It’s interesting to see the proliferation of tools focused on tackling these business needs. This post reminded me of http://usesummit.com which allows to create financial forecasting models
Startup Financial Modeling: What is a Financial Model? (2016)
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Re: Startup Financial Modeling: What is a Financial Model? (2016)
#12> Google sheets is convenient for making changes and having multiple people editing, but sending an investor a model in Google sheets signals that you are not financially savvy. I do wonder how many of these 'signals' there are, and what weight they really carry for investors.
This may have been true in 2016, but since then, I’ve seen CEOs raising multimillion dollar rounds using Google Sheets, financial modeling software, and Excel alike.
There’s certainly still some preference towards Excel in 2020, but in no way using sheets will mean that you’re not “financially savvy.”
Re: Startup Financial Modeling: What is a Financial Model? (2016)
#13Check out: usesummit.com
Re: Startup Financial Modeling: What is a Financial Model? (2016)
#14> Google sheets is convenient for making changes and having multiple people editing, but sending an investor a model in Google sheets signals that you are not financially savvy. I do wonder how many of these 'signals' there are, and what weight they really carry for investors.
Yep, this is where I switched off. If the advice is to "look good" to investors based on the type of spreadsheet program you use you've got bigger problems.
Re: Startup Financial Modeling: What is a Financial Model? (2016)
#15Is it useful to have a startup financial model if you're still at the early stages? I've analyzed over 480 founder interviews (mostly for their acquisition channels [1]) and there's 1 adjective that defines their growth: "messy". They pitched a bunch of journalists, did a trial & error for 100s of ads on FB/Google, had search traffic after 6 months of trying (but 0 before that) and so on. There's a sub-headline in th…
Yes. It’s almost never too early to build a financial model. As noted in the original article, your model will always be wrong. However, the exercise of creating the model and using it to build out strawman scenarios is enormously helpful to let you understand how internal burn rates, customer acquisition costs, COGS, recurring revenues, etc all interact and how those could line up to different fundraising timelines.…
> almost never too early
Sure, but when is "too early"?
Re: Startup Financial Modeling: What is a Financial Model? (2016)
#16He is refusing to share the financial model and requires to sit with the investor...? I understand that F2F is better when looking for investors. But this gives me the idea his documentation of the financial model is very poor or he is afraid people don't understand it (which indicates it can be improved).
Re: Startup Financial Modeling: What is a Financial Model? (2016)
#17He is refusing to share the financial model and requires to sit with the investor...? I understand that F2F is better when looking for investors. But this gives me the idea his documentation of the financial model is very poor or he is afraid people don't understand it (which indicates it can be improved).
I’m a seed stage VC. I give our founders the same advice as OP when raising their next round: If it’s more complicated than a basic pitch deck, walk through it with the VC, and optionally leave them a copy to play with.
Investors don’t have much time and can misconstrue stuff easily. When you walk through it, you get to answer questions in real-time and learn about any weaknesses they perceive in the modeling or the underlying biz.
Why wouldn’t you do it that way?
Re: Startup Financial Modeling: What is a Financial Model? (2016)
#18> Google sheets is convenient for making changes and having multiple people editing, but sending an investor a model in Google sheets signals that you are not financially savvy. I do wonder how many of these 'signals' there are, and what weight they really carry for investors.
This particular one is outdated advice. I’ve seen many financings the past few years, and many really sophisticated google sheets models. It’s a total no-op what you use as long as it can model what you need it to.
Re: Startup Financial Modeling: What is a Financial Model? (2016)
#19Earlier quoted context omitted.
Yes. It’s almost never too early to build a financial model. As noted in the original article, your model will always be wrong. However, the exercise of creating the model and using it to build out strawman scenarios is enormously helpful to let you understand how internal burn rates, customer acquisition costs, COGS, recurring revenues, etc all interact and how those could line up to different fundraising timelines.…
> almost never too early Sure, but when is "too early"?
It's definitionally never too early if you consider "???" as a valid business model.
I often tell people that Facebook's early business was an "underpants gnomes model". ie, it was:
Step 1: Acquire lots of users
Step 2: ???
Step 3: Profit!
But that this model was actually enormously useful to Facebook because it brought alignment over what to focus on and what not to focus on and where there were areas of high certainty and where there was, intentionally, areas of low certainty.
A business model of "???" is a valid and useful business model because it tells people that we know that we do not know anything about the business model yet and this is an intentional choice and we are aware of it. The key is, even if it is "???", you still need to write it down and have everyone agree that this is, indeed, the business model right now.
Re: Startup Financial Modeling: What is a Financial Model? (2016)
#20For those looking for the rest of the series, it's here: https://www.mathventurepartners.com/blog?offset=157373689900... This looks like a series on how to build a relatively straightforward operating model with a focus on cash balance and "founder value" (I guess that's attributable equity to the founder) If you're interested in valuation, it's worth checking out Prof. Damodaran's work or an online resource such as…
MultipleExpansion.com is another good (and free) modeling resource.
Damodaran is good for understanding valuation - not necessarily financial modeling.