How to Get Venture Funding, page 27

Business Plan and Financial Model, continued

The financial model should clearly present all assumptions. It should be possible to independently verify and/or assess those assumptions. Using the financial model, the VC should be able to make conservative, average and aggressive revenue projections.

All facets of the financial model should be realistic. For instance, sales forecasting should never assume 100 percent chance of closing a particular sale. There is always a chance that something will go wrong even after a deal has been signed.

A detailed financial model will help you plan expenditures. It should tell you how net cash flow negative you will go (and, therefore, how much outside capital you need). It should also let you predict when you will turn the corner and see cash flow improvement. Ideally, a financial model is implemented as a set of interlocking Excel spreadsheets.

In other words, a financial model done right is a great deal of work—but it is work that will help you run your business and benchmark progress. Many VCs will want to see that before they invest.

Conclusion

When all is said and done, good deal flow is the lifeblood of a VC. That means that the venture capitalist needs you as much as you need them. It only feels like they hold all the cards.

Seriously, venture firms have more money now than at any time in history. True, you can’t just waltz in and expect to get funded the way you might have a short while ago. But sober, meticulous, rigorous well-planned start-ups have every chance of getting funded, provided you follow the guidelines in the briefing.

Fortune favors the bold! If you have an idea, probably others have also thought of it. So don’t hesitate. The difference between a successful business and an also-ran is execution and the willingness to put your neck out and just do it. If you are truly ready, follow the steps outlined in this briefing and get ready for success.

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