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The Benefits of a Family Office

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    Tips For Using Your Financial Model

    December 22, 2021

    2 min read Financial models contain numerical data about the past, present, and future of your business. This information can be used to make business decisions, analyze the financial health of the company, and can also be presented to potential investors. In this article, we provide tips for using your financial model. Using Your Financial Model in Your Pitch The financial model is a key component of your pitch. You should be using key financial numbers from the model to tell the story of how your business can scale up. To do this, start with your unit economics to show the business works. Show how the systems you have built drive the business using the financial model. Highlight the market size and how fast the market is growing as well as how you will go to market if you are in the early stage. Call out key cost figures to demonstrate you know the numbers that drive your customer acquisition process and retention rates. Show how you will use the funds by pointing to the costs for building products, generating leads, or closing sales. Show your cash burn and how the fundraise will give you runway. The financial projections alone don’t tell the story of your business. You have to pull out key numbers to tell the story. Using Your Financial Model in Your Pitch Deck Many founders cut and paste cells from the financial model spreadsheet into a slide. This renders the information unreadable as the spreadsheet doesn’t fit with the presentation format. To show your financial projections, consider the following: Don’t cut and paste from the spreadsheet. Investors cannot take in a detailed spreadsheet on a slide, only the high-level information. Instead, choose specific numbers from your financial model and place them into the slide using the same font and format as the rest of the deck. Choose three sets of numbers: Revenue, costs, and profits. For these categories, show last year, this year, and projections for the next three years. This provides a five-year window into the company. For each of the three categories, create a line graph. Avoid hockey sticks as investors will discount those numbers as unrealistic. Investors will look for the growth rate you are projecting. They will look to see when you go cash flow positive. Investors will look at the burn rate on the profit line and then check the fundraise to see how much cash runway you are proposing. The key takeaway regarding how to present your financial projections is the importance of calling out three key numbers such as the growth rate, months to cash flow positive, and the number of months of cash runway. How Investors Use Your Financial Model Investors use the financial model to understand not only the business but also to learn about the founder and their skills.  Here are some key points investors look for: Salaries: How well is the team compensated, and does this fit the stage of the business? Customer acquisition and retention: Have you built a system for acquiring customers and retaining them? Traction: What traction do you have going so far? Knowledge of the business: How well do you know the costs of running the business as well as what factors drive revenue? Scale factors: Based on the costs and customer acquisition model, how well can the business scale? Use of funds: How are you are going to spend the funds raised? Does it make sense for the stage of the business? Potential outcome: Is this a venture business or a lifestyle business? Consider how the investor will view your deal in building out your financial projections.  Feel free to try out our calculators and contact us if you would like to discuss your fundraise: https://staging.startupfundingespresso.com/calculators/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group.

    How to Answer the Investor’s Questions

    March 24, 2021

    1 min read In raising funding, the startup will meet with many investors, so how should they answer the investor’s questions? First, listen to the investor’s questions carefully. Answer each one directly and to the point. If a question requires a number, give that number. For example, if the investor asks how much revenue do you have, answer with: “We have $200K of revenue so far this year” or, “We have $10K of monthly recurring revenue”. Be careful not to answer every question with a story. Long-winded answers waste the investor’s valuable time and often miss vital information. If the investor wants to hear the back story for a particular question, they will ask. For example, “That sounds interesting. Tell me how you arrived at that model”. The investor often has a list of questions to go through and a limited amount of time. Not responding with direct and to-the-point answers only serves to lengthen the pitch process. Also, some investors may interpret the long and winding response as avoiding the answer, which raises a red flag. It’s best to be straight up. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/the-art-of-pitching/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Five Things Investors Love to Hear in a Pitch

    March 17, 2021

    1 min read What are some things Investors love to hear in a pitch? Investors hear pitches continually throughout the year. There are so