of Directors, Executive Board, stakeholders, and employees, startups have a lot of moving parts, and a Chief of Staff can be the cog in the machine that makes all those pieces work smoothly together. A Chief of Staff is the right-hand person to an executive team member, typically the CEO or COO. The COS is tasked with managing the executive’s goals, priorities, internal and external operational tasks, and special strategic projects as needed. The typical responsibilities included in a Chief of Staff role may include: Managing Executive Goals and Priorities A Chief of Staff helps determine what optimized time really looks like. For CEOs and COOs, there is plenty of work that could easily fill the day. But what work is most important for business development and moving the business forward? A Chief of Staff helps direct the decision-making and serves as a sounding board for the CEO, owning the task of keeping the executive aligned to the goals he or she set forth to push the business forward. A COS considers these executive goals and even formalizes them in a framework such as the OKR (Objective Key Results) framework. With these executive OKRs formalized, a COS helps guide the CEO/COO’s priorities day over day. Related resource: Should I Consider a Part-time Executive for My Startup? Operational Tasks With specific areas of work, including board meetings and other critical decision-making sessions or meetings on the agenda, the Chief of Staff helps manage these priorities by handling operations tasks like agenda setting and distribution, communications with teams across the startup to gather insight and updates on various company-wide priorities and progression. Not only will a Chief of Staff work on internal operational tasks like meeting prep, gathering updates, and tracking company progress towards goals, but they also tend to handle external operational tasks as well. These external operational tasks might include sending investor updates to stakeholders, serving as the point of contact to the Board of Directors representing the CEO’s office, or even working on communications and PR. Special Strategic Projects Startups move fast, and different priorities and special obligations come up for leadership out of the blue. Additionally, as your startup goes through strategic growth periods like fundraising or even acquiring smaller startups down the line, the priorities of a CEO’s time will greatly change. These strategic times are the perfect way to utilize a COS. If fundraising is going to take up a significant chunk of a CEO’s time, a Chief of Staff can step in and manage aspects of that strategic task such as deck assembly, overview materials for the potential investors, and communication with parts of the business that need to deliver information for said fundraising presentation. Chief of Staffs are typically very versatile in their skill set, with communication, strategic thinking, and analytical skill sets. This background makes them the perfect person to take on roles that require strategic thought and concise summaries but are potentially too time-constraining for a CEO to dedicate all of their energy to. With their unique mix of hard and soft skills, executive insight, and strategic position in the company, a COS is a major value-add to any startup. Our team at Visible has identified seven primary ways that a Chief of Staff can strengthen your startup. When is it Time to Hire a Chief of Staff? Determining the right moment to bring a COS into your startup is crucial for maximizing their impact. By recognizing the following indicators and acting promptly, startups can leverage the unique skills and perspectives that a Chief of Staff brings to the table, ensuring sustained growth and success. Related resource: How to Hire Your First 10 Startup Employees Here are some key indicators that it might be the right time to hire a COS: Leadership Bandwidth is Strained As your startup grows, the demands on the leadership team increase exponentially. This strain manifests as longer work hours, difficulty in prioritizing tasks, and a constant feeling of being overwhelmed. Executives may find themselves bogged down with operational details rather than focusing on strategic initiatives. A Chief of Staff can help alleviate this burden by managing critical tasks, streamlining decision-making processes, and allowing leaders to focus on high-level strategic goals. They act as a force multiplier, extending the reach and effectiveness of the leadership team. A Need for Cross-Departmental Collaboration Effective cross-departmental collaboration is essential for startups to innovate and scale. However, as the organization grows, silos can form, and communication breakdowns can occur. This can lead to inefficiencies, duplicated efforts, and missed opportunities. A Chief of Staff ensures seamless collaboration by facilitating communication between departments, aligning goals, and overseeing cross-functional projects. They help to break down silos and ensure that all parts of the organization are working towards the same objectives. Related resource: How to Build Organizational Alignment Easily Mergers, Acquisitions, or Product Launches Significant events like mergers, acquisitions, or major product launches require focused attention and meticulous coordination. These initiatives bring unique challenges such as integrating new teams, managing extensive paperwork, and aligning strategies. A Chief of Staff can manage these complex processes, ensuring that all aspects are covered and that the executive team can concentrate on high-level strategic decisions. They provide the necessary oversight and coordination to make these critical events successful. Leadership Succession Planning Succession planning is vital for maintaining