Runway Extension Playbook
Runway Extension Playbook

Runway Extension Playbook

2023, The Turning of the Tide

Over the past decade, we have witnessed a continuous rise in company valuations, accelerating between 2020 and 2022. However, this trend has come to an end.

Since September, Europe has entered a new "P&L leading era," where money no longer flows into vanish metrics, and investors are becoming more selective.

Valuation divided by 2 compared to what could be expected last year, very small investment tickets, first signals of down rounds… While this can be seen as a fair return to normalcy after a few years of insane growth, the coming months will be challenging for entrepreneurs with less than a 24-month cash runway.

This playbook aims to help founders to get the missing months of runway they need before their next fundraising. We hope you’ll find it useful!

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Pauline

Head of Startup Success @ XAnge

⚠️
This document is a confidential playbook for extending runway. It includes information on the financing strategy shift in 2023, identifying runway situation, reducing costs, and more.

This playbook has been created by:

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Pauline / @Pauline Paquet Head of Startup Success 📞 06 63 74 53 84 ✉️ pauline.paquet@xange.fr

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Sarah / @Sarah Green Startup Success Associate 📞 07 62 62 74 83 ✉️ sarah.green@xange.fr

And with all the expertises of XAnge team and our proud partners:

Founders, why should you care about your runway in 2023?

Against a backdrop of geopolitical and energy crisis, the financing strategy of companies is undergoing a clear paradigm shift in 2023. You will be facing:

  • Complex activity financing that is difficult to monitor (persistent supply chain disruptions with impact on working capital requirement, rising inflation, less visibility on business planning...);
  • More restrictive and less advantageous access to non-dilutive medium-long term financing with increasing interest rates;
  • The beginning of repayments of the PGE loans taken out in 2020 and 2021;
  • Dilutive financing processes / M&A operations that are also becoming more complex and demanding.
⚠️
The message is simple: try everything not to need to fund raise within the next 18 months.
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We recommend to companies to be ready not to raise funds in 2023. In other words, they have to have enough cash for 12 months minimum.” - Alexis, Partner @ XAnge
"This advice has two exceptions: either you are a successful business that has tripled its revenue for two consecutive years and then doubled it for two more years, or either you operate a business that cannot afford to stop developing, such as deep tech companies or businesses that require a minimum critical size to become profitable. In both cases, downsizing or postponing your next fundraising may not be possible.”

- Cyril, Managing Partner @ XAnge

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Source:
https://www.meritechcapital.com/benchmarking/historical-trading-data/ev-ntm-revenue
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“Given this context, it is imperative that companies secure their cash position for the next 12 to 18 months, have a precise vision of their cash run way, and implement a cash management policy that allows them to be less dependent on external capital, demonstrate their adaptability, and have leeway in conducting their activities.” - Vincent Hugounenc - Director @ 2CFinance

Playing with new rules with investors

if despite your best efforts you still need to try to raise funds, know the new rules of this playground:

  • Be lucid about your market attractiveness: either you are a climate tech or a martech, your current appealing power is not the same. Be ready to change fundraising direction into cash burn reduction.
  • Get prepared: Investors are more likely to ask for a complete data room that includes mandatory cohort exports for example. They will have time to dig in as investment processes will get longer…
"The most important unit economics are: ARR/employee, NewARR/CashBurn and NRR/Client. - Cyril, Managing Partner @ XAnge
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  • Let's return to basic unit economics: Unit economics based on complex calculations using a cohort analysis have not proven their performance. Investors will revert to P&L metrics that are less manipulable and can be done on their own.
  • Get to know investors more than ever: Fundraising is a long term play, identify very early the right investor and build a long term relationship with them since the beginning of your entrepreneur journey. Make sure you talk with investors having funds to deploy.
🤔
Want to know more about key question to ask when meeting a VC? Check it here:

If you have partnered with great VCs, you can also ask for bridge financing.

"However, keep in mind that VCs usually only perform a "protection" bridge round once and will not accept to do it twice.”

- Cyril, Managing Partner @ XAnge

Put your oxygen mask before helping your company

Creating a business is a marathon. As you read this, you may have been building your company for 4-5 years now, and the next chapter of your growth always seems to be bigger and harder. Chapter 2023/2024 is known as the "potential death" chapter, and it is a very difficult one. As founder, you will learn a lot about yourself and your ability to conduct such a period.

But be careful! Being alone during such a period is not a good idea. If you notice that you have difficulties sleeping, a negative impact on your diet, low energy levels, or a high stress level, it's time to take care of yourself and seek help to take a step back.

🤔
Many founders benefit from having specialized entrepreneur coaches who can guide them through the challenges of building a business. If you need a recommendation, we can provide some. Remember, we are here to support you - you don't have to go through this alone.

Identifying your runway situation

To identify your runway situation, it is first necessary:

  • To produce a 2023 activity budget, including a "normal case" scenario and a "depreciated scenario", in order to anticipate any cash flow needs that may arise.
  • To produce a cash flow forecast including key strategic assumptions, in order to:
    1. Detect any cash flow needs to be addressed in the coming months in advance.
How to calculate your cash runway by Agicap

To calculate your cash runway, you have to calculate your Cash Burn Rate.

