2 ms·

How does an early-stage investor review your financial plan?

• wtvanhest 15y ago
  "It is in its forensic analysis of your thinking behind the model, however, where an early-stage investor really gets a feel for how you think and how you want to direct your company in the near future. Next, it is in how your cash will be used efficiently to accomplish the mutually agreed goals." I worked for an Angel investment group and heard this from the investors often. That being said, I felt like many investors used the model to discuss the business in financial terms to make sure the startup management understood it. What they really liked to see was the following: We will get X revenue per person who signs up. It will cost the business Y to get each person to sign up. X > Y at some future point so we will make a ton of money. X - Y is called contribution margin. Total fixed costs must be less than (x-y)Xtotal users you are getting once you reach scale and that number should be very large so you have a large market size. The investment round should take care of fixed costs and allow you to reduce the Y or increase the X over time to achieve the result. Sticking to that logic, you can make a VERY simple model which most investors will like. (I have a master's in finance and work for a mutual fund, I can make an extremely complex model but never would for a startup)