continuity and stability within the leadership team. It involves identifying and developing future leaders within the organization. However, amidst the daily hustle of running a startup, this can often be neglected. A Chief of Staff plays a crucial role in leadership succession planning by mentoring potential leaders, overseeing development programs, and ensuring there is a clear plan for leadership transitions. This not only secures the future of the company but also helps in retaining top talent by providing clear career progression paths. Typical Responsibilities for a Chief of Staff A Chief of Staff in a startup wears many hats, acting as a strategic partner to the CEO or COO. Their role involves a wide range of responsibilities that help streamline operations, drive strategic initiatives, and ensure that the leadership team can focus on high-priority tasks. Below are some of the key responsibilities that a Chief of Staff typically handles, each of which will be covered in more detail in their respective sections. Managing Executive Goals and Priorities A Chief of Staff helps determine what optimized time looks like for the executive team. For CEOs and COOs, there is plenty of work that could easily fill the day. But what work is most important for business development and moving the business forward? A Chief of Staff directs the decision-making process, ensuring that the executive's time is spent on tasks that are crucial for growth. They serve as a sounding board for the CEO, aligning the executive with the company’s strategic goals and formalizing them using frameworks such as OKRs (Objectives and Key Results). This helps guide the CEO/COO’s priorities day by day. Operational Leadership The Chief of Staff manages both internal and external operational tasks, ensuring smooth day-to-day operations. This includes setting agendas for board meetings, gathering updates from various teams, and tracking progress towards company goals. They handle communications across the startup to ensure everyone is aligned with the company’s priorities. Externally, they might send investor updates, serve as a point of contact for the Board of Directors, and manage public relations tasks. By overseeing these operational details, the Chief of Staff allows the executive team to focus on more strategic issues. Strategic Projects Startups often encounter special strategic projects that require focused attention. Whether it’s fundraising, a product launch, or an acquisition, a Chief of Staff manages these projects, ensuring they align with the company’s strategic goals. They take on roles that require strategic thinking and concise summaries, handling aspects such as preparing decks for investors, assembling materials for presentations, and coordinating communication across the company. This enables the CEO to concentrate on core business functions without getting bogged down by the intricacies of these special projects. Important Skills for a Chief of Staff to Have When making the strategic hire of a Chief of Staff, startup founders need to look for specific skills that will ensure the candidate can effectively support the leadership team and drive the company forward. These skills serve as crucial filters and green flags in the interview process, guiding founders on how to frame their questions and identify the best candidate for their organization. Strategic Thinking Strategic thinking is vital for navigating the complexities of a growing startup. A Chief of Staff must be able to anticipate future challenges, identify opportunities, and develop long-term plans that align with the company's vision. By outsourcing strategic thinking to a Chief of Staff, the executive team can ensure that someone is always focused on the bigger picture, allowing them to concentrate on immediate operational needs. This skill is essential for maintaining a clear direction and ensuring the startup's long-term success. Project Management Effective project management is crucial for keeping various initiatives on track and within budget. A Chief of Staff must be adept at coordinating multiple projects, setting deadlines, and ensuring that resources are allocated efficiently. In a growing startup, where rapid execution is key, outsourcing project management to a Chief of Staff ensures that projects are completed on time and meet the company's strategic objectives. This allows the executive team to focus on higher-level strategic decisions without getting bogged down in the details of project execution. Analytical Skills Analytical skills enable a Chief of Staff to interpret data, identify trends, and make informed decisions. In a data-driven startup environment, these skills are critical for providing valuable insights that inform strategic direction and operational improvements. By outsourcing analytical tasks to a Chief of Staff, the executive team can ensure that decisions are based on solid data and analysis, reducing the risk of errors and improving overall efficiency. Communication Skills Strong communication skills are necessary for a Chief of Staff to act as a liaison between the executive team and other departments. They must be able to convey complex ideas clearly, facilitate effective meetings, and ensure that all stakeholders are on the same page. Good communication helps maintain transparency, fosters a collaborative work environment, and ensures that everyone in the organization is aligned with the company's goals. By outsourcing communication management to a Chief of Staff, the executive team can ensure that information flows smoothly and efficiently throughout the organization. Ways a Chief of Staff Can Strengthen Your Startup A Chief of Staff can significantly enhance the effectiveness and efficiency of a startup. By taking