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"Your business model, including 3- or 5-year financial projections that include sales, profits, cash flows, and returns on investment." How can anyone reasonab

"Your business model, including 3- or 5-year financial projections that include sales, profits, cash flows, and returns on investment." How can anyone reasonably predict where their N-month old company is going to be in 3-5 years?

brandnewlow 15y ago
And how is it worth $50k to make it harder to raise the $500k+ you'll probably need to build your company?
- firefoxman1 15y ago
  Could you elaborate on how it would make it harder to raise more in the future?
  - wtvanhest 15y ago
    No VCs in St Louis.
    - sachinag 15y ago
      Not true. I worked at one! However, it's fair to say there are no VCs in St. Louis that focus on consumer-facing technology companies. That said, St. Louis isn't impossible. Strangeloop STL is one of the hands-down, bar none, best conferences in the country each year; Slicehost did quite well for themselves from there; Jack Dorsey goes back home all the time (a co-founder of Square is from the Lou, and the swipe-powered dongle technology comes out of Wash U); and it's not like Chicago's all that far away.
      - wtvanhest 15y ago
        Yes, there are VCs in almost every major city, and I was definitely exaggerating, but the number of VCs in cities like St Louis is laughable compared with the valley. By the time you move a team you may exceed $50,000 in expenses. Anyone who is really serious will not take $50,000 to move to St. Louis. And of course there are exceptions, like someone who has family in St. Louis, or someone who does know investors there etc.
- bpodgursky 15y ago
  1) you don't need $500k+ in funding to build a successful software company. 2) this is especially true living in a part of the country with a reasonable cost of living. Somewhere like Missouri, $50k is two reasonable years of runway for a single 20-something (even in a metro area like St Louis, you'll be able to rent for ~$400 .) 3) it's pretty ridiculous (and arrogant) to assume that nowhere else in the country can you get investors.
  - philwelch 15y ago
    If you're a one-man shop, there's little point taking any funding, and it's doubtful even these guys would fund you.
    - ArchGrants 15y ago
      Actually, if you're a sole entrepreneur with a great idea or disruptive venture, we want to read your submissions!
  - brandnewlow 15y ago
    If you're raising $50k, you'll probably want to raise $500k if things go well. Doing that in STL is unquestionably harder in STL than SV.
xarien 15y ago
Same way you work any business model projections, pull it out of your.... It's really not a bad idea to set up a business model with a set of variables defined from which you base your projections. When I do this, I make it very easy to drop in actuals and have the projections auto updated based on the collected metrics over the original projected ones.
firefoxman1 15y ago
Well, if you've ever had to write a business plan, you'll agree the projections for a startup end up being complete BS, but they make investors feel safe looking at a 20+ page document with lots of charts and numbers. That said, business plans can be useful and help the founders solidify their business model, predict costs, etc. If anything, it helps you get a vague idea of what to expect a few years down the road instead of just the next 60 days.
- mhartl 15y ago
  business plans can be useful and help the founders solidify their business model, predict costs, etc. I would guess the vast majority of tech entrepreneurs would disagree with the implication that business plans are generally useful.
  - firefoxman1 15y ago
    Haha is that a stab at the "worry about the business model later" attitude in tech, or am I interpreting it wrong?
    - mhartl 15y ago
      No, I'm being serious. Thinking about your business model is useful, and planning is useful, but the formal practice of writing an official "business plan" (with revenue projections, etc.) is from a bygone era. More than anything, business plans give people (in this case, Arch Grants) a false sense of security.
      - firefoxman1 15y ago
        Oh yes I completely agree. New industries move too fast to predict their profitability. I think the resume will go the way of the business model in our lifetime, if not 10 years.
        mhartl 15y ago
ry0ohki 15y ago
I don't think anyone sees 3-5 year plans as promises, more as the fact that you've thought about what your company will be doing in 3-5 years. Yes technology is impossible to predict but they want to see that you've given it more thought then, we don't need revenue Google buys us in year 2!!!1!
deleted 15y ago
[deleted]

brandnewlow 15y ago

And how is it worth $50k to make it harder to raise the $500k+ you'll probably need to build your company?

firefoxman1 15y ago
Could you elaborate on how it would make it harder to raise more in the future?
- wtvanhest 15y ago
  No VCs in St Louis.
  - sachinag 15y ago
    Not true. I worked at one! However, it's fair to say there are no VCs in St. Louis that focus on consumer-facing technology companies. That said, St. Louis isn't impossible. Strangeloop STL is one of the hands-down, bar none, best conferences in the country each year; Slicehost did quite well for themselves from there; Jack Dorsey goes back home all the time (a co-founder of Square is from the Lou, and the swipe-powered dongle technology comes out of Wash U); and it's not like Chicago's all that far away.
    - wtvanhest 15y ago
      Yes, there are VCs in almost every major city, and I was definitely exaggerating, but the number of VCs in cities like St Louis is laughable compared with the valley. By the time you move a team you may exceed $50,000 in expenses. Anyone who is really serious will not take $50,000 to move to St. Louis. And of course there are exceptions, like someone who has family in St. Louis, or someone who does know investors there etc.
bpodgursky 15y ago
1) you don't need $500k+ in funding to build a successful software company. 2) this is especially true living in a part of the country with a reasonable cost of living. Somewhere like Missouri, $50k is two reasonable years of runway for a single 20-something (even in a metro area like St Louis, you'll be able to rent for ~$400 .) 3) it's pretty ridiculous (and arrogant) to assume that nowhere else in the country can you get investors.
- philwelch 15y ago
  If you're a one-man shop, there's little point taking any funding, and it's doubtful even these guys would fund you.
  - ArchGrants 15y ago
    Actually, if you're a sole entrepreneur with a great idea or disruptive venture, we want to read your submissions!
- brandnewlow 15y ago
  If you're raising $50k, you'll probably want to raise $500k if things go well. Doing that in STL is unquestionably harder in STL than SV.

xarien 15y ago

Same way you work any business model projections, pull it out of your.... It's really not a bad idea to set up a business model with a set of variables defined from which you base your projections. When I do this, I make it very easy to drop in actuals and have the projections auto updated based on the collected metrics over the original projected ones.

firefoxman1 15y ago

Well, if you've ever had to write a business plan, you'll agree the projections for a startup end up being complete BS, but they make investors feel safe looking at a 20+ page document with lots of charts and numbers. That said, business plans can be useful and help the founders solidify their business model, predict costs, etc. If anything, it helps you get a vague idea of what to expect a few years down the road instead of just the next 60 days.

mhartl 15y ago
business plans can be useful and help the founders solidify their business model, predict costs, etc. I would guess the vast majority of tech entrepreneurs would disagree with the implication that business plans are generally useful.
- firefoxman1 15y ago
  Haha is that a stab at the "worry about the business model later" attitude in tech, or am I interpreting it wrong?
  - mhartl 15y ago
    No, I'm being serious. Thinking about your business model is useful, and planning is useful, but the formal practice of writing an official "business plan" (with revenue projections, etc.) is from a bygone era. More than anything, business plans give people (in this case, Arch Grants) a false sense of security.
    - firefoxman1 15y ago
      Oh yes I completely agree. New industries move too fast to predict their profitability. I think the resume will go the way of the business model in our lifetime, if not 10 years.
      - mhartl 15y ago

ry0ohki 15y ago

I don't think anyone sees 3-5 year plans as promises, more as the fact that you've thought about what your company will be doing in 3-5 years. Yes technology is impossible to predict but they want to see that you've given it more thought then, we don't need revenue Google buys us in year 2!!!1!

deleted 15y ago

[deleted]