You Need a Financial Model, But You Might Be Doing it Wrong

Last week we focused on tips to remember when building your financial models. However, we received feedback that many of you are looking for more resources, so this week, we listened.

Modeling Templates

When looking for a good template, it is important to find one that is specialized for your market and revenue flow. Enterprise SaaS and consumer goods require completely different templates since their markets and revenue flows are structured entirely differently.

Another important factor is to think about paid versus free templates. Paid is not always better, but free may not always have the functionalities you need. Before determining if you want to pay for a model, compare the paid and free templates to see what best fits your needs.

Here are a few resources that we can recommend to help you find the right template:

• OpenVC hosts an excellent post in which they compare 12 different financial modeling templates to help founders determine which one is the best for them. It is a mix of free and paid templates, but each one has its pros and cons depending on what the goal of the model is.
• Slide Bean is a well-respected platform for building pitch decks. They recently added a free financial template for founders to download. With over 20K companies using this template, it is safe to say it may be better than some paid options.
• Taylor Davidson is often seen as one of the best when it comes to financial template designs. His template is discussed in the OpenVC article above, but his work is so well known it deserves a bullet point for itself.

Modeling Best Practices

After you have found the right template for your startup, it is important to understand standard conventions for imputing data into the model. VCs are often impressed by founders who can demonstrate a strong mastery over their financial models.

Some conventions to impress VCs:

• Start with a summary page showing annual historicals if you have them along with projections for 2-3 years out.
• Make the model clean by removing the gridlines.
• Cells should only contain one type of input. Do not mix formulas, text, and numbers in a single cell. It makes tracing information much more difficult.
• Maintain the color code for numbers so it is easy to see what the source of the data is:
  • Manually inputted data should be BLUE
  • Formulas should be BLACK
  • Data linked from another sheet should be GREEN 
• Do not link data between different workbooks since it can create errors if you email just one of the workbooks to a VC.
• All the main inputs should be at the top of the sheet so that it is easier to test other possibilities and their impact on the model. 
• Provide comments and notes in the assumption cells to explain how you go to those assumptions

 We realized that financial modeling is not for everyone and it is important to know when it is best to outsource the task. This is why we have partnered with Keane McCarthy to discuss the value of hiring a fractional CFO. See the event below to learn more.

Maximize fundraising success with expert insights from a startup fractional CFO. We dive into the value of fractional CFOs and how their unique blend of expertise and experience can boost the odds of fundraising success

Topics Include:

• Unveiling the secrets behind effective financial modeling techniques that optimize financial operations and forecast growth trajectories that impress investors. 

• The importance of telling your story with numbers and which KPIs resonate the most with investors.

• Practical tips, real-world case studies, and actionable advice for founders

• Exploring the ways to craft compelling financial narratives that resonate with investors 

• Building robust financial models that highlight scalability, profitability, and long-term sustainability.

• Breaking down complex financial concepts into digestible insights for both startup founders and investors. 

Keane McCarthy has 10+ years of Investment Banking experience in financial technology, business services and software, real estate technology, insurance technology, wealth management technology, exchanges, and marketplaces.  His robust financial models highlight powerful financial information, third-party alternative data, market share statistics, pricing strategies, and applicable macroeconomic variables.   He’s worked with clients ranging in size from pre-revenue to Series C takes a highly customized approach and builds a strategy specific to their needs and goals.  

Join us on August 24th @ 1 PM EST! RSVP Here

Fundraising Demystified Episode #11 is Live!

In this episode, we speak with Nik Talreja, the CEO and co-founder of Sydecar, a deal execution platform for venture investors, specializing in SPVs and fund management. They've recently raised an $8.3MM Seed round bringing their total capital raised to $16.5M.

Here's a sneak peek into what we discussed:

1. Attracting Investors Who Align with Your Customers: Sydecar focused on finding investors who shared the same vision and target customers, ensuring a strong alignment between their investors and their business.
   
   
2. Calculating TAM, SAM, and SOM: Talreja emphasizes the importance of calculating the Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) when fundraising, providing valuable insights for entrepreneurs looking to raise capital.
   
   
3. Building a Strong Technical Team: The podcast episode explores the challenges faced by Sydecar as a startup without a technical co-founder and the importance of building a strong technical team to drive success.
   
   
4. The Power of Special Purpose Vehicles (SPVs): Sydecar utilized SPVs to simplify their cap table, consolidate checks, and streamline the fundraising process, providing more optionality and maintaining a clean cap table.
   
   
5. Market Opportunities and Revenue Potential: We delve into how founders can approach market opportunity slides and realistically assess revenue potential by taking a bottom-up approach and understanding the true customer base.

Jason has already roasted 20+ decks during this weekly event. We have received incredible feedback from founders who had their decks roasted or just came to watch.

Click the link below to submit your deck to receive feedback on how a VC would look at it. This is a RARE opportunity, so don't miss your chance! RSVP Here

What the Experts Have to Say

Guide to Understanding Financial Modeling

Wall Street Oasis has trained many of the biggest investment bankers. This article explains many models in length and discusses best modeling practices. Read More

Best Practices When Building a Financial Model 
A short article that provides some additional ideas on how to keep your financial model looking clean and consistent. Read More

Best Practices Financial Modeling

One of the best articles on standard conventions to know when building a financial model. It discusses everything from formatting to testing your model. Read More

If you're ready to raise capital, accelerate your fundraising process by upgrading to Premium. All premium clients receive a complementary consulting session with Jason Kirby, Managing Partner at Thunder. Upgrade Now

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Written by Jason Kirby - https://www.linkedin.com/in/jasonrkirby
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