Key Financial Principles Every Startup Founder Should Know

Prashasta Seth, CEO, Prudent Investment Managers LLP, is a distinguished leader in the financial services industry. As the CEO of Prudent Investment Managers LLP, he has established himself in the asset management space, with a steadfast focus on delivering risk-adjusted and sustainable returns for clients in a fair and transparent manner.

Founded in February 2021, Prudent Investment Managers LLP is a boutique asset management firm focused on client-first service and excellence. Under Prashasta’s leadership, it has become a trusted name in asset management, planning to expand from Portfolio Management Services (PMS) to Alternative Investment Funds (AIFs). The firm aims to launch Category 2 and 3 AIFs in the next 12 months.

Prashasta brings extensive experience to Prudent Investment Managers. As the former CEO and CIO of IIFL Asset Management Company, he managed client portfolios and optimizing processes. He also held key roles, including India Head at Irevna Research Services and Analyst at JP Morgan, London, gaining deep expertise in financial markets and client-centric strategies.

In this exclusive interview with CiOL, Prashasta shares valuable insights on startup financial management, from maintaining good fiscal hygiene during rapid growth to making smart funding decisions, adopting timeless financial principles, cultivating financial habits, and building resilience to foster investor trust. Excerpts.

What does good fiscal hygiene really look like for a young startup, especially when the focus is often on aggressive growth?

Good fiscal hygiene for a startup doesn’t mean being overly conservative—it means building financial discipline into the DNA of the company from day one. Even in the pursuit of rapid growth, it’s essential to ensure that the basic business unit economics and path to profitability are embedded in the model from the start.

A young startup should have clear visibility into monthly expenses, a rolling 12-month runway forecast, and a process for adjusting expenses or investments depending on fund availability. A strong finance lead (even part-time), and a monthly review between founders and investors can instill the right habits.

Aggressive growth is not incompatible with fiscal prudence—it simply requires clarity on the business model, the right unit metrics, and identifying where to prioritize spending. Sustainable growth starts with knowing exactly how much capital is being consumed and how that aligns with both short-term targets and long-term vision.

How should founders approach the decision between bootstrapping and raising external funding early on?

The choice between bootstrapping and external funding depends on the startup’s business model, risk appetite, and speed-to-market requirements. Bootstrapping offers control, allows for organic growth, and forces sharper decision-making—but it can also limit the scale and pace of expansion. External funding, on the other hand, brings capital and access to networks, but comes with expectations, dilution, and accountability to outside stakeholders.

Founders should first validate their product-market fit and understand their unit economics. If a startup can reach profitability or traction without immediate capital, bootstrapping can be ideal in the early stages. However, if the business operates in a winner-takes-all market or requires upfront investment (such as R&D-heavy sectors), raising external capital early may be necessary.

Ultimately, the decision should be intentional—not reactive. Founders must assess what kind of runway they need, whether they are building a lifestyle business or a venture-scale one, and how much control they’re willing to trade for speed.

What are two or three timeless financial principles you believe every founder should adopt from day one?

• Know your numbers: Regardless of their background, every founder must understand key financial metrics—burn rate, gross margin, runway, CAC, LTV, and working capital cycle. Financial literacy is non-negotiable.

• Cash is king: Profit may be on paper, but cash keeps the lights on. Managing liquidity, especially in the early stages, is vital. Always plan for at least 12–18 months of runway and buffer for contingencies.

• Build for sustainability, not just valuation: It’s easy to chase top-line growth at any cost, but building a business that can generate cash flow and withstand market shocks is more valuable in the long run. Focus on unit economics, not just vanity metrics.

These principles help founders make sound decisions, attract the right investors, and avoid common pitfalls that derail even the most promising ventures.

What simple, actionable habits can help startup teams stay on top of their finances amid the chaos of building a company?

Startups thrive on speed and agility, but without structure, financial missteps can quietly accumulate. A few small habits can make a big difference:

• Weekly cash flow check-ins: Just 15 minutes every week to review incoming and outgoing funds can prevent liquidity surprises.

• Monthly P&L reviews: Even at a pre-revenue stage, tracking burn and budget adherence builds awareness.

• Tag and categorize expenses: Using digital tools to automate expense categorization saves time and improves visibility.

• Set spending thresholds: Empower team leads with budget autonomy, but establish limits for discretionary spending and approval layers for large purchases.

• Build a ‘pre-mortem’ culture: Before large financial decisions (like major hiring or new vendors), ask: “What could go wrong, and how can we safeguard against it?”

Consistency in these small practices creates financial discipline without slowing down the business.

In a volatile funding environment, how can founders build financial resilience and long-term trust with investors?

Financial resilience begins with transparency and planning. Investors appreciate founders who are proactive, not just reactive. Regular and honest communication—monthly or quarterly updates that include not just achievements but also challenges—builds long-term credibility.

From a financial standpoint, resilience is built through having the right business metrics and a clear path to profitability. Founders should avoid the temptation to grow in an unsustainable way in anticipation of closing the next round. Instead, they should create a plan A (ideal scenario), plan B (base case), and plan C (conservative survival mode) which they can adapt depending on business and funding traction.

Lastly, investors look for stewardship, not just vision. Founders should thus have diligent financials and up-to-date compliance ready at all times.

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How to Build a Startup: What Makes or Breaks It