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Perhaps "fiction" is the wrong way to look at it, because the exercise has value. I think of it this way: every business's financial model is a collection of n
by ska 6y ago
Perhaps "fiction" is the wrong way to look at it, because the exercise has value.
I think of it this way: every business's financial model is a collection of numbers, some empirical (and hopefully correct) and some estimated.
The thing about a startup is that there are few empirical numbers (but they are critical, you have to understand your burn rate and what affects it) and the estimated numbers are poor estimates. The evolution of the size of the error bars on those estimates is probably more important than the size itself. If you are very early on, you should be using these to help you focus information gathering on the most impactful areas.
- icedchai 6y agoThe exercise does definitely have value... My frustration comes from personal experience. I've worked in a few startups where the "size of the error bars" never changes. It is very, very frustrating to see the same optimistic, almost delusional thinking used 3 or 4 years in. Some founders are very, very stubborn and won't listen or look at previous results.
- ska 6y agoThat's fair enough. I think a good measure of how an early stage startup is doing is to see how the thinking is evolving. If your CEO is doing the same hand-waving in year 3 that sold the seed round, I agree something has probably gone wrong, and may indicate time to think about a change.