Ready, set, grow: 10 ways to set your startup up for success in 2023

December 19th, 2022   —   Charlie Ross

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It was quite a year, wasn't it? 2022 was all about "revenge", at least according to the internet—revenge spending, revenge travel, revenge parties! If you're not catching up, it's this post-pandemic phenomenon where everybody's all out, making up for lost time and doing everything that COVID restrictions prevented them to do.

But are we done with the revenge yet? In the tech startup world, it looks like 2023 is shaping to become all about sustainability, steady growth, and slowing down to speed up.

Nearly 5.4 million startup applications were filed in 2021 and the trend continues upward. This only means that many startups are hoping to ramp up growth this 2023, while also anticipating tougher competition and capital raising challenges.

With that said, here are some simple but essential tasks to think about to kick off this brand new year.

1. Plan your next capital raise

2023 is going to be a tough year for capital raising—how many times have you been warned about this in the past quarter alone?

Antler's Kevin Brennan highlights all the ways the technology sector broke VC records in 2022:

"Looking at the technology sector—so central to the venture capital landscape—the last year has brought the steepest and widest drawdown for a generation. And the long period of low cost capital supporting fast-paced growth in revenues seems consigned to history, leaving most investors uncertain of how economies will respond to an interest rate trajectory not seen since the 1980s."

CNBC reports that Southeast Asia venture capital firms are expected to be pickier in 2023 than in 2022. Crunchbase reports also that Global VC pullback was dramatic in Q3 2022, and that startup founders are preparing for another recession in 2023.

We get it. The tech startup world is at the edge of its seat, anticipating the challenges of raising capital and sustaining a business in 2023.

Here at Cake, we like seeing situations like this for the opportunity they present. Planning for the rainy days, as they say, rather than wallowing in fear.

"This drier fundraising landscape is a litmus test revealing the true sustainability of business models and sector demand"

says Yinglan Tan, CEO and founding managing partner at Singapore-based Insignia Ventures Partners.

“The companies that actually last this winter will prove to be survivors of the down market situation. So in a way, the market is doing a lot of work for us,”

says Jessica Koh, director of investments at Vertex Ventures.

If you are considering raising capital in 2023, do not fret. It is worth setting out the key details early on. Your vision will become clearer for the entire business by setting your intention now.

  • How much capital do you want to raise? How much equity do you want to give away?
  • What is the value of your company now? What factors might change it this year?
  • Have you reviewed your cap table? Have you considered using modelling to analyze capital raise scenarios?
  • How many shareholders do you have currently? How many more would you be prepared to add to your cap table?
  • Does your shareholders' agreement need updating? And do you really understand the terms? How you understand a deal's terms and how you can discuss and negotiate them can really improve an investor's confidence.
  • Is your employee stock option plan all set up and factored into your fully diluted cap table? Is the pool big enough for future staff to be included?
  • When was the last time you reviewed your startup equity distribution? We've done the math and created a startup equity calculator to help you plan your next capital raise.

Learn more about capital raising

For new learnings and inspiration, feel free to check out also our recent webinars on capital raising. Learn from the experts so you don't have to keep re-inventing the wheel:

2. Set up and/or review your employee stock option plans

If you haven’t set up your employee stock options plan, now is a good time to get it done!

Even if you’re not ready to make the offers, you can set up the pool and the equity grant agreement (plan rules) and have it ready to go. This way, when that unicorn candidate comes along, there will be no delay in getting them the sweat equity offer they expect.

Similarly, when the raise investors come knocking, you can immediately show them your fully diluted cap table, with the stock options plan accounted for.

If you already have your stock options set up, it is worth checking it is all up to date. On Cake, you can check this in your dashboard.

It is also worth thinking about how you’ll incentivise your key staff this year:

  • Is it worth offering ‘top-ups’ to any staff?
  • Should you add a couple of additional milestones, based on the way their role has progressed?
  • Some of your employees could be around for more than 5 years, how are you empowering them to keep going?
  • Are they aware of the potential value of their options? For example, how much would their options be worth if they were to be sold at the value of the next planned capital raise? How much does the company want them to be worth in a couple of years?

Now, look beyond the horizon. Are you looking to expand globally, or seeing it at some point in your future? Now is the time to go global.

3. Develop your global equity plan

2023 is the year to implement your overseas expansion strategy and become a remote and globally distributed team. (If you're not one, yet!)

