Financial Misstatements

What are the reasons startups can't hire good finance people? Or at least contract with an expert?

Is it a difficulty in judging their abilities when it's not your area? Is it something where only at a certain size would it be worth the reduced financial risk to have someone on it? Learning from scratch has to be the slowest, highest risk way of doing it -- which is the exact opposite of what a startup should be optimizing for (reduce risk where possible, move fast)

It seems like helping identify business talent is what an accelerator should be helping with, not becoming a half assed B-school for engineers..

There's some implicit assumption here that learning from scratch is better than hiring talent, and I think that's a mistake.

Some of the more extreme stuff is the fault of "stretch the truth till it breaks" ideology in business culture. This stuff is dubious in any form IMHO, but when naive first-timers without MBAs pick it up it easily devolves into outright fraud. Someone who knows finance, law, and accounting inside and out knows when and where to stop stretching, but non-experts in these areas do not.

I've heard some jaw-droppers myself in conversations with other founders/entrepreneurs over the years. It's okay to put a positive spin on it, but it's not okay to lie. You can't say you are "cash flow positive" if you are not in any way shape or form collecting actual cash from anyone.

If you don't understand MBA-level accounting and finance, then the safest and most honest thing to do is stick to concrete numbers and things you clearly do understand. Revenue is actual dollars that land in your bank account-- real money that really exists. Profit is revenue minus expense. Customers are actual people or businesses who have given you money for an actual thing. Contracts are actual promises to do so in the future for some length of time. Users are people who are actually handling, running, or consuming your product right now, etc.

It's also perfectly okay to say "I'm not an accountant" in response to questions you don't understand. Your prospective investors are looking for someone to build a product and sell it, and if you can do that then that's your expertise. Accountants and lawyers can be hired on a consulting basis just like any other domain expert. It's okay not to have expertise in all areas as long as your expertise is where it counts and you have traction/results.

Investors will appreciate that too, since anyone operating as a VC or serious angel will see right through any nonsense you spew. It will simply discredit you, and any investor who doesn't have very sensitive radar for blowhards and con men will not be an investor long.

"What are the reasons startups can't hire good finance people?"

I think the reason is that you are in stage where the CEO personally empties the rubbish bins in the office, that's why.

Accounting is so important and so underrated.

With a good accounting you can check the health of any company with just minute reading of the statements, cash flow, profit/losses, debits for short term, investments, etc.

With accounting you can easily know how your investments are going, when you have many and other people administrating.

You can also use accounting to invest in good companies for long term, and for this, I recommend Peter Lynch books.

I find most people can't name the summery lines of an income statement (Revenue>COGS>gross profit>sg&A>operating profit> etc.) let alone a balance sheet or cash flow statement. but frankly the one annoys me the most is is the way "cash flow" is misused.

BTW this comes into play https://en.wikipedia.org/wiki/SEC_Rule_10b-5