on critical tasks and responsibilities, they enable the executive team to focus on strategic goals and high-priority items. Here are some of the ways a Chief of Staff can strengthen your startup: Focus on Priority Items The day-to-day life of a CEO or COO can be extremely hectic, with numerous decisions and tasks competing for their attention. A Chief of Staff helps manage these priorities by filtering out less critical tasks and directing the executive’s time towards the most strategic decisions that align with the company's OKRs (Objectives and Key Results). This ensures that the leadership focuses on what truly drives the business forward while the Chief of Staff handles smaller issues and routine decision-making. Facilitate Smooth Information Sharing Effective communication is crucial for the smooth operation of a startup. A Chief of Staff acts as a central point for gathering and disseminating information across the organization. They collect updates from various departments, distill the most important points, and present a contextualized executive summary to the CEO. This process ensures that the CEO receives all the necessary information without being overwhelmed by details, and that communication flows smoothly from the CEO to the rest of the company. Inform Strategy and Decision-Making A Chief of Staff serves as a valuable resource for keeping the executive team connected to the various happenings across departments. By providing an executive summary of company-wide updates, a Chief of Staff helps the leadership team make informed strategic decisions more quickly. They ensure that all relevant information is considered, facilitating better and faster decision-making processes. Maximize Time While You Scale As a startup scales, the demands on the executive team’s time increase. A Chief of Staff helps maximize this time by prioritizing tasks and focusing on critical projects. They handle routine and operational tasks, allowing the CEO to dedicate more time to deep-think projects and strategic initiatives. This ensures that the leadership’s time is used efficiently, even as the company grows and evolves. Tackle Special Projects Special projects, such as fundraising rounds, product launches, or industry presentations, require focused attention and dedicated resources. A Chief of Staff is perfectly positioned to spearhead these projects, managing aspects such as preparing investor decks, assembling materials for presentations, and coordinating communication across the company. This allows the CEO to stay focused on daily priorities while still ensuring that special projects are executed effectively. Provide Oversight and Perspective Startups can often become echo chambers where new perspectives are hard to come by. A Chief of Staff, especially one with experience from other startups, brings a fresh viewpoint to the c-suite. They provide oversight and serve as a sounding board for new ideas and strategies, helping to ensure that the company stays innovative and adaptable. Push the Business Forward Ultimately, a Chief of Staff is a strategic player in moving the business forward. They streamline operations, manage strategic projects, and ensure effective communication, all of which contribute to the company’s growth. By freeing up the executive team to focus on high-level strategic goals, a Chief of Staff helps take a startup from good to great and potentially to unicorn status. Chief of Staff vs Executive Assistant Understanding the difference between a COS and an Executive Assistant (EA) is crucial for startup founders to ensure they make the right hire at the right time. While both roles support the executive team, they do so in different ways and with distinct focuses. Chief of Staff A Chief of Staff is a strategic partner to the executive team, particularly the CEO or COO. Their responsibilities are broad and focus on aligning the company’s strategic goals with daily operations. Here are some key aspects of the COS role: Strategic Focus: The COS works on high-level strategic initiatives, ensuring that the executive team’s vision and goals are implemented across the organization. Project Management: They handle complex projects that span multiple departments, such as mergers, acquisitions, product launches, and fundraising efforts. Decision-Making Support: The COS provides critical insights and data analysis to support executive decision-making, helping to inform strategy and operational improvements. Cross-Departmental Collaboration: They facilitate communication and collaboration between different departments to ensure everyone is aligned and working towards common goals. Leadership Development: The COS often plays a role in leadership succession planning and mentoring potential future leaders within the organization. Executive Assistant An Executive Assistant, on the other hand, focuses on optimizing the executive’s daily schedule and administrative tasks. Here are some key aspects of the EA role: Administrative Focus: The EA manages the executive’s calendar, schedules meetings, handles correspondence, and organizes travel arrangements. Time Management: They ensure that the executive’s time is used efficiently by prioritizing meetings and tasks, allowing the executive to focus on their most important responsibilities. Task Coordination: The EA handles a variety of administrative tasks that help keep the executive’s day running smoothly, from booking appointments to preparing documents. Support Role: They provide general support to the executive, ensuring that they have everything they need to perform their duties effectively. Routine Operations: The EA is instrumental in managing routine operational tasks, allowing the executive to concentrate on more strategic issues. Key Differences