Startups & Early-Stage Tech Knowledge Center
Explore our verified library of Startups & Early-Stage Tech transactions. Every entry is reviewed for IFRS compliance and real-world accuracy by our technical accounting team.
SAFE - Issuance of YC Simple Agreement for Future Equity
Recording the receipt of cash from an investor under a SAFE (Simple Agreement for Future Equity) — the dominant seed-stage instrument — classified as a liability or equity depending on its features.
SAFE Conversion - Converting to Preferred Stock at Priced Round
Recording the conversion of outstanding SAFEs into Series A preferred stock at the qualifying financing — applying the valuation cap or discount (whichever gives the investor more shares) to determine the conversion price.
Convertible Note - Seed Financing (Debt with Conversion Feature)
Recording the issuance of a convertible promissory note — a short-term debt instrument that converts to equity at the next priced round — including interest accrual and potential warrant coverage.
Convertible Note - Monthly Interest Accrual
Accruing interest on outstanding convertible notes at the stated rate — even though interest is typically not paid in cash but rather converts to additional equity at the priced round.
Convertible Note - Conversion to Preferred Stock at Priced Round
Recording the conversion of convertible note principal and accrued interest to Series A preferred stock — extinguishing the debt and accrued interest liabilities and issuing preferred equity.
Series A Preferred Stock - Issuance at Priced Round
Recording the issuance of Series A convertible preferred stock to venture capital investors — the first institutional priced round with negotiated rights, preferences, and protections.
Preferred Stock - Liquidation Preference (Balance Sheet Disclosure, Not Journal Entry)
Disclosing and calculating the aggregate liquidation preference of all outstanding preferred stock series — the amount preferred holders are entitled to receive before any proceeds go to common stockholders in a liquidation or M&A exit.
Preferred Stock - Cumulative Dividend Accrual (Non-Cash, Compounds Annually)
Accruing the cumulative preferred stock dividend that compounds annually even if not declared or paid — reducing retained earnings and increasing the carrying value of the preferred for EPS and liquidation waterfall purposes.
Down Round - Anti-Dilution Adjustment to Preferred Conversion Price (Weighted Average)
Adjusting the conversion price of existing preferred stock series when the company raises a new round at a lower price (down round) — triggering the weighted-average anti-dilution protection.
Venture Debt - Facility Drawdown (Silicon Valley Bank / Hercules / Western Technology)
Recording a drawdown on a venture debt facility — a loan product designed for VC-backed startups providing non-dilutive growth capital, typically with warrant coverage and an end-of-term payment.
Founder Stock - Initial Issuance at Par Value (Cheap Stock)
Recording the issuance of founder common stock at a nominal price (typically $0.0001 or $0.001 per share) — the 'cheap stock' issued before any external investment or 409A valuation.
83(b) Election - Tax Accounting for Early Exercised or Vesting Restricted Stock
Recording the tax and compensation accounting implications of an 83(b) election — where the founder or employee elects to include the spread between FMV and price paid as ordinary income NOW rather than as shares vest.
Stock Option Grant - Employee Options (409A FMV Exercise Price, ASC 718)
Granting employee stock options with an exercise price equal to the 409A-determined FMV of common stock — creating a stock-based compensation expense amortized over the vesting period.
Cheap Stock - Compensation Expense When Options Granted Below FMV (409A Problem)
Recording immediate compensation expense when options or stock are issued at a price below the 409A-determined FMV — a serious tax and accounting issue that triggers re-measurement and potential employee penalties.
Stock Option - Early Exercise Before Vesting (83(b) Election on Exercise)
Recording the early exercise of unvested stock options by an employee — paying the exercise price in full for unvested shares, filing an 83(b) election to freeze the FMV for tax purposes.
Founder Share Repurchase - Buyback of Unvested Shares on Termination
Recording the company's repurchase of unvested founder or employee shares at the original issuance price (cost) upon termination of employment — before the shares have vested.
Advisor / Consultant Stock Grant (Non-Employee SBC under ASC 718)
Recording stock or option grants to advisors and consultants — non-employee equity compensation treated under ASC 718 (post-ASU 2018-07), generally at the grant date fair value measured using the stock price or Black-Scholes.
Common Stock Warrant Issuance (To Lender or Service Provider)
Recording the issuance of warrants to purchase common stock — given to a venture lender, landlord, or service provider as additional consideration — measured at fair value using Black-Scholes.
SaaS - Monthly Recurring Revenue Recognition (Subscription Service)
Recognizing monthly subscription revenue for a SaaS product as the service is delivered — the foundational revenue entry for virtually every B2B and B2C software startup.
