Scale the engineering talent you already have
Know what each product costs to run and how long your cash will last. Level brings together books, payroll and cloud usage to review gross profit, burn and runway. We also help prepare R&D and provider-credit records for the appropriate review; AI development spend does not automatically qualify for a payroll-tax research credit.
The AI Startups Problem
Does your AI cost model explain margin, burn and applicable credits?
Qualifying research requires documented technical uncertainty, experimentation, eligible activities and qualified expenses; custom software or AI work does not qualify automatically. The 6-14% range is an illustrative sensitivity, not a statutory credit rate. Eligible small businesses can elect up to $500K against employer payroll taxes, subject to actual credit, liability and election rules. Application starts with employer Social Security tax up to $250K per quarter; remaining credit can reduce employer Medicare tax, subject to liability and carryforward rules. The less-than-$5M gross-receipts test is joined by a five-tax-year receipts-history test and group rules. Review Form 6765 and Form 8974 requirements before claiming.
Startup credits are conditional provider offers, not cash and not guaranteed retroactive refunds. Microsoft describes up to $150K of Azure credits unlocked over time; AWS, as reviewed October 8, 2026, advertises up to $200K for eligible Portfolio applicants, with different Founders and invitation-only tiers. Confirm approved products, prior usage, expiry and provider access before forecasting savings. Do not assume a combined award; each provider sets its own tiers. We help document eligibility and application timing; approval belongs to each provider.
AI cost shape is different from SaaS. Cost of goods sold (COGS), the direct costs assigned to serving revenue, may include inference and data licensing. Training compute may instead be research and development, depending on what the spending supports; agree the classification with your accountant. Standard SaaS metrics like gross margin and customer acquisition cost (CAC) payback need to be calculated differently for AI companies. Match usage and cloud invoices to the relevant customer or workload before comparing gross margin; blended revenue growth can hide an expensive inference-heavy feature.
Analyzed with the CLEAR Framework
Cash · Labor · Earnings · Accounts · Risk, the five pillars we evaluate for every AI startup.
AI Startups Benchmarks and Planning Inputs
Use Level observations as cross-trade context. Other cards are planning scenarios, not measured industry percentiles. Match your business model, period and cost definition before comparing.
R&D Credit Capture
6-14%
Planning inputs to test, not measured industry percentiles: Illustrative share of qualified research expenses, not a statutory rate. Actual credit depends on method, base amount, Section 280C treatment and election limits. Payroll offset requires the gross-receipts/history tests, election, actual credit and employer tax liability.
GenAI Credit Programs
By provider
Planning inputs to test, not measured industry percentiles: Microsoft describes up to $150K of Azure credits and AWS up to $200K for eligible Portfolio applicants; other tiers differ. Confirm current provider eligibility, covered products, expiry and prior usage.
Burn Multiple Target
Under 1.5x
Planning inputs to test, not measured industry percentiles: Planning test, not an investor requirement: Net burn / net new ARR for the same period. Under 1.5x and above 2x are sensitivity points; zero or negative net new ARR makes this ratio unhelpful.
Inference COGS %
20-40%
Planning inputs to test, not measured industry percentiles: Use 20-40% of revenue as a sensitivity, not a measured vertical-AI range. Reconcile usage, model and infrastructure invoices, data licensing and approved credits before interpreting feature or account margins.
Runway Standard
18-24 mo
Planning inputs to test, not measured industry percentiles: Test 18-24 months and a separate 12-month downside case against expected receipts and milestone costs. These are planning horizons, not a documented VC requirement.
Treasury Yield
4.5-5.0%
Planning inputs to test, not measured industry percentiles: Fictional yield sensitivity; confirm current rates, fees, eligible funds and liquidity before forecasting income.
Primary sources, reviewed October 8, 2026
- Public Law 119-21, section 70431: acquisition-date, holding-period and QSBS limit changes
- IRS Schedule D instructions: qualified-business, stock and asset tests
- IRS Form 6765 instructions: qualified expenses and payroll-credit eligibility
- IRS payroll research credit: election, employer taxes and carryforward
- Microsoft for Startups: conditional Azure credit benefits
- AWS Activate: current tiers, eligibility and approved credit scope
Content reviewed . Read the revision history.
What Level Does for AI Startups
Gross Profit Per Engineer Hour & Burn
For a defined period, gross profit per engineer hour divides revenue less included direct revenue costs by logged engineering hours. This Level operating measure requires time records or a disclosed allocation and consistent treatment of engineering costs as direct costs or research and development. For a pre-revenue team, use cost per milestone instead. From approved books, payroll and cloud exports or supported connections, Level’s team reviews gross-profit ARR (annual recurring revenue adjusted by the chosen gross margin), burn multiple (net cash spent / net new ARR) and runway (how long the cash plan lasts).
R&D Credit Optimization (Section 41)
Map documented technical uncertainty and experiments to qualified payroll, contractor and supply expenses. Separate routine model subscriptions, ordinary configuration and production hosting from activities that actually satisfy Section 41. Then review the group, receipts-history and timely election tests before using Form 6765 and Form 8974; an AI product label alone establishes no credit.