Scope of Responsibilities: The COS has a broader, more strategic scope, focusing on aligning and implementing the company’s long-term goals. The EA’s scope is narrower, concentrating on the day-to-day administrative support of the executive. Strategic vs. Administrative: The COS is involved in strategic decision-making and high-level project management, while the EA handles administrative and logistical tasks. Cross-Departmental Impact: The COS often works across departments to facilitate collaboration and ensure alignment with company goals. The EA typically works closely with the executive and less so with other departments. Long-Term vs. Short-Term Focus: The COS is focused on long-term strategic initiatives and projects that drive the company forward. The EA is focused on the immediate, short-term needs of the executive. Making the Right Choice For startup founders, deciding between hiring a Chief of Staff and an Executive Assistant depends on the company’s current needs and stage of growth: If the company needs high-level strategic support, project management for complex initiatives, and cross-departmental coordination, hiring a Chief of Staff is the right choice. If the primary need is managing the executive’s schedule, handling administrative tasks, and ensuring day-to-day operations run smoothly, then an Executive Assistant is the appropriate hire. Equipping a Chief of Staff for Success at a Startup To ensure a COS is successful at your startup, it's crucial to clearly define their role and responsibilities from the outset. This includes creating a detailed job description that outlines specific tasks and expectations. Additionally, providing a comprehensive onboarding process with clear goals and KPIs will help the COS integrate smoothly and start contributing effectively. Regular check-ins and feedback sessions will also ensure they are aligned with the company’s strategic goals and can adjust to any evolving needs. Equipping your COS with the right tools and resources, fostering open communication, and maintaining a supportive environment will enable them to execute their duties effectively. This preparation ensures that the COS can focus on driving strategic initiatives and managing critical projects, ultimately contributing to the startup’s growth and success. How Visible Can Help Visible offers a range of tools and resources designed to support Chief of Staffs in their roles, making it easier to streamline executive and investor communications. With features that facilitate data tracking, reporting, and stakeholder updates, Visible ensures that your Chief of Staff can efficiently manage information flow and keep everyone aligned with the company’s strategic objectives. By leveraging Visible's platform, startups can enhance their operational efficiency, improve decision-making processes, and ultimately drive growth. For more information about how Visible helps Chiefs of Staff streamline their executive and investor communications, learn more here.

Founders are tasked with hundreds of responsibilities when starting a business. On top of hiring, financing, and building their product, early-stage founders are generally responsible for developing initial strategies — this includes the earliest sales and market strategies. In this article, we will look to help you craft a successful SaaS sales strategy. We’ll highlight the elements you will want to think of when you start to build your sales motion. This will help your team to understand how to measure the number of potential customers in your pipeline and the growth potential you might see in your revenue numbers. How are SaaS sales different from other types of sales? Like any sales strategy, it is important to start with the basics when looking at a SaaS sales strategy. At the top of your funnel, you have marketing leads that likely find your brand via content, word of mouth, paid ads, your own product, etc. From here, leads are moved through the funnel. In the middle, SaaS companies can leverage email campaigns, events, product demos, etc. to move leads to the bottom of their funnel. However, as the SaaS buying experience takes place fully online — sales and marketing organizations can be creative with their approach. The online experience allows companies to track more robust data than ever before. Additionally, SaaS products have turned into their own growth levers as well — the ability to manipulate pricing and plans has led to the ability for companies to leverage their own product for growth. Related Resource: How SaaS Companies Can Best Leverage a Product-led Growth Strategy The online presence and emergence of product-led growth have led to new sales strategies unique to SaaS companies. Learn more below: 3 Popular SaaS sales models There are countless ways to structure your Saas sales strategy. For the sake of this post, we’ll focus on 3 of the most popular strategies. Learn more about the self-service model, transactional model, and enterprise sales model below: Related Resource: The SaaS Business Model: How and Why it Works Self-service model The self-service model allows prospects to become customers without communicating with your team. As put by the team at ProductLed, “A SaaS self-serve model is exactly what it sounds like. Rather than rely on a dedicated Sales team to prospect, educate, and close sales, you design a system that allows customers to serve themselves. The quality of the product itself does all the selling.” This strategy is typically best for a strong and simple product that typically has a lower contract size. Transactional sales model The transactional model allows you to create income-generating actions where prospects have to become a customer at that point in time. This requires transactional sales models