How I'm Building A Financial Model For A Client Closing a $5MM Pre-Seed Round.

A close-in on how I operate.

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TLDR;

• Financial Model — Why it’s the golden document in an investment.

• Consultant? CFO? Yourself? What to do where?

• My exact steps of working out a financial model for a client who’ll close a $5mm Pre-Seed round.

  • 3 Statement Model

  • (For Paid Subscribers) The Unique add-ons that are critical for such a ticket size.

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You’re working on a startup. You’ve gotten yourself some traction, and it’s now time to raise some funding. You prepare some documents (and meet me in the process).

That’s how most of my clients find me. Then, I start working alongside them on the needed business document. That might be a whitepaper, a market research, a pitch deck, or a financial model.

This is how I describe the process metaphorically.

• You: Hey! — Equivalent to a pitch deck.

• You: Thanks for giving me your attention — Equivalent to a business plan or a whitepaper.

• You: I’m looking for $10m to fund my startup — Equivalent to a financial model.

The financial model is your closer. This is the end of a conversation and the start of a new one. But how should you do it? Should you even do it?

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A specialist is sometimes good in this sense. Don’t get me wrong. If you know a bit of maths, you can spend a couple of weeks and understand how your financial model works. You can develop and write an average financial model. But an expert does that for a living; they’ll know things you don’t.

That does not mean you’re out of it. Throw it to a consultant and wait for the prize.

A good entrepreneur would know where each and every number came from. You’ll be asked in a pitch meeting about a number, and you ought to know the answer. If not, it’s not a catastrophe, but it isn’t amazingly impressive.

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If you surf the web, you’ll find many types of financial models. Honestly, most startups go for a 3-statement model that is projected for five or ten years. Five is more accurate in a world filled with inaccuracy.

A client of mine recently came in touch to finalize a 5Y financial model to send to a VC for a $5mm+ Pre-Seed investment.

So, I start by meeting up with my financial analyst and having a chit-chat. Then, there are two main things we work on.

The Standard

A 3-statement model is not complicated. We just need answers to specific questions and some market research in place, and then we project accordingly.

But in the above sentence, the keywords were not the model or questions. The secret lies in the market research and the competition. This promotes the second element I work on.

The Accuracy Technique of the Model