Startup Financial Modeling: What is a Financial Model? (2016) • Hacker News Board

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#31

Post by dnh44 » Thu, Oct 22, 2020, 11:17 AM UTC

beagle3 wrote: post #26

justiceforsaas wrote: post #4

Is 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…

The saying goes: "Plans are useless but Planning is invaluable" - and it goes well with "No business plan survives first contact with the customers" (which was adapted from IIRC Churchil's "No battle plan survives first contact with the enemy", even though customers shouldn't in general be regarded as enemies)

I prefer Mike Tyson's version; "Everybody has a plan until they get punched in the mouth."

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#32

Post by ArikBe » Thu, Oct 22, 2020, 11:56 AM UTC

itslogotime wrote: post #20

ArikBe wrote: post #3

For 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.

Thanks! I did not know about MultipleExpansion.

And yes you are right that Damodaran - although the spreadsheets on his site can be useful as well.

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#33

Post by formercoder » Thu, Oct 22, 2020, 12:03 PM UTC

JaakkoP wrote: post #12

paulryanrogers wrote: post #2

> 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.”

Back in 2016 google sheets couldn’t do circular calculations, so many financial modeling tasks were impossible.

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#34

Post by Artistry121 » Thu, Oct 22, 2020, 1:22 PM UTC

tasuki wrote: post #30

westurner wrote: post #22

https://www.causal.app/ has free business model templates: SaaS (Foresight), eCommerce ( https://foresight.is/ ), Startup Runway, Buy/Rent, Ads Calculator

The article explicitly, repeatedly says templates are a bad idea. If you disagree, it'd be interesting to see your reasoning, rather than links to free templates.

Causal is also really easy to build something from the ground up. The templates are nice guides but it’s a cool tool.

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#35

Post by b20000 » Thu, Oct 22, 2020, 1:33 PM UTC

a financial model is a document that you spend weeks creating, which is then ignored in the countless pitches you will do in front of VCs, possibly shared with other companies they already invested in.

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#36

Post by ramie » Thu, Oct 22, 2020, 1:41 PM UTC

rapidlyinc wrote: post #8

You could also just get Finmark.

Thanks for the shoutout! www.finmark.com (YC S20)

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#37

Post by ramie » Thu, Oct 22, 2020, 1:43 PM UTC

b20000 wrote: post #35

a financial model is a document that you spend weeks creating, which is then ignored in the countless pitches you will do in front of VCs, possibly shared with other companies they already invested in.

Next time you want to make a financial model, instead of spending weeks making it try out Finmark (YC S20). We want to make creating a model turbotax easy without forcing people to use a template. Instead, our modular approach allows every company to create their own unique model in under an hour.

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#38

Post by ramie » Thu, Oct 22, 2020, 1:51 PM UTC

davidedicillo wrote: post #11

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

You're not wrong about a ton of new tools coming to market in this space. Redpoint recently did a writeup of just some of the financial modeling companies https://medium.com/redpoint-ventures/the-finance-tech-stack-...

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#39

Post by icedchai » Thu, Oct 22, 2020, 1:52 PM UTC

nrp wrote: post #9

justiceforsaas wrote: post #4

Is 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.…

The exercise is useful since it makes you think.

However, from personal experience working with several startups, the actual numbers are generally pure fiction.

Re: Startup Financial Modeling: What is a Financial Model? (2016)

#40

Post by baking » Thu, Oct 22, 2020, 2:08 PM UTC

nilsbunger wrote: post #17

TeeWEE wrote: post #16

He 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…

Spreadsheets are non-linear. I would rather be given the chance to explore first on my own, and then have a chance to ask questions. The forced walk-through might be helpful to some people, but that can also be documented in the spreadsheet.

Also, formulas are what they are. You can try to tell me what they do, but the formula speaks the truth and I don't want noise when reading formulas for the first time. Again, you can comment any non-obvious formula, but let me read the formula on my own.