to have high-volume sales that can be supported by a strong sales and customer support team. Enterprise sales model The enterprise model is a strategy to sell more robust software packages to corporations – you will need baked-in features in a prepackaged manner to sell to a fellow business. Enterprise sales is the model that shares the most similarities with a traditional B2B sales funnel. Inbound vs outbound sales In a Saas sales funnel, you are constantly looking to consistently fill your sales funnel with fresh prospects. Once you have prospects you will look to find which prospects are worthy of being qualified and have a high likelihood of converting so you can spend your time communicating with those high-quality prospects. There are two popular strategies for creating fresh prospects that would be defined as inbound and outbound sales strategies. Inbound sales is when you invest in marketing to create prospects reaching out to you – fresh prospects reaching out to your business to ask about your software product. As put by the team at HubSpot: “Inbound sales organizations use a sales process that is personalized, helpful, and directly focused on prospects’ pain points throughout their buyer’s journey. During inbound sales, buyers move through three key phases: awareness, consideration, and decision (which we’ll discuss further below). While buyers go through these three phases, sales teams go through four different actions that will help them support qualified leads into becoming opportunities and eventually customers: identify, connect, explore, and advise.” An inbound strategy typically works best for SaaS companies that need a greater volume of customers and can nurture them and move them through their funnel at scale (e.g. self-service model) Outbound sales on the other hand are having members of your organization reach out to potential prospects to see if they would be interested in using your service. Outbound sales require highly targeted and proactive pushing of your messaging to customers. Generally, outbound sales require dedicated team members to manually prospect and reach out to potential customers. This means that outbound sales organizations do not naturally scale as well as an inbound sales organizations and will likely require a higher contract value. An enterprise model would rely heavily on Outbound sales, while a self-service business model will rely heavily on Inbound sales. The SaaS Sales Process The best Saas sales strategy will be a hybrid of inbound and outbound sales, but all of them should include a sales funnel. This funnel should have stages that help to qualify your prospects. These stages should be: Step 1: Lead generation This activity is often times a marketing activity that gives you contact or business information to explore the fit further Step 2: Prospecting This is where you develop the bio of who is the contact you are reaching out to within the organization. It is always helpful to prospect for someone who can make a buying decision Step 3: Qualifying In this step, you need to understand whether the prospect has the resources to pay for your product and the problem that your product can solve. This step is often the time for you to ask questions of your prospects Step 4: Demos and presenting This is when you will share the features and capabilities of your product with the qualified prospect. You want to show them the different features and where they can get the most value. Step 5: Closing the deal After your demo or a presenting call, the prospect should be pushed to a point where they need to make a decision on whether to buy your product. Step 6: Nurturing Once someone becomes a customer, you need to make sure to nurture them and grow your product offering with their business. This is the most difficult stage. Make sure to share your new product releases, stay in tune with how they are using your product, and build relationships with your customers. Cultivating a robust sales team To create a sustaining sales team, it is important to hire talented and tenacious people to own your sales funnel. They will need to track conversion numbers, stay organized with their outreach to prospects, and grow your funnel over time. There are three key roles within a Saas sales funnel. Those positions within your organization are: Sales development representatives (also known as business development representatives) These members of your team own lead generation, prospecting, and qualifying potential customers on your sales team. They get paid 40-60k/year depending on geographical location and experience. They should be tasked with outreach and drumming up new business. Account executives Account executives should focus on giving product demos, closing deals, and nurturing existing customers. They should be a bit more buttoned up in their approach and have a commission incentive associated with the # of accounts they manage. Sales managers/VPs Sales managers and Vice presidents of sales should take ownership of the data within your sales pipelines. Numbers like # of new leads, # of new qualified leads, # of new customers, # of churned customers, amount of new revenue, and lead to customer conversion %. Growing these sales numbers each quarter. Measuring these numbers weekly, monthly, and quarterly. Making them visible to the rest of the company regularly. 