SaaS - Annual Contract Paid Upfront (Deferred Revenue Recognition)
Recording an annual SaaS contract where the customer pays 12 months upfront — creating deferred revenue that is recognized ratably at 1/12 per month as the service is delivered.
SaaS - Monthly Recognition of Deferred Revenue (Earning Down the Annual Contract)
Recording the monthly recognition of SaaS subscription revenue from deferred revenue as each month of service is delivered under an annual prepaid contract.
SaaS - Onboarding / Implementation Fee (Distinct vs. Not Distinct Performance Obligation)
Analyzing whether an onboarding fee represents a distinct performance obligation (recognized when onboarding is complete) or is inseparable from the subscription (deferred and recognized ratably with the subscription).
SaaS - Usage-Based / Consumption Revenue (API Calls, Seats, Data Volume)
Recognizing variable usage-based SaaS revenue — where charges depend on actual consumption (API calls, active users, data processed) — recognized as the variable usage occurs, not ratably.
SaaS - Contract Modification (Upgrade / Upsell During Contract Term)
Recording an upgrade or upsell to an existing SaaS contract — adding new seats or features mid-contract — applying the ASC 606 contract modification framework to determine whether to modify the existing contract or create a new one.
SaaS - Customer Churn / Contract Termination (Early Termination)
Recording the accounting impact when a customer cancels their SaaS subscription — recognizing any remaining deferred revenue immediately if the obligation is extinguished, or applying a penalty for early termination.
Sales Commission - Capitalization Under ASC 340-40 (Contract Acquisition Costs)
Capitalizing incremental sales commissions paid to sales representatives for obtaining new SaaS contracts — amortized over the customer benefit period, not expensed when paid.
Sales Commission - Monthly Amortization of Capitalized Contract Costs
Amortizing capitalized sales commissions over the customer benefit period — recognizing the commission as sales expense ratably as the related revenue is earned.
SaaS - Bundled Professional Services (Implementation + Subscription) — SSP Allocation
Allocating the transaction price between a SaaS subscription and professional services (implementation, customization, training) using standalone selling prices — when sold together in a single contract.
R&D Expense - Research and Development Costs (ASC 730, Expensed as Incurred)
Expensing research and development costs — including engineer salaries, equipment, materials, and third-party R&D services — as incurred under ASC 730, the most common expense category for technology startups.
Internal-Use Software - Capitalization During Application Development Stage (ASC 350-40)
Capitalizing the direct costs of developing the startup's core SaaS platform — programmer salaries, cloud architecture design, and directly attributable costs — after the preliminary project stage and during the application development phase.
Cloud Infrastructure - AWS / GCP / Azure Hosting Costs (Expensed as Incurred)
Recording monthly cloud infrastructure costs (compute, storage, data transfer, CDN, database services) as cost of revenues — the primary cost of delivering a SaaS product to customers.
SBIR / STTR Government Grant - Cash Receipt and Revenue Recognition
Recording receipt of an SBIR (Small Business Innovation Research) or STTR grant from a federal agency — recognized as grant revenue or R&D expense offset as qualifying expenditures are made.
R&D Tax Credit - Federal Section 41 Credit (Payroll Tax Offset for Startups)
Recording the federal R&D tax credit under IRC Section 41 — available to early-stage companies as an offset against payroll taxes (FICA employer portion) under the PATH Act provision for qualified small businesses.
Cash Burn Rate - Monthly Net Cash Outflow Tracking (Runway Calculation)
Tracking the company's monthly cash burn rate and calculating runway — the number of months of operating capital remaining — a critical metric for every startup's financial health.
Startup Office Lease - ROU Asset and Lease Liability (ASC 842) or Deferred Rent
Recording a startup's office lease under ASC 842 — recognizing the right-of-use asset and lease liability for any lease over 12 months, which replaces the old deferred rent concept.
Special Purpose Vehicle (SPV) - Investor Pool Invests Through SPV into Startup
Recording the formation of a SPV that aggregates multiple angel investors into a single entity for investing into a startup — with the startup only seeing one cap table entry (the SPV) rather than individual investors.
Revenue-Based Financing (RBF) - Non-Dilutive Loan Repaid as % of Monthly Revenue
Recording a revenue-based financing facility — where the startup receives upfront capital and repays a percentage of monthly revenues until a fixed total repayment cap is reached.
Acqui-Hire - Retention Bonuses Classified as Compensation (Not Purchase Price)
Recording acquisition consideration paid in an acqui-hire where amounts paid to founders and employees are structured as future compensation — these are COMPENSATION EXPENSE over the retention period, not goodwill.
Going Concern - Substantial Doubt Assessment and Footnote Disclosure
Assessing and disclosing substantial doubt about a startup's ability to continue as a going concern when current cash and projected cash flows indicate inability to meet obligations for the next 12 months.
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