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Part 5 of 5 in the “Financial Modelling for Startups” Series

In the startup lifecycle, receiving external funding is only an intermediate step within the bigger picture. An investor who is financing your startup certainly likes your vision and wants to support you throughout your journey, but, above all, he expects that the journey will end in a profitable exit at some point.

So far, this article series has mentioned suggestions for improving your model and the preparation for discussions surrounding it. I argued that founders should rely wherever they can on proven fundamentals in the form of historical data, KPIs, and grounded assumptions.

Once again, coming back to the analogy that successful fundraising means selling a bet on your business case, you could say that the individual parts aim to help investors define the odds for that bet. …


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Part 4 of 5 in the “Financial Modelling for Startups” Series

When looking at startups to invest in, it is a common saying that most investors tend to discount 50% from every forecast they receive. Even if the exact percentage of deviation will never be known, it tends to be true that investors will not treat your original forecast and unit economics as the sole analytical basis for evaluating the deal.

This is because startup lifecycles are never linear. …


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Part 3 of 5 in the “Financial Modelling for Startups” Series

When investors evaluate your business case, they try to develop an intuition if what you are doing now on a small scale would work on a big scale with a lot more firepower through additional funding.

Unit economics and KPIs are excellent indicators for that since they provide a micro-level view of the fundamental relationships that drive growth and potential for profitability.

Assuming that your business is not in the pre-seed stage, historical and projected unit economics and KPIs are a must in every fundraising model. …


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Part 2 of 5 in the “Financial Modelling for Startups” Series

The market environment is a focal point of analysis for startup investors since it is a critical variable affecting the prospects of customer acquisition, margins, and, ultimately, reaching profitability. Large and rapidly growing markets promise an opportunity for high growth rates and moderate acquisition costs since switching costs are less relevant for new customers entering the market.

Framing the opportunity of your venture case means intentionally setting boundaries to clearly define your business’s target area and expressing the magnitude of the opportunity in numbers.

Implementing a well-designed market section in the financial model provides an opportunity to signal market expertise and strategic focus. That is, as long as your pitch deck includes a thorough analysis of your target market, a market sizing section in your model is not a must-have. …


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Part 1 of 5 in the “Financial Modelling for Startups” Series

Raising financing from venture capitalists and institutional investors can be a significant hurdle for any startup. Whether a venture seeks funding for product development, testing of market hypotheses, or scaling up of operations, at some point, every founder has to prepare for the often time-consuming and stressful process of fundraising.

And although some challenges are unavoidable, there are distinct steps a founder can take to build a business case that is both reasonable and convincing for investors. In this series, I want to share a few suggestions for those steps.

Successful fundraising involves storytelling. Because startups usually only have limited historical data to back up their business case, investors evaluate a potential deal as a bet on a few connected hypotheses about the relevant market segment, the founding team’s capabilities, and the fit between the opportunity itself and the plan to achieve it. …

About

Maximilian Bruhn

VC @ FinLab AG | FinLab EOS VC. Let’s connect on LinkedIN: https://www.linkedin.com/in/maximilian-bruhn-a97608148/

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