8 Key Elements of a successful SaaS sales strategy One of the most important elements of building a successful business is having a like-minded team around you to support and work with you. Make sure to align with all your team members and hire people with good work ethics and similar values of your company. A good sales team should be competitive, goal-oriented, and metric-driven. The sales managers and VPs will be really crucial in shaping the team dynamics and culture of your business. Hire great people and the numbers will take care of themselves! We’ve identified 8 elements of a successful sales strategy that every Saas sales strategy should include 1. Solidify your value proposition It is so important to understand thoroughly and communicate your product’s core value proposition. If someone decides to buy your product, they should know how to use the product and how to get the most out of it. 2. Superb communication with prospects Communication is of the utmost importance. Make sure your prospects understand your product and how it will help their business. Inform them of new product updates 3. Strategic trial periods An effective strategy is to give potential customers a free trial of your product to understand your value proposition. You want to make sure not to make this trial period too short or too long. Make it strategic so the prospect will understand the value prop but also be encouraged to make a buying decision. 4. Track the right SaaS metrics Tracking your core metrics is vital to success. See a few of those below: Customer Acquisition Cost – the amount of money it takes to acquire a new customer Customer Lifetime Value – the amount of value a customer provides your company over the course of their relationship with you as a customer. Lead velocity rate – the growth percentage of qualified leads month over month. This will help you understand how quickly you are qualifying your leads Related Resources: Our Ultimate Guide to SaaS Metrics & How To Calculate and Interpret Your SaaS Magic Number 5. Develop a sales playbook Every successful sales management team should develop a playbook on how to deploy their resources and where each team member should spend their time. Playbooks are often thought of in sports terms, but they also work wonders in the business world. They will help you do things efficiently and effectively. 6. Set effective sales goals How many new customers does your business hope to bring in next month? This is an important question and one your whole sales team should understand and work towards! 7. Utilize the right tools to enhance the process Your team should have all the resources at their disposal to communicate effectively and track their metrics. As you build out your strategy and team, be sure to give them all possible resources at their disposal. There are tons of great tools out there for teams to make the most out of their time and have direct methods of communication with customers and one another. 8. Establish an effective customer support program A huge part of an effective sales strategy is welcoming potential customers and making sure your existing customers are not forgotten about. When customers reach out, it is important to talk and listen to their issues. Understand what they are needing so your product can continue to evolve. Make sure anyone getting introduced to your product will also have the information they need to use your product successfully. It might be helpful to include this member of your team in your sales meetings and keep them informed as to messaging and efforts for growth! Generate support for your startup with Visible Developing a successful SaaS sales strategy is not an easy task. It will take a hybrid approach of many of the elements listed in this article and will need attentive members of your team to nurture it and test new things. We created Visible to help founders have a better chance for success. Stay in the loop with the best resources to build and scale your startup with our newsletter, the Visible Weekly — subscribe here. Related resource: Lead Velocity Rate: A Key Metric in the Startup Landscape

Jessica is the co-founder and president of Maad, francophone Africa’s fastest-growing B2B e-commerce player. Jessica and her team adopted Visible in December 2021 to start sending out investor updates for the first time after closing a pre-seed round. Since then the team at Maad has continued to leverage Visible’s suite of fundraising tools such as data rooms and pitch decks. Maad successfully closed its seed round led by Ventures Platform in late 2023. Read more about their recent coverage in TechCrunch here. This case study details why Maad chose Visible and the specific solutions they leveraged to support the successful raise of their seed round. Jessica's Founder Journey—From Airbnb to Empowering Retail Owners in Africa Maad was co-founded by Jessica Long in 2021. Jessica has a demonstrated passion for creating software that adds value operationally. She fostered this passion in her previous work as a software engineer at Airbnb, building systems to support novel machine learning and crowdsourcing technology at Idibon in San Francisco, and leading the development of national digital health platforms in West Africa as the Director of Global Services at Dimagi. Jessica started Maad because she believed that better data tools could transform the business landscape of Senegal and other developing West African countries. After spending two years building out a generalizable tech platform to track field operations of all kinds, she and her cofounders zeroed in on the informal retail market. With 100,000s of small shops sourcing the same products from a patchwork supply network, Jessica saw a big opportunity to connect small shops directly to the agribusinesses supplying them. Maad is now Francophone Africa's fastest-growing B2B e-commerce player. Maad supplies food, beverages, and everyday household products to thousands of small shops. The company is dedicated to empowering traditional retailers in Francophone West Africa. Their product offerings provide traditional retailers with a mobile app that’s a one-stop shop for all their supply