Challenge

The Buyer needed two things at once:

  1. A new, adjacent cybersecurity technology developed to precise specifications.
  2. A rare, specialized cybersecurity team recruited from the top tier of the industry.

The challenge?

  • Building such a team and technology in-house would require substantial upfront investment.
  • The Buyer wanted to understand Variable Interest Entity (VIE) and consolidation accounting complexities.
  • The CFO and auditors needed to be completely confident in the transaction’s structure and compliance.

Solution

XLIO Ventures proposed its unique “Made-to-Order Startup” model:

  1. You Specify – The client defines their technology, team, and timeline requirements, including measurable KPIs and clear milestones. The acquisition price for the future startup is pre-agreed up front.
  2. We Build – XLIO finances and constructs the startup from the ground up, assuming all cost and risk. The team is recruited specifically for the project, and code is checked in with each sprint for seamless integration with the client’s infrastructure.
  3. You Acquire – Once all targets are met, the client purchases the startup at the agreed price. Because the technology and team are pre-integrated, value delivery begins on day one.

Key benefits

The startup is custom-built and fully funded by XLIO, eliminating outside investor complications, excess infrastructure, or unwanted staff. Teams are motivated by clear career and financial outcomes, and clients achieve product goals faster and more cost-effectively.

In this case, XLIO incorporated a brand-new entity (“NewCo”) dedicated solely to the Buyer’s requirements and recruited a top-tier cybersecurity team in the specialized field.

To ensure accounting compliance and eliminate VIE/consolidation risks, XLIO engaged Baker Tilly as strategic accounting advisors.

Baker Tilly’s Role

Baker Tilly provided the financial and accounting expertise that made the deal possible:

  • GAAP Compliance Review: Evaluated potential control and consolidation risks under GAAP.
  • Audit Alignment: Considered and addressed the Buyer’s audit firm’s concerns.
  • Valuation & Structuring Services: Ensured the transaction met technical accounting standards.
  • CFO Assurance: Experts in VIE accounting delivered the confidence the Buyer’s finance leadership needed to greenlight the project.

Results

  • Successful Launch: NewCo was staffed with the world-class talent required and began development on the Buyer’s custom cybersecurity technology.
  • No Upfront Cost: The Buyer preserved capital until proven results are delivered.
  • Accounting Clean Bill of Health: Baker Tilly’s involvement removed VIE/consolidation risks and satisfied all financial oversight parties.
  • Future Collaboration: The Buyer is so pleased with the NewCo model that discussions for a second project are already underway.

Key Takeaway

XLIO Ventures’ “Made-to-Order” company build model removes operational and financial risk for clients — and when paired with Baker Tilly’s deep technical accounting expertise, it passes the toughest CFO and auditor scrutiny.

Baker Tilly makes no representations or warranties as to the accuracy, completeness, validity, or applicability of information provided. Baker Tilly’s provision of the information contained herein is not and cannot be considered legal advice. You must consult your attorneys with respect to any matters or items that require legal interpretation or to determine what additional policies, procedures or requirements under federal, state or other type of law or regulation apply to you.