These two burn rates: gross burn rate and net burn. These two burn rates are usually calculated for one month, so that a company knows its monthly expenses.

Gross burn rate = Monthly operating expenses (staff salaries, rent and administration costs). → The gross burn rate shows how high a company's total monthly costs are.

Net burn rate = Monthly operating losses = Monthly revenue - Monthly operating expenses. → The net burn rate shows how much cash the company needs to keep its operations running.

The cash runway indicates how long the available cash will last if the company continues to lose money at a certain burn rate

GrossCashRunway=TotalCash/GrossBurnRateGross Cash Runway = Total Cash / Gross Burn Rate
NetCashRunway=TotalCash/NetBurnRateNet Cash Runway = Total Cash / Net Burn Rate

Let’s take this case:

  • 10 millions euros cash in the bank
  • Monthly revenue is 1 million euros
  • Monthly operating expenses are 1.83 millions euros.

Your Net Burn Rate is thus 0.83 millions euros (1 - 1.83) and your cash runway is 12 months (10/0.83).

If you assume flat revenues for the sake of the exercise, here are the cost reductions you need to implement to reach different cash runway objectives :

  • 18 months (increase of 6 months) > reduce your costs by 15% down to 1.56M€ every month. You need to save 270k€ every month.
  • 24 months (increase of 12 months) —> reduce your costs by 23% down to 1.41M€ every month. You need to save 420k€ every month.

🤝 Get helped on business planning and cash monitoring:

🤑 BEST

24 Months

You’re comfortable in your business running and maybe are still hiring.

📊 GOOD

18 Months

You’re safe for the next 18 months and are looking to extend your runway.

SO-SO

>12 Months

You’re in survival mode. Need to save money asap.

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Make sure you don’t run a spendthrift business

Before putting efforts in extending your runway, make sure it worth it. There is few key P&L based unit economics able to tell you if you are running a promising business. Let’s assessed yours!

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Warning: these are very SAAS B2B focused unit economics. Make sure to use relevant ones for your business type.

Are you spending more money to acquire new customer than customer revenue?

ARR/EmployeeARR/Employee

Do you have difficulties to gain new customers?

CashBurn(year)/NewARR(year)CashBurn(year)/NewARR(year)

Do you attract and retain customers?

NetRevenueRetention/CustomerNet Revenue Retention/Customer

How to interpret the result?

🟢  >140 excellent

🟡  >100 good

🟠  >50 to 100 to be improved

🔴  <50 danger zone

How to interpret the result?

🟢  <0,5 excellent

🟡  0,5-1 good

🟠  1-2 to be improved

🔴  >2 danger zone

How to interpret the result?

🟢  >110-120 excellent

🟡  >100% good

🟠  90 to 100% to be improved

🔴  <90% danger zone

Is your sales machine working?

There are also specific metrics showing your ability to be profitable and predictable in your business ramp up. Stéphane, CEO @ AtScale share with us the Key Sales Unit Economics to focus on.

Sales team profitability

ARR/SalesTeam=min.4SalesRepsSalary+SalaryTaxesARR/Sales Team = min. 4* Sales Reps' Salary + Salary Taxes

How to interpret the result?

So, if your sales rep costs 80k€ per year of gross salary, meaning 116k€ (adding in France 45% of taxes), it means that each sales rep should generate over 12 months 464k€ of ARR, when they are fully-ramped.

Sales time to hit full speed

FullSpeedQuota/MonthsFull Speed Quota/Months

How to interpret the result?

It’s a key financial metric to pilot new sales hires. The time to hit full quota should not exceed 3 months for SMB (ARPA €5k-€20k) and Mid-Market (ARPA €20k - 50k€) oriented companies. This can go up to 6 months for companies targeting the Enterprise segment (ARPA >50k€) companies.

Sales Cycle Length

ClosingDate/SalesCycleStartDateClosingDate/SalesCycleStartDate

How to interpret the result?

Finally, the sales cycle if you target SMB companies should be between 1 to 4 weeks, Mid-Market 4 to 12 weeks, Enterprise 12 to 36 weeks.

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If you don't have those indicators post Series A in your excel sheet, something's wrong and needs to be improved. - Stéphane, CEO @ AtScale

Meanwhile extended your runway by optimizing and reducing costs, try to work on those metrics. They will be key to lead your business toward profitability.

Additional resources on business health 📚
Cost Leadership at Fast-Growing Tech Companies: The Sector’s Unsung Hero
Growth Calculators - Calculators for Marketers and Startups
Hacking Software’s Rule of 40
Operating Expense Benchmarks for SaaS Startups

Playbook unfair advantages & events summary

Find below a summary of all the playbook unfair advantages. There are dedicated to XAnge Family companies. Please, do not share this page outside of XAnge’s portfolio companies.