needs and Fast-Moving Consumer Goods (FMCG) brands with a complete picture of the fragmented consumer market. The Need to Professionalize Investor Communications After Raising a Pre-seed Round Maad closed a pre-seed round in 2021 led by Launch Africa, Oui Capital, and Alumni Ventures. This was the first time Jessica and her cofounders had ever sent out monthly investor updates. Their first attempt included a few bullet points in an email to which her investors gave her feedback: “You could be doing this more professionally.” Jessica’s early investors explained that monthly updates are often the first thing that new investors will look at to understand the trajectory of a company. “Writing crisp, effective updates was one of the best ways to showcase our company’s growth and development,” - Jessica Long, Co-Founder and President of Maad The team at Maad took this feedback to heart and evaluated several tools for the job. In response to why Jessica chose Visible she shared, “Visible struck us as the best choice, with its emphasis on high-quality email reports.” Jessica highlighted specific features that made Visible stand out: Filterable contact lists that make it easy to manage the email’s audience The ability to add charts and graphs inline The optional live data integration The ability to add photos and GIFs Recipient engagement tracking Maad’s Growing Need for Visible’s Fundraising Solutions Originally Maad’s primary use case for Visible was sending out monthly updates to investors. When Maad started its second fundraise, Visible became its centralized fundraising solution where they also hosted their pitch decks and data rooms as well. “It truly became a home for sharing information with investors about our company.” - Jessica Long, Co-Founder and President of Maad Since first leveraging Visible in December 2021 to update current investors, Maad utilized Visible’s more advanced fundraising solutions and successfully closed their Seed round of $2.3M (in equity) in late 2023. The round was led by Ventures Platform. Read more about the announcement of Maad’s recent financing in TechCrunch here. Visible Impact on Maad’s Investor Engagements Visible has equipped Maad to send high-quality investor updates every month since December 2021. Visible's update engagement tracking allowed Jessica to see how closely prospective investors were following her company, which helped their team prioritize their timespend during the seed stage fundraise. Increasingly, the team at Maad kept all investor-related information assets on the Visible platform including monthly investor updates, pitch decks, and data rooms. This created a clean and consistent place for sharing information and tracking engagement. “Every month we get compliments on the quality of the investor updates we are able to generate with Visible’s platform.” Maad’s Top Four Visible Solutions Jessica shared the key advantages of using the Visible platform are: The beautiful and polished investor updates Thoughtful collaboration and versioning features Engagement tracking Consolidation of all major sources of investor information onto a single platform Below are some examples of some of Maad’s favorite solutions in Visible. 1) The ability to store investor updates all in one place. This makes it easy to review previous updates, track engagement rates, and resend the updates if needed. 2) Fun features like directly embedded GIFs in newsletters allow us to connect with Maad’s supporters with more immediacy. 3) Uploading different pitch decks to the same link is an incredible feature for us. We love the versioning and collaboration this allows us internally, while presenting a unified experience to external collaborators 4) Beautiful graphs, directly configurable on the platform, are one of the most popular features of our monthly updates:

About Airtree Ventures Airtree is a Sydney-based venture capital firm backing founders based in Australia and New Zealand building the iconic companies of tomorrow. The firm was founded in 2014 and is now deploying out of its 4th fund with $1.3 billion in assets under management. Their portfolio includes over 105+ portfolio companies and 250+ founders who have helped create over 17,000 jobs. Airtree’s portfolio includes the region’s breakout technology companies, such as Canva, Go1, Employment Hero, Pet Circle, Immutable, and Linktree. For this case study, we spoke to Dan Lombard who is the Data Lead at Airtree Ventures. Related article: Airtree Ventures already returned its first fund thanks to Canva while maintaining the majority of its stake Fragmented Systems and Processes Prior to Visible Prior to the integration of Visible, Airtree relied heavily on a fragmented system of spreadsheets to manage their portfolio of 105+ companies. Each quarter, four employees were tasked with managing the relationships with the points of contact at 15 to 20 portfolio companies through manual outreach and communications. This reliance on spreadsheets resulted in inefficiencies and potential data loss, as spreadsheets are prone to break when modified. Challenges With Data Accuracy and Scaling Manual Outreach to a Growing Portfolio Before Visible, 80% of Airtree’s portfolio monitoring problem was having clean data and scaling outreach to their portfolio companies. They faced two primary challenges with their former system: Operational Efficiency: Four team members spent significant time manually collecting data from over 100 companies every quarter. The Airtree team members were sending one-off email communications to each company and manually keeping track of who needed to be followed up with at each company which diverted resources from other critical projects they could be working on. Data Integrity and Scalability: Frequent changes