Asked how they're able to attract talents, Sondre Rasch, co-founder at SafetyWing, answers,

“One is definitely hiring remotely international. There is no better way to start. Number two, if people who work remotely still want the same benefits and have a desire for that, we definitely see the quality of applicants going up when we started adding the benefits in the job ad. That is something that people care about. Especially people who have family or responsibilities.”

Post-pandemic, there's just no other way to attract and retain this new generation of workers but to adapt to new ways of working.

Get the legal work done right

Naomi Seddon, International lawyer and shareholder at Littler (global employment and labor law practice) speaks of the importance of remote work and ensuring that you're doing it the right way:

"We're seeing a lot more companies that want to tap into new markets so that they can access talent. But I think there's another aspect to consider as well, and that is as a result of COVID, obviously, most people were working remotely. Things have changed a little, but what we've actually seen is that employees are demanding more… so what that means is that there's a real talent retention piece to this that needs to be considered as well."

Legal requirements is probably the last thing you want to think about during downtime, but, at least plan for it.

Seddon adds,

“You've got to make sure that the person has the right to work in the country. That's the first thing. The second thing is, you know what employment laws are going to apply to them because if they're based in a different country or a different state, then that's something that needs to be worked through as well.”

Look, we know there are a lot of bells and whistles to consider when sharing equity across borders, which is why most startups don’t even consider this option. We baked most of these legal documents into Cake for this reason, working on the ingredients with our legal partners so that you don't have to.

Get help with your 409a

US-based companies are familiar with 409a valuations, but even if you're not based in the US, you need your 409a done before issuing any stock options to US-based employees.

Cake knows the value of getting this done so we designed a Growth Plan to include a built-in 409a; this way Cake users have one less thing to worry about!

Learn more about building global startup teams

Learn in-depth from our recent webinar on this subject: Building your global startup team with Naomi Seddon, International lawyer and shareholder at Littler; Sondre Rasch, Co-founder and CEO of SafetyWing, and Kyle Croyle from Deel, a global payroll solution for global teams.

4. Automate and delegate

Founders hate admin – shock, horror.

And unfortunately, managing your company’s equity can involve a lot of admin if not set up correctly. Worse, it can become costly when you get hit with unexpected fees or need to pay professionals to fix your mistakes.

Cake has the ability to automate and delegate 90% of the admin involved. For example, you can:

  • Automate your ESOP vesting and management
  • Engage fixed-fee lawyers and accountants to handle certain transactions where mistakes are not worth the risk
  • Move your cap table to software so it’s not being manually updated in a spreadsheet - excuse us, where are our bifocals?

Feel free to book an additional session with our customer success team to make sure you are getting the most out of your account.

5. Prepare for the tax season

Nothing in life is for certain except birth, death, and....well, you know the rest. In the US, January to April doesn’t have to be the time of year for pulling your hair out or stress eating if you prepare for the tax season ahead.

  • Get organized. Start by collecting all your business records and receipts for the previous year. This will help you ensure everything is in order when filing your taxes.
  • Know what deductions you can take advantage of. Many deductions are available to small businesses, so make sure you know what they are and how to get your money’s worth.
  • Seek professional advice. Tax laws can be complicated, and having someone who knows the ins and outs on hand is priceless for your mental health!

6. Extend your startup runway

No one wants to think about the possibility their business might run out of cash. If you want to keep your runway long and strong, there are a few things to consider:

  • Get those grants. Have you explored equity grant opportunities? They can be a great way to fund some of the costs associated with getting off the ground.
  • Tap your employees. Using equity from employees and advisors is a smart way of offsetting cash burn. Depending on how much everyone is willing to invest in the business, this could be an effective way of stretching your resources further without having to dip into savings or take out a loan.
  • Get creative. Think of innovative ways to get more sales. It's time to step outside the box and develop some creative ideas that will help drive sales and increase revenue.
  • Tighten your belt. If it's not necessary, don't spend money on it! This should be a no-brainer for any startup - try to keep costs low to maximize profits and extend your runway further.
  • Consider your options. Corporate credit cards or other non-dilutive funding sources are becoming increasingly popular among startups and can give your business the extra boost it needs to stay afloat.

