Finance for Software Engineers

The Finance Book for Software Engineers.

It’s a working title. This site is where you can track its progress and sign up for updates. The book is being written by Kelly Sutton.

About the Book

This book is written for software engineers by a software engineer (hi). Its goal is to introduce someone with a background in software engineering to corporate finance and managerial accounting. It will be a traditional dead-tree book with digital versions.

By gaining a surface level understanding, developers can unlock more career growth for themselves and personal financial gain. The companies they work for will be more well-rounded, able to innovate not just on engineering axes but financial as well.

Yet many smart software engineers cannot tell the difference between Amazon and WeWork’s definitions of profitability. Every year there are companies that IPO and then flop. Some technology companies are worth tens or hundreds of billions, while others are worth fractions of that. Why?

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Process and Progress

This book is being written a day at a time. The book is taking a map-reduce approach: Write a bunch of words, then cut out the chaff.

The goal here is to get a good chunk written and then work with a publisher to help take it across the finish line. If you are a publisher and would like to chat, please get in touch.

Goal: 40,000 words
13,437 words written
100%

Above is the current progress of the book. Some of the pieces of the book will be made available as they are written. Would you like to read the Introduction (coming soon) or Table of Contents?

Get Involved

Is there something you'd like to see in the book? I’ll do my best to research and answer any questions you might have. If you have a question you’d like to see answered in the book, please send me an email.

Please take a look at the Questions section to see if someone else has already asked your question.

Table of Contents

Here is a rough sketch of the Table of Contents:

  • Chapter 00 - Introduction
  • Chapter 01 - Let’s Start with You
  • Chapter 02 - What is the Purpose of the Finance Department?
  • Chapter 0X - [The Balance Sheet Chapter]
  • Chapter 0X - [The SaaS Metrics Chapter]
  • Chapter 0X - [The VC Chapter]
  • Chapter 0X - [Equity Chapter]
  • Chapter 0X - [The IPO Chapter]
  • Chapter 0X - [The Private Chapter]
  • Chapter 0X - [The Macroeconomic Chapter]
  • Chapter 0X - [The Mental Models Chapter]

Questions

As I’m writing this book, I’m collecting a list of questions I hope to answer. Here are the questions so far:

  • Why are software engineers paid so much?
  • What is the purpose of the finance department?
  • Why is the question “Are you profitable?” hard to answer?
  • When is turning a profit bad? When is turning a profit good?
  • Are engineers operators or builders? Why does SSH-ing into a machine hurt the profitability of the company?
  • Why do companies raise so much money from VCs with few strings attached?
  • What are the acronyms and nomenclature? P&L? Top line? Bottom line?
  • Why would a company lay off software engineers?
  • What is an S-1, and what can they tell us about a company?
  • When do companies decide to cut costs? When do they decide to pursue growth?
  • How does the company make money? Is that sustainable?
  • How long does it take for engineering effort to payback?
  • What are some of the more recent financial metrics for measuring company health?
  • Why is SaaS so much different than every other business before it?
  • What are finance ideas that apply to software engineering (e.g. “technical debt”)?
  • What are the differences between employee compensation, e.g. stock, ISOs, NSOs, RSUs, etc.? Why would a company choose one over the other?
  • How do VCs make money? Why are they in the game? What do they expect to see from companies?
  • How should SWEs think about personal finance?
  • Why do companies stay private? Why do they go public? What are the pros and cons of going public? To whom?
  • What sorts of questions does the CFO answer to the board?
  • How do macroeconomic conditions affect my company?
  • I've heard that if you think your options will be worth something, exercising options early brings tax benefits. Why is that?
  • Similar to above, if I feel like an IPO is coming, should I exercise my options?
  • What happens to options if my company sells to another company?
  • How does a company choose the correct VCs?