Tips for the Startup Financial Pro Forma

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Part of the fundraising documentation is the financial pro forma.

Investors want to know what the founder proposes will happen if they raise the target fundraising amount.

The financial pro forma shows this projection.

Here are some tips on building your startup financial pro forma.

The pro forma should be a bottom-up analysis, not a top-down.

This means each revenue and expense comes from history.

Use historical dates such as 2024, 2025, rather than year 1, year 2, etc.

This helps the investor understand what will happen and when.

For hires, include the full overhead that comes with each one.

For revenue, start with a realistic amount and then apply a growth rate to it.

This will give a steady ramp to the revenue and can be changed easily when the assumptions change.

Model the sales funnel in the pro forma by showing the cost to generate the lead, qualify it, set up a pilot, and close the sale.

Include churn as a part of the financial pro forma.

Build the pro forma with each month listed, but be able to roll it up into quarters for use in the pitch deck.

The investor understands the entire forecast is based on receiving funding, and that is a moving target.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Mistakes VCs Make

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Venture capitalists make mistakes just like every other investor.

Here’s a list of mistakes VCs make:

Not investing consistently through the market's ups and downs.

Valuations are better in down markets, and good deals are hard to find in up markets.

Treating venture capital funding as a one-size-fits-all.

There are some sectors of the market that do well with VC funding, while other sectors only waste it.

Quoting returns without taking into account the management and carry fees.

Fees are a cost of investing and should be counted in the return metrics.

Not taking into account the overall portfolio structure.

Time to exit, sector position, and other factors can help build a solid portfolio.

Investing in overvalued startups.

During frothy markets, one can get carried away by stellar startups even though they have outsized valuations.

Not scanning the overall industry for the best deal.

Some VCs choose startups because they are accessible, but this may fail to find the best startup in the industry.

Funding too many deals in a specific application.

Diversification is still a key factor in successful startup funding.

Consider these mistakes VCs make.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

_________________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/

For Feedback please contact info@tencapital.group

Please follow, share, and leave a review.

Music courtesy of Bensound.

The Dark Side of Venture Capital

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

While venture capital brings many benefits to the startup ecosystem, it also has drawbacks.

Here’s a list to consider:

The venture model generates a high number of startup failures.

By pushing the business to the extreme, many fail.

The standard for venture-backed businesses is very high.

The cost of venture funding is expensive, so losses to the investor are also high.

The pressure to succeed at all costs drives some founders into mental and physical health problems.

Venture capital is still a long way from being an inclusive and diverse group.

Women and minorities are still woefully underrepresented.

The pressure to find and join successful startups can drive investors to overvalue startups.

The emergence of new technologies can turn into market bubbles driven by irrational exuberance.

Venture capital brings many benefits to the startup ecosystem, including capital, innovation, and expertise.

It’s important to keep these challenges in mind.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

_________________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/

For Feedback please contact info@tencapital.group

Please follow, share, and leave a review.

Music courtesy of Bensound.