7. Join a startup community

No lone wolves allowed! Starting a business can be brutal, and it is essential to surround yourself with like-minded people for support. Joining a startup community is one of the best things you can do to succeed in 2023.

Not only will this give you access to valuable resources and mentorship, it also allows you to connect with other entrepreneurs facing similar challenges.

Plus, let's be honest. Starting something from scratch can get lonely! Just having someone to vent your frustrations or celebrate successes with can make all the difference in staying motivated.

At Cake, we don’t just talk about community, we walk the walk. We've partnered with Founder Institute for many collaborations in the past years, and in the last quarter we've also engaged with Founder University and LA-based Launch House.

We also actively engage with our customers, whether to shine a light on their startup stories or to carve a space for learning together.

Our common denominator with these amazing people? We believe in the importance of community. Their existence inspires us to keep going, and we pay it forward by helping other startups get their feet on the ground. It's the gift that keeps on giving.

You too should be part of a community!

Join us on LinkedIn, and keep an eye out on all the virtual learning and social events we've lined up for 2023!

8. Invest in personal learning and development

You can't give what you don't have. To support and encourage learning in your team, you need to lead by example. So why start a habit of broadening your mind and investing into your own learning?

Here are some ideas for investing in brain equity:

  • Online courses. Take online courses in areas that help you understand the industry better.
  • Mentorship or coaching. Hire a mentor or coach who can guide you through growing your startup and keep you on track. Or maybe it's time to add a new startup advisor to your advisory board. Think of an area of weakness and consider finding a seasoned advisor to learn from.
  • Networking. Attend startup events to network, learn from other entrepreneurs, and gain insights into what's working in the market today (and what isn't).
  • Books. Books, the analog type, are great because they force you to take a break from your gadgets and get off the grid. Read books written by successful business owners to understand their strategies for success—you may find some ideas to incorporate into your business plan!

We guarantee when you mix all these ingredients, you’ll be inspired to tackle problems you've set aside for later or specific areas in your business (and life!) where you feel stuck.

9. Give back to the people who contribute to your success

It's time for you to give back to those who have helped build and sustain your startup. Whether it's through stock options, employee referral bonuses, or other creative gifts.

And there’s no better way to let an employee know they’re being cared for than a benefits package. Seddon says,

“[Employees] want benefits that would traditionally be seen as outside the box. But also within the companies that I'm on the board of, one of the things that I was really passionate about was making sure that we have consistency across the organization globally.”

At the end of the day, you want a team that feels they’re respected and well compensated. Jason Atkins, co-founder at Cake Equity, says,

“The more you can show that you're ethical and you're providing good leadership, you've got transparency, you've thought through the complexities, or making sure that your global team will feel empowered, engaged, and fairly treated…it's really going to set you apart and help you hire and retain a great team.”

10. Decompress, rest – unplug!

Mental health and self care have been quite a game-changer for many of us, post-pandemic. Startups have found so much value from encouraging their employees to take care of their health now more than ever.

Cake is all about promoting a creative and healthy lifestyle—we want our team to be well-rested, relaxed, and unplugged from the everyday buzz of business. We know that decompressing can do wonders for productivity in the long run.

So we encourage everyone to take time off when needed—whether taking a walk around your neighbourhood or going on a camping trip with friends.

And during time offs, if you don't have any pressing business, consider shutting down your laptop and stepping away from your desk, make time for rest and recreation, and spend time in nature!

We are certain, as we have seen in our own team, that you will come back more productive, more creative, and mentally stronger.

Peace of mind feels good. Real good.

As a startup founder (or employee), you’re busy working on building your dream (or contributing to it.) So naturally, most of the above will fall into the “I’ll do this later tonight” basket throughout the year.

While we have no doubts about your ability to throw down that 4th espresso and churn it out to the early hours, we are advocates of peace of mind.

A founder is most empowered when they have peace of mind.

  • Peace of mind that everything is working in the background.
  • Peace of mind that everything is done correctly.
  • And peace of mind that they have been proactive and not reactive.

Getting the above done will give you that peace of mind. And it is a bloody nice feeling once you get it!

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This blog is designed and intended to provide general information in summary form on general topics. The material may not apply to all jurisdictions. The contents do not constitute legal, financial or tax advice. The contents is not intended to be a substitute for such advice and should not be relied upon as such. If you would like to chat with a lawyer, please get in touch and we can introduce you to one of our very friendly legal partners.

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