GenAI & Cloud Credit Planning
Microsoft for Startups Azure credits and AWS Activate have documented eligibility programs. We help assemble the application records and timing. For other model or cloud providers, confirm current offers directly, including covered products, expiry and prior-usage rules. Bedrock or Azure OpenAI coverage must be confirmed for your particular offer. Approval belongs to the provider.
AI-Specific Burn & Runway Modeling
Inference, training, and data costs scale differently than SaaS hosting. We build runway models that account for usage-based COGS, training spike costs, and the gap between top-line ARR and gross-profit ARR.
Investor Reporting & Board Decks
Agree the board’s definitions for burn multiple, annual recurring revenue (ARR), gross margin and runway. A magic number compares recurring-revenue growth with sales-and-marketing spend; any adjustment for AI delivery costs must be stated. We prepare reporting around your actual investor requests and the source records available.
Treasury Optimization (Ramp / Rho / Mercury)
Build a treasury plan from payroll reserves, near-term obligations, liquidity, counterparty risk, fees and tax treatment. A 4.5-5% yield is a fictional sensitivity, not a current quote from Mercury, Ramp or Rho. At illustrative $5M invested for a full year at 4.8%, gross interest is $240K before fees and taxes; changing balances or rates changes the result. A $10M balance at 4.5-5% would yield $450K-500K on the same assumptions. Check current terms and access before moving cash; income is not a guaranteed engagement payback.
QSBS & Founder Stock Strategy
Qualified small business stock (QSBS) can exclude part of a gain when eligible stock is sold. It requires qualifying original-issue C-corp stock, an eligible business and shareholder, applicable asset tests and the required holding period. For stock acquired after July 4, 2025, the phased exclusion is 50% after 3 years, 75% after 4 years and 100% after 5 years; the per-issuer exclusion limit is the greater of the applicable $15M dollar limit or 10 times qualifying basis, with prior-exclusion coordination and other limits. Earlier stock uses different rules, including the older $10M limit. Formation alone does not secure eligibility; we coordinate records and tax review before issuance or an exit. Founder review can also include an 83(b) election (recognizing income on qualifying nonvested property at transfer, with a filing deadline no later than 30 days after property transfer), incentive stock options (ISO) and alternative minimum tax (AMT), as your legal and tax advisers determine.
Bookkeeper, your CPA, vs. Level
Comparison illustrates engagement scopes, not a survey of providers. Confirm each firm's actual services, cadence and contract; Level features depend on the agreed scope and available records.
| Capability | Bookkeeper | CPA | Level |
|---|---|---|---|
| Record transactions | ✓ | No | ✓ |
| Tax-ready books and CPA handoff | ✓ | ✓ | ✓ |
| R&D credit (Section 41) | No | Sometimes | ✓ |
| GenAI credit programs | No | No | ✓ |
| AI-specific burn modeling | No | No | ✓ |
| Board decks for AI metrics | No | No | ✓ |
| QSBS eligibility coordination with counsel and tax advisor | No | No | ✓ |
| Treasury optimization | No | No | ✓ |
| Founder tax coordination (83(b), AMT) | No | Varies by engagement | ✓ |
Your bookkeeper records the past. Your CPA files taxes. Level helps your team connect work, costs and cash to the decisions ahead, using the records and review scope agreed for your engagement.
Work from the tools you already use
Accounting tools hold your books; operating tools hold jobs, sales or service records; payroll and payment tools show labor costs and money movement. We compare the relevant records to answer your financial question. These are systems to evaluate, not a promise of a native connector for every product. Access and setup vary by software, plan and permissions. We use approved connections or exports and request read-only access where supported.
AI Startups Insights
Data-driven articles for AI startups who want to see the numbers.
R&D Tax Credit on Your AI Workflow Spend
Section 41 four-part test. What qualifies, what doesn't, how to claim with Form 6765 + payroll tax offset.
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AI Patterns Across 540 Contractor Conversations
What aggregating data revealed across hundreds of operations.
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Your CPA Files Taxes, Your Bookkeeper Closes Books
How to coordinate the CPA, bookkeeper and CFO around tax, provider-credit and cash decisions.
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Most Fractional CFOs Are Spreadsheet Operators
Real CFO work is decision-driven, not reporting-driven.
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Operating review
Software-business decisions the numbers should explain
The margin, cash, and operating questions we check first when reviewing your numbers.
Does the runway model include committed cash costs?
Recurring revenue and an income statement do not identify every upcoming funding event.
Is acquisition payback a profit calculation or a cash calculation?
Cohort age, included spend and predictive settings change the comparison.
Which infrastructure cost is variable with the service delivered?
A billing category does not by itself establish the cost behavior used in a growth decision.
Simple pricing
Three tiers, one ladder.
$500+/mo
Bookkeeping
The clean data layer: monthly books, reconciliations, and organized financials AI can work with.
$1,500-$5,000/mo
Scale
The full AI operating layer: custom agents, weekly actions, and benchmarks to grow margin per hour.
Custom
Platform / Multi-Office
Multi-branch benchmarking and scorecards for PE-backed and multi-location groups.
Book a call
Book a free 15-min AI Startups audit.
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No commitment. Real numbers, not generic advice.