to the data in spreadsheets resulted in errors in the sheets and data loss, which caused frustration as there was no way of understanding which changes were made to the sheet and when. This process made it difficult to scale portfolio monitoring operations as Airtree grew. Why Airtree Chose Visible as their Portfolio Monitoring Platform Airtree chose Visible for its robust, scalable, and user-friendly platform. Key factors influencing their choice included: Ease of Use and Customization: Visible's platform offered unparalleled customization and ease of use. Support and Development: Visible’s team actively listened to feedback, offered best practices, and continuously invested in their product, ensuring a partnership that catered to Airtree’s evolving needs. Automation and Integration: Visible excelled in automating portfolio monitoring and offered a frictionless experience for founders. Airtree leveraged the Visible API to seamlessly integrate data into their existing data warehouse system. Airtree’s historical data collection process, previously led by four Airtree team members, is now a streamlined process led only by Dan, who leverages Visible Requests to collect data from their portfolio of 105+ companies. Visible Requests empowers Dan to send customized link-based data requests to each company, automate the email reminder process, and easily keep track of where companies are in the reporting process. View an example Visible Request below. Onboarded to Visible within 24 Hours Visible provided Airtree with an efficient and supported onboarding. When asked about Airtree's onboarding with Visible Dan Lombard shared the following: Visible stood out by enabling a swift and seamless transition that was operational in less than 24 hours, a stark contrast to other providers who estimated a quarter for full implementation. This rapid integration was facilitated by a comprehensive onboarding template provided by Visible. Visible API & Airtree’s Data Infrastructure With the implementation of Visible, Airtree wanted to take a more sophisticated approach to the way they handle their portfolio data with the goal of driving more valuable insights for their team. The approach needed to be automated, integrate with other data sources, and have a singular view accessible for the whole team. This was not possible when their data lived in disparate systems, files, and spreadsheets. Dan Lombard has led the improvement of Airtree's data infrastructure. Now, data sources like Visible and Affinity are piped into Snowflake via recurring AWS Lambda jobs. Airtree leverages the Visible API daily. Dan mentioned that while Airtree collects data quarterly, a daily sync of the data is crucial because Airtree is always onboarding new companies, communicating with their founders, and uploading historical data. “The Visible API gives us this level of daily fidelity and only takes the AWS Lambda job 5 minutes to populate an entire data architecture.” - Dan Lombard, Data Lead at Airtree Ventures Once the data is in their database, Snowflake handles the ETL and entity matching. Airtree then has Streamlit sit on top of Snowflake to query data, provision access, and build out new insights. Advice for Other VC Firms Building Out Their Data Infrastructure Don’t overcomplicate things to start. It is easy to get caught up in the bells and whistles. Dan recommends a bias towards simplicity. Start small and use it as a stepping stone as you build things out. Conclusion Airtree’s adoption of Visible transformed their portfolio management by automating key processes and centralizing data, thus enabling more strategic decision-making and efficient operations. The case of Airtree is a testament to how the right technological partnerships can profoundly impact business efficiency and data management.

It’s common for venture firms to start raising their next fund in the last year of capital deployment, typically years 3-4 of a fund’s life. This poses a sort of chicken-and-egg problem because many of the common fund performance metrics that Limited Partners use to drive allocation decisions only become reliable, and therefore more meaningful, around year six (Source: Cambridge Associates). Farooq Abbasi, founder and General Partner of Preface Ventures, created a Seed Stage Enterprise VC Funding Napkin to help GPS think through alternative fund metrics that help communicate performance outside the traditional indicators that LPs use to measure success for more mature funds. The Seed Stage Enterprise VC Funding Napkin helps answer the question "What is good enough to raise a subsequent fund in the current market conditions". Farooq from Preface Ventures joined us on Tuesday, February 27th for a discussion about the fund performance metrics GPs can use to benchmark and communicate fund performance when it's still 'early'. View the recording below. Webinar Topics The issue with ‘typical’ fund performance metrics for ‘early’ funds Overview of Preface Venture’s Seed Stage Enterprise VC Funding Napkin Deep dive into alternative early performance benchmarks How to keep track of alternative fund performance metrics How to leverage alternative fund performance indicators into your fundraising narrative Inside look into how Preface Ventures keeps LPs up to date Q&A Resources From the Webinar Christoph Janz's What does it take to raise capital, in SaaS, in 2023? Preface Ventures' A GP's View on VC Fund Performance When It's Early Diversity VC About Preface Ventures Preface Ventures is a New York City-based firm started in 2020 led by Farooq Abbasi. Preface invests $500-$2M at the pre-seed and seed stage into startups who are building the Frontier Enterprise structure. Preface has 20 active positions in Fund II and 7 active positions in Fund III. (Learn more)