Up until a few years ago, companies with a global orientation didn’t start by aiming globally at the beginning. First, they launched the product in their country of origin, created a beta, and improved it until they felt ready to move forward. Only then, they paved the path by trial and error to other countries until eventually, the company became global.
Today, we witness a different approach: aiming globally from day one. although this method is significantly quicker in achieving a global appearance, it has a greater risk of failure. As the global market shows instability and it is becoming challenging to find investors, founders try to come by faster, less costly, and more efficient ways to grow globally. This article will highlight the often neglected financial aspects to remember while starting small and aiming globally.
Paper hasn't forgotten its roots and like the trees, it isn't especially mobile. For most problems, there is a digital solution so try and find a way to digitalize any process you can. Working via SaaS will help the company to stay agile, change its base, or open new branches with ease.
On top of that, digitalizing the company’s process and the database will help keep the information accessible even after years go by. From our experience, documentation such as grant letters, valuation reports, and tax reports are often forgotten in an unobtainable hard copy and will be a hustle to come by if they're needed (and they probably will be).
Getting properly ready is the most important feat, only after everything is in order, entering a local, global, or any market can be smooth. As Abraham Lincoln put it: “Give me six hours to chop down a tree and I will spend the first four sharpening the axe”. Being prepared means making sure you can properly handle things that in all likelihood will come in the future, a 409A valuation for example.
409A valuation is a must for any company intending to allocate stock options to its American employees. Although some investors ask for it in a due diligence process, if you are not based in the USA or intend to employ Americans, a 409A is probably not a must right now. That being said, if one day you will have to go through one, odds are, you will need a report for each year that has gone without a 409A valuation. When this common scenario might occur, a badly kept cap table might create a headache like no other and will be a struggle to get out of (more on that up ahead).
An Anti-Headache Cap
A capitalization table (cap table) is commonly created when the company is no more than two founders with a laptop and should be kept meticulously from that moment forward. The cap table is the company's database regarding every shareholder and equity distribution. Therefore, it is essential not only for a 409A valuation but for any equity-related matter.
In the beginning, it has no more than a few rows, but as time goes by, investors join, stock options are allocated, vested, and sold, the cap table will change often. Most successful companies and accounting firms use an automated cap table to max the efficacy and avoid human error. A decent automated cap table should keep track of the frequent changes regularly and update the information automatically. If for some reason you decided to go with the old spreadsheet, be prepared to update the information and go through the data constantly or face future consequences.
Unlike most companies, altshare offers free automated cap table management, so utilizing this incredible tool comes with zero cost. Furthermore, a unique feature called Funding Scenario was recently added to the altshare SaaS (Jul 2022). Now founders can better plan by visualizing all scenarios imaginable with a single click and stay prepared for any vesting opportunity.
Fill and File
Paperwork tends to pile up, some companies invest in the intelligent thing and digitalize it all. Although the files are now digital, it is still an issue to send and share documents securely worldwide. Fortunately, a dedicated data room was made to solve this problem exactly, it is a designated space made for sensitive documents. It especially comes in handy when something from the first years is requested by an investor or an audit team and needs to be dug up.
Data rooms oriented to this field, are made to keep financial information so they are considered highly secured. Some platforms even offer compartmentalization between the recipients themselves. To be able to file everything online, and share it globally, combined with an ability to decide who sees what and how is an ace in the hole for any globally inspiring company.
When considering the concept of a global company it is important to digitalize whatever is possible and work via SaaS platforms to allow access from anywhere. Even after digitalizing everything, it is crucial to stay organized and prepare for any scenario. By keeping a meticulous cap table or by working with an automated one, preparation becomes smoother and more officiant. When everything is completed, keeping the company’s documentation in a designated data room can increase mobility, accessibility, and allow compartmentalization among recipients.
altshare is a leading, fast-growing Equity Management & Compensation Plans Administration solutions provider. We love challenges. We are obsessed with our clients. We are on a mission to redefine the way founders do equity. All our products & services are supported through the altshare Platform - the only equity management platform built for entrepreneurs.