Extend your runway by reducing …

Your non profitable activities (and focus on profitable ones)

Shutting down a non profitable business units

Deciding to shut down a business unit is never easy. Here are some key questions to ask yourself before doing it:

Q°:
  1. Is this business unit break even? Are sales paying for their salaries and direct costs?
  2. Is this business unit highly strategic for my short and mid-term play? Does it have high-value synergies with others today or in the near future?
  3. Does our leadership team invest enough/too much time to make it work?
  4. Do we have enough money & time to invest to make it work? If so, for how long?

Don't forget that 90% of the time, if a new business unit or new geo is not taking off, it's a people issue.

Assuming that you have a proven PMF with your core product in your domestic market and that you have top players internally who can support new sales reps in the new business unit, and except if you're operating under serious legal constraints in the new market, it's down to a people issue. By that, we mean that not enough work has been done to speak with prospects to adapt the product to a new market, or new sales reps don't have a sales playbook, have not been trained on the sales playbook, they lack basic sales skills etc.” - Stéphane, CEO @ AtScale

To launch a new market or product, you need to start with seasoned sales (3-5 years proven experience as AEs). If you have opened a new geo or launched a new product with junior reps, or reps not based in your headquarters close to the knowledge of the central team, shut it down, it won't work.

🤝 Get helped on business efficiency:

Stop working with non profitable clients

Being non profitable does not necessarily mean that all customer and/or product segments are. Therefore, it is important to define which segments and calculate their profitability. Then, you can make the decision to stop serving the segments where you are experiencing the most losses. This means no longer signing new similar contracts and potentially terminating current contracts. Before cutting off, always try to increase the selling price. You can also set a minimum price below which you refuse to sell or negotiate with your customer for a business contribution.

Increase your average basket size
“At Agicap, at the beginning of 2022, we reached a historic milestone with the launch of 2 new products: a supplier invoice payment solution and a customer payment collection and reminder solution. We could have decided to stop the development of these products to reduce costs. But instead, we increased our investments to accelerate their launch to the market. A few months later, a significant portion of our new MRR in France comes from these 2 products, which greatly increased our average basket.” - Clément Foltzer, Head of Sales @ Agicap

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Your people costs

Optimize your labor costs - Coming soon!

Learn how to optimize your:

🤝 Get help on Labor costs:

Decide if your situation involve a team reorganization: Depending on your cash runway and your 1 year vision, your organization structure can only go 3 ways and implement related changes :

✅ Grow

⚠️
If you’ve come across this content and think you might embark on a reorganization journey, please feel free to contact the Startup Success team for support.

🟰 Maintain

→ Freeze hiring

→ Replace turnover

↘️ Downsize

→ Don’t pursue trial periods or short terms contracts

→ Don’t replace turnover

→ Ultimately, layoffs or reduction in force

To identify either you have to maintain or downsize your headcount, you have to critically examining your organizational structure. Before taking actions, here are some advice to help you pin down:

Decision-making funnel for considering a reorganization:

Here are the 4 steps to perform:

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Don’t think short term: Rethinking your company is often overlooked by startup founders. It involves fundamentally reconsidering how your team operates for the next year or longer. Implementing changes takes time, particularly if layoffs are involved.

Questions to ask yourself
  • Where do you want the organization to be in the future?
  • How does you strategic planning looks like? Look at your OKRs.
  • What are the main projects for the coming year?

Analyze what works and what doesn’t the current organization: It's important to realize that the situation that prompted the desire for a reorganization is a consequence of your current state and its dysfunctionality.

Questions to ask yourself
  • How can I use the current organizational structure to streamline the business while keeping the target objectives in mind?
  • What is the organization’s current state, as it relates to the situation?
  • Where do you want the organization to be in the future? What do you need to get there?
  • How do you think you will get there?
  • What works? What doesn’t?

Don’t remove positions you may need later (⚠️ avoid this mistake⚠️ ):

When considering removing functions or activities, weight the long-term impact and ensure alignment with your organization's goals and values.

The risk in removing a function is that you may need it again in six months to execute your strategy. Rehiring will take time, money, and a period for ramp-up. Therefore, consider reallocating functions before removing them if you anticipate needing them again in the near future.

Questions to ask yourself
  • Will you need this function anymore?
  • Are you closing down an activity? Or just shifting focus?

Respect the Span of Control:

The Span of Control is the ratio of employees reporting directly to a manager. In a changing organization, you may need to alter your managerial relationships. A good average for span of control is between 5-7, although it can be much larger for some teams (engineering, customer success…).

Once decided, prepare your reorganization: Balancing your headcount can mean different things depending on your situation. This is a complex topic that requires input from multiple parties and careful consideration before any decisions are made.
  1. Designed your target organization depending on the strategy for the coming 12/18 months, you need to work on your target organisation to be able to turn your vision into reality ; You can use the Organizational Realignement Plan
  2. Identify the skills and know-how required: Your goal is to define with your team (manager, HR and any other relevant third party) your current and open headcounts and split it in 3 categories below.
  3. Balance your headcount depending on your strategy, cash and organization resources.

MUST HAVE

NICE TO HAVE

NOT NEEDED

Questions to guide you place positions
  • What positions are needed? (refer to Steps 2 and 3)
  • Will these positions be needed for the long term or just for a specific project?
  • Am I in need of A players? Or do you need a hands on B player?

HIRE

→ New team members → Quiet hires by using Providers/Freelance for specific needs.

TRANSFER/PROMOTE

→ Use existing employees to fill needed positions. Recruiting from the outside can cost more and ramp up will be slower.

LAYOFF

→ When positions are not needed anymore.

⚠️
The following are not XAnge’s advices but extracts from outside sources:

Before considering layoffs, here are some options you can consider to reduce your HR costs (source: How to prepare for and communicate layoffs - Pyn):

  1. Delay or freeze hiring: Can you move hiring resources to a different quarter? Look at the headcount to delay or reprioritize hires.
  2. Reset the senior/junior employee ratio: Depending on the company, senior leaders should make up less than 5% of the headcount of your organization. If it is significantly higher, explore ways to close the gap between the compensation of senior and junior staff.
  3. Decrease perks, travel, and expenses.
  4. Salary cuts: Especially at the senior level and for those with variable on-target earnings.

If you need to conduct layoffs, you can use the following criteria to help you decide (source: What criteria should be used in selecting employees for a workforce reduction? - SHRM):

  • Seniority: last in, first out.
  • Employee status: deprioritize part time, freelance and other non core employees;
  • Merit-based (or performance-based): are they A players?
  • Skills-based: do they have the skill and know-how you need for your target Org?
  • Multiple criteria: you can also do mix between the different options above.
Additional resources to dig deeper 📚

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Operationalizing your reorganization - focus on layoffs:

Below is a list of the different kinds of levers that French law can provide for a layoff shared by Margaux Tedesco.

2023 03 09 - Note réorganisation V1.pdf152.5KB
⚠️
Disclaimer: The information provided in this document is for informational purposes only and does not constitute legal advice. If you are considering a layoff process, please consult with your legal team or reach out to us for recommendations on legal professionals who can assist you.
🇩🇪
Labour Laws in Germany If you’re planning layoffs in Germany, don’t hesitate to book an Office Hours with our Labour Law Expert. Vittorio helped us put together the following content.
During economically stable times, dismissals for personal or conduct reasons are more common. However, during times of economic crisis, companies may resort to dismissals for operational reasons in order to reduce their staff.

Q&A: important things to have in mind for Germany

What is the “Unfair Dismissal Act”?

If you are an employer in Germany, it's worth noting that your employees are generally safeguarded against unfair dismissal by the Unfair Dismissal Act (Kündigungsschutzgesetz).

In practice, this means that as an employer, it is your responsibility to ensure that you can provide a valid operational (e.g. redundancy), personal (e.g. long-time sickness) or behavioural (e.g. breach of duty) reason for terminating an employee's contract of employment. However, there are some exceptions to this protection: If your company has 10 or fewer full-time employees or if an employee has been in their position for less than six months, they may not have the same level of protection. In such cases, you are not required to provide a justification for dismissal, although general anti-discrimination laws still apply.

Please note that certain groups of employees are always (i.e. regardless of the number of staff and/or the seniority in their position) granted extra protection against dismissal. These groups include:

  • Pregnant women or mothers who have recently given birth
  • Severely disabled employees
  • Employees on parental or maternity leave
  • Members of the works council (“Betriebsrat”)

More information in the Kündigungsschutzgesetz (KSchG):

What is the “Social Selection” (Sozialauswahl) in the context of termination?

In cases of dismissal for operational reasons (i.e. the reason for terminating stems from the employer) in a company subject to the Unfair Dismissal Act (see question above), employers must select the individual to be dismissed according to so-called “social criteria”, such as:

  • seniority (duration of employment);
  • age;
  • number of dependents (children…);
  • disabilities.

Note that a "social selection" must only be conducted among comparable employees on the same or similar level within the organization's structure. Only those employees who are least in need of protection may be dismissed.

  1. To begin, identify a group of employees who are similar and meet the criteria for social selection.
  2. Then, use the social criteria mentioned above to make a decision.
  3. Consider whether certain individual employees should not be included in the social selection because their continued employment is necessary for the company's legitimate interests.
  4. Finally, consider whether you can offer the selected employee a suitable alternative employment. If not, you may terminate.

If you are aiming at dismissing a particular employee whose position is not needed any more and there is no comparable employee in the company, you don’t need to conduct a social selection. Eg: you withdraw from the Spanish market. You only had one Spanish-speaking customer care employee. You don’t need that employee any more.

More information in the § 1 Sozial ungerechtfertigte Kündigungen of the KSchG:

How long are notice periods?

The employer's statutory notice period for termination of the employment relationship increases over time:

Years of Employment
Notice Period
Less than 5
1 month
5+
2 months
8+
3 months
10+
4 months
12+
5 months
15+
6 months
20+
7 months

Unless otherwise agreed, termination always takes effect at the end of a calendar month, i.e.: Termination served to employee on 5 March + 1 month of notice period = 5 April à effective at the end of April, i.e. 30 April.

Notice periods can be extended contractually (only in favour of the employee) an apply regardless of whether the employee enjoys the Unfair Dismissal Act protection or not.

Note: Notice of termination must always be given in writing on a paper original signed by the employer (no digital or electronic signatures!) and handed over or served to the employee as a paper original.

More information in the § 622 of the German Civil Code:

Can a mutual agreement about the termination can be settled?

Termination by mutual agreement is quite usual, and negotiations often begin with a calculation of 50% of a monthly salary per year of service with the company.

Both employer and employee must sign a written termination agreement that outlines the date of the employment end, pay leave, severance payments, and job reference.

It is important to draft written agreements with legal advice to avoid costly errors on both sides.

Note: Termination agreements must always be done in writing on two paper originals signed by the employer and the employee (no digital or electronic signatures!).
Support your departing employees:

Below is a list of the different kinds of levers that can help you to communicate and supporting departing employees.

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Your offices costs

Usually, offices is the 2nd cost item of a company P&L. In addition, rent indexations will be higher (from 2 to 3% to 6 to 8% in 2023). It’s time to optimize rent with maximum profitability.

Calculate your office space needed according to your growth plan and with maximum profitability

To determine a target area, you need to take into account:

🏠  I’M LEASING

Once I have determined my target surface area, if it differs from my current surface area, I compare the "stay or leave" options.

  1. I conduct an audit of my lease.
  2. I compare rents, charges, and taxes with market prices.
  3. I negotiate.
Negotiate with your lender

Do you have a higher rent than market practices? If so, you can easily negotiate with your lender. Paris Centre is still in demand because many companies prefer to rent smaller but central offices rather than larger ones in the suburbs.

However, some landlords prefer to secure against rental risk in exchange for a lower yield... In other words, if you commit for a several years, I can try an approach even in a tight area.

Did your lender made mistakes? 40% of the leases have anomalies. If an error is committed such as error in the indexation of the rent, re-invoicing of charges not provided for in the lease, ... Then possibility to recover the cash over 5 years.

Sublease your available seats If you have too much space or too many seats, don’t hesitate to sublease seats. There is plenty of companies looking for offices for few months. Be careful though, it can be difficult to manage if your activity need privacy or if you make developers and sales cold callers live together…
Get back your security deposit It can be reduced or simply removed (or switched to GAPD). It can be a cash gain of up to 6 months' rent. If you are a good lender (pay your rent for enough time), the landlord may make an effort since he is confident compared to the beginning of the relationship.
Stop your lease to take a co-working or sublease solution Even if the co-working cost is higher, it can be more profitable for 3 years depending of staff variation. In a classical lease, if people headcount strongly grow, you have to move to new offices and this generate a lot of CAPEX... (refurbishment, decoration, moving relative costs…). Whereas using co-working will allow to have access to other offices as my business grows. This shift typically occurs around 4 years. Therefore, it's important to consider this duration when signing a traditional lease of 3/6/9 years. Predictability of staff and work modes that allow for densification of my spaces are the two key points to consider.

🏠  I’M CO-WORKING

Change co-working for a just opened one or difficult to fill

WEWORK, MYFLEXOFFICE, DESKEO, MORNING, GUSTAVE COLLECTION, WOJO, SPACES, NEWTON OFFICE… They are all developing new co-working spaces. Check the newest ones, the price will be more attractive. Example :

Ultimately, from city center to off-center We don’t recommend it unless this is your last resort. Expectations on offices increased sharply to offer a unique experience that can’t be replicated remotely. The office is expected to provide an environment that supports the wellbeing and productivity of employees in the best way possible.
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“Geographic location is a key factor in recruiting and retaining talent, which is why companies prefer to take less office space but more central one and with additional services.” - Arnaud Paquet, Real Estate Fund Manager @ AXA Investment Management

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Your stack cost (20%+ of savings on annual SaaS spend)

Did you know that SaaS pricing inflation is growing 4x faster than market inflation? Between 2010 and 2020, global annual SaaS spend increased from $13b to $157b.

SaaS spend increased by 26% in the months following the initial lockdown in 2020, and has only continued to grow in the years since.

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We know that on average, companies spend $4,552 on SaaS per employee / year. This figure is significantly higher for sales teams, with organizations spending around $9,000 / year on SaaS for each sales employee.

90% of SaaS buyers are overpaying by an average of 20-30% a year. With $1 in every $8 going to SaaS in the modern organization, paying the right price for software could easily extend your runway by a few months.

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Additional resources on stack cost reduction 📚
SaaS Inflation Index: 2022 | Vertice
We stand to save $7m over five years from our cloud exit
The Ultimate Guide to Purchasing Sales Software
How to cut AWS costs as a Startup?

Additionally to stack cost reduction, and depending on your business, you can try to reduce your main providers costs.

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Postpone PGE loans payment deadlines

Companies can freely receive assistance from "la Banque de France", thanks to an anonymous process, to negotiate a PGE reimbursement schedule with their bank.

The duration of the extension is assessed on a case-by-case basis depending on the situation of the company. In general, the extension can be up to 2 additional years compared to the initial schedule (which is normally limited to a maximum of 6 years), providing a possibility of loan repayment over a maximum of 8 years in total.

In exceptional cases, the duration of this extension can go up to 4 additional years compared to the initial schedule, which is a maximum of 10 years in total, without any additional premiums.

Process to follow
Obtain a certificate from their accountant or auditor stating that the company is unable to meet the repayment deadlines of the State-guaranteed loan in 2022.
Provide a cash flow forecast for the next 12 months.
Submit a statement of their tax and social debts.
Provide any other document that justifies the company's difficulties, their temporary nature, and the commercial and financial prospects that will ensure its sustainability (e.g. order book).
Contact the credit mediator directly via:
🤔
The “Banque de France” has a dedicated "startup correspondent" that can provide guidance in choosing and understanding financing mechanisms such as loans. It can also serve as a reference for quoting scale-ups, particularly those listed in the NEXT 40 or FT 120.
📧
Contact your TPE/PME correspondent via this email: tpmeXX@banque-france.fr (XX = department number) or startup@banque-france.fr or through your startup correspondent https://entreprises.banque-france.fr/startup

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Find non-dilutive cash

Improve cash collection process

In 2022, companies are facing an explosion in the length of payment delays, increasing from an average of 11 days in 2021 to 17 days.

The payment of clients is not in the control of sales reps. Hence, the Cash Collection team should be on top of this topic. If your company is small, it's the responsibility of the CFO to do the job of cash collection.

“AEs should be targeted on ARR. Period. On large opened and overdue invoices, the person in your company with the closest connection with the client (usually Customer Success) should of course strongly assist your CFO in collecting cash. However, bear in mind that each hour focused on collecting cash by your Customer Success team is not focused on upselling clients. ” - Stéphane, CEO of Atscale
🤔
Want to know more about CFO role and bonus criteria? See our resource: Construction du variable du CFO

Some advice for your sales team by Agicap :

  • Always ask for a deposit.
  • Automate the follow-up of your unpaid clients with tools such as: Agicap 😁
  • Follow-up with your clients immediately in case of non-payment, first by phone then by email. Don't wait for several weeks thinking they will eventually pay.
  • Do not sign new contracts with clients who have outstanding payments until they are resolved.
Additional resources on cash collection 📚
Les retards de paiement explosent depuis le début de l’année
L'European Payment Report 2022 | Intrum
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Pre-financing your CIR (min 92K€ cash in)

🤔
Pre-financing your “CIR” (Crédit d’impôt Recherche and Crédit d’impôt innovation) is an advance payment of the research tax credit already declared (CIR of year n-1 or earlier) or in the process of being established (CIR of the year in progress). It allows companies to earn 6 to 12 months of cash-flow.
👤 Relevant for? Companies with research tax credit =/> 100 k€/year and not paying corporation income tax.

Unless these two conditions, all companies are eligible without any restrictions of size or area, no financial backing (revenues, profit, funds).

💶  Cash you can get out of it? 92,5% of eligible expenses.

After the first funding stage we have two deductions

  1. The first is called “individual deduction”, equal to 5% of the receivables
  2. The second is called collective deduction, equal to 2,5% of the receivables this is a mutual guarantee fund which aims to cover the risk of unpaid funds. This fund is dissolved on the maturity date of the fund which is expected in 5 years (end of 2025). At this time we will return all the deductions minus any losses that the fund would have had.

After repayment by the public treasury

  1. The individual deduction is returned to you immediately
  2. The collective deduction is refunded to you upon the liquidation of the Fund (ie after 2025)
📆  Time to cash? ≅1 month
  • The agreement in principle is communicated within 7 days after your request on our online platform
  • The funds are made available within 48 hours after the submission of the audit report
🏉  Process and relative costs? 5 steps, processing time 4 weeks. Cost = fees + interest rate.

CIR prefinancing can be performed by:

  • a bank;
  • a specialized provider such as Neftys;
  • BPI France.

For a specilized provider such as Netftys, the cost of operation is divided into 3 parts:

  • Processing fees ~1% of the amount of receivables
  • Audit fees.
  • And financial costs amounting to 4.25% per year (first funding stage of 92,5%) + Euribor 6 Months

All fees are deducted from the first payment.

The prefinancing process is done in 5 steps, very simple and 100% online:

  • Simulate your financing
  • Complete your application online (cir, corporate information and treasury position)
  • Validation of your demand by the committee
  • Audit (the longest step of the process lasts 10 days on average)
  • Signature and release of funds

*Euribor: the basic rate of interest used in lending between banks on the European Union interbank market and also used as a reference for setting the interest rate on other loans.

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Public grants and subsidies

There are more than 2000 grants and subsidies available in France. All companies are concerned, startups and scale-ups and SMEs. The main funders are: BPI France, Territories (Regions), National agencies (ANR, ADEME, etc.), Europe (Horizon Europe).

Some grants and subsidies are co-managed by several funders. For example: Innov'UP can be instructed in first reading by BPI France and granted by the IDF region.

Application documents needed 📚

Most of the grants and subsidies are based on the same scheme and mainly require a written presentation (and sometimes in addition an oral presentation) whose template is imposed by the funders and shall contained:

  • Detailed presentation of the company,
  • Planned development program (R&D, Innovation, Industrialization, international development, etc.),
  • A financial projection of the program budget and the company's business plan.

The grants and subsidies most commonly used by tech startups and scaleups are : French Tech Scholarship, ADI (Recovery advance, PRDI), Innov'Up (IDF region), Aide au Développement Deeptech (ADD).

Added to this list, there are innovation competitions, which are based on the same mechanism as grants and subsidies, with a stricter selection of applications : iNov (PIA), iLab, iDemo, Innov'Up Leader PIA, EIC Accelerator (Horizon Europe).

"We have observed that access to medium to long-term non-dilutive financing has become more restrictive and less advantageous with the increase in interest rates.”

- Vincent Hugounenc - Director @ 2CFinance

🏆  Top 10 Grants and Subsidies according to Jérémy Ohayon

Grants and subsidies (Top 10)
Funders
Frequency/Time in the year
Startups
Scaleup
SMEs
Bourse French Tech
BPI France
As time goes on
X
ADI (PRDI ou Avance récupérable)
BPI France
As time goes on (best time : just after fundraise)
X
X
X
Prêt d'amorçage (PAI)
BPI France
As time goes on (best time : just after fundraise)
X
X
ADD (Aide au développement Deeptech)
BPI France
As time goes on
X
X
iLab
BPI France / MESR
Every year, 1 call / year
X
iNOV
BPI France / Ademe
Every year, 1 or 2 calls / year
X
X
X
Innov'UP
Région IDF / BPI France
As time goes on
X
X
X
Innov'Up Leader PIA
Région IDF / BPI France
Every year, 1 or 2 calls / year
X
X
X
EIC Accelerator
UE
Every year, 2 or 3 calls / year
X
X
X
1er Usine
BPI France
New grant (1 or 2 calls / year)
X
X
X

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Factoring

🤔
Factoring is a short term financing technique for B2B companies consisting in selling its invoices to a Factor in exchange of direct access to invoice amounts, less factor fees. The factoring service includes :
  • Invoice financing
  • Credit Insurance (and creditworthiness information)
  • Recovery service

French Factoring market has more than doubled between 2012 and 2022, settling at €380 Billion.

👤 Relevant for? B2B companies, of all business sectors (IT Service, Software etc.) up to € 20M ARR. Companies based in France, UK, Poland, Netherlands.
💶  Cash you can get out of it? 70% to 90% of open invoices transmitted.

Facility size up to 2000 K€ Turnover or ARR up to € 20M.

📆  Time to cash? Facility settlement within a week, Funding of your invoices issued within 2 working days.

To be implemented, a factor requires a brief study of the company profile, customer base, perspectives. First contract activation can be done within one or two weeks.

  • Digital sector invoices types are broadly accepted :
    • Set-up
    • Software subscription
    • Renewal
    • Term to Expire
    • Etc
🏉  Process and relative costs? A percentage of financed invoices ; based on volume, billing type, quality of the billed customer (approx + or - 1%) + A Financing commission (base on Euribor 3 months + a spread)

Factoring is generally a 1 year renewable contract. Fees are a percentage of the financed invoices by the Factor, and a financing commission (based on Euribor + %spread)

Additional resources on factoring 📚
Qu'est ce que l'affacturage : ce qu'il faut savoir | Définition

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Revenue Based Financing

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Revenue Based Financing (RBF) is a debt method that involves receiving a cash advance on anticipated future revenues. Complementary to equity money and bank debt. The European RBF market has grown rapidly since 2019. In the first quarter of 2022, RBF European fintech startups raised a total of 220 million dollars, including Silvr's successful fundraising of 130 million euros.
👤 Relevant for? Relevant for all digital companies (eCommerce, SaaS, Marketplace, Mobile App, etc.), based in France and Germany, with at least 1 year of business history and minimum 120K€ turnover per year.
💶  Cash you can get out of it? Tickets size from 10K€ to 800K€ every month. Approximately 10M€ max each year.

Facility size up to 2000 K€ Turnover or ARR up to € 20M.

📆  Time to cash? 24 hours to get an answer. 48 hours to receive the funds.

To be implemented, a factor requires a brief study of the company profile, customer base, perspectives. First contract activation can be done within one or two weeks.

  • Digital sector invoices types are broadly accepted :
    • Set-up
    • Software subscription
    • Renewal
    • Term to Expire
    • Etc
🏉  Process and relative costs? Fixed commission between 3 and 12% of the total amount. Average process time 48h.

Automated self-sign-up.

1) Enter company information.

2) Connect bank accounts. 3) Connect software accounts.

4) Receive an offer.

5) Meeting with an Investment Associate to discuss the offer.

6) Sign the contract.

7) Get funded.

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In a turbulent financing ecosystem, leveraging the best solutions for your cash flow is mandatory. Maximizing each source of financing must be done to address the various cost items you have.Revenue-based financing becomes a structural partner of your business alongside bank debt and equity.” - Charles, Strategic Partnerships Manager @ Silvr
Additional resources on revenue based financing 📚
RBF (Revenue Based Financing) : définition et utilisation

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Loans & Short term cash placement

Choose the relevant tools according to your situation:
👤
BPI loans

Current interest rate: 6/7%

👤
Bank loans

Fix and progressive rates, banks can lend money to startups along other banks. It’s a classical solution for extending runway.

Current interest rate: 4.5-5%

As for PGE, the SVB episod remind us that it’s important to have a strong relationship with traditional banks and diversify cash allocation. It’s also true for loans. If you don’t have a strong relationship with traditional banks, it will be more difficult to get one then.” - Pauline, Head of Startup Success @ XAnge
👤
Venture loans

What? High risk loans with high and composed interest rates. They can include options to buy companies shares and involve very strong warrants allowing to get the money back in case of incident. Venture loans are usually for loans of +20M€. The European Investment Bank is the most used/preferred venture debt actor (and public one) when considering venture debt.

Current interest rate: 7-15%

Don’t forget to take advantages of your cash (if you have some):

There are two ways to make profit of your cash:

  • Via “Current account”: currently average 1.5-2%.
  • Via short term placements (“comptes à termes”): Interest rates of short term cash placement are more and more interesting (currently 3/5%).
Short term placements (or “comptes à termes”): It’s a fixed-term deposit account that generates interest calculated at a fixed rate and paid at the end of the investment period.
PROS 🟢
→ Guaranteed (contractual) rates over an average term; → Possible withdrawal at any time at rates determined at the start, subject to a notice period of 32 calendar days; → Capital guarantee at any time; → Possibility to split the invested amount into several accounts to facilitate possible withdrawals before end of engagement period; → No fees.
CONS 🔴
→ In case of early repayment before end of engagement period, short term account will be closed and penalty applies. → Interests are not capitalized and will be paid at the end of engagement period or at early withdrawal.

To know more about cash placement, contact:

Key bank contacts able to understand startups:
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Thomas Bourlot - Pôle Innovation

thomas.bourlot@bnpparibas.com 06 63 46 11 82 Maxime Andrieux Chargé d’affaires entreprises maxime.andrieux@bnpparibas.com 06 76 93 50 22

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Idris Hedaraly Directeur Centre d'Affaires Tech idris.hedaraly@socgen.com
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Laurent Blanchard - Cellule Startup

laurent.blanchard@arkea.com

06 46 46 62 36

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Pierre Pradayrol

Directeur Filière entrepreneurs chez Caisse d'Epargne Ile-de-France

pierre.pradayrol@ceidf.caisse-epargne.fr

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Sophie Magné Responsable du Marché Entreprises Innovantes et Start-up

sophie.magne@rivesparis.banquepopulaire.fr Thierry Maurer Directeur du centre d’affaires innovation thierry.maurer@rivesparis.banquepopulaire.fr

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Playbook Additional Resources

Qu'est ce que l'affacturage : ce qu'il faut savoir | Définition
Factoring
Marchés de l’immobilier français
Metrics That Matter – Three Analyses for Startups and Scaleups to Track on the Path to Profitability | by Paris Heymann | Index Ventures
Business Health
Cash burn rate: meaning and formula
Cash Runway
L'European Payment Report 2022 | Intrum
Cash Collection
Les retards de paiement explosent depuis le début de l’année
Cash Collection
How to cut AWS costs as a Startup?
SaaS Inflation Index: 2022 | Vertice
The Ultimate Guide to Purchasing Sales Software
We stand to save $7m over five years from our cloud exit
Cost Leadership at Fast-Growing Tech Companies: The Sector’s Unsung Hero
Business Healthyness
Growth Calculators - Calculators for Marketers and Startups
Business Healthyness
Hacking Software’s Rule of 40
Business Healthyness
Operating Expense Benchmarks for SaaS Startups
Business Healthyness
A balanced Approach to Growth
Reorganization
Building Your 18-month Organization Chart Target
Reorganization
Designing an Organizational Structure for Your Startup
Reorganization
Functional vs Unit Organizations
Getting reorgs right
Reorganization
Headcount Calculator
Reorganization
Organizations and Hypergrowth
Reorganization
Planning and Managing Layoffs
Reorganization
Reduction in Force Toolkit
Reorganization
Startup Best Practices 2 - Startup Team Sizes
Reorganization
RBF (Revenue Based Financing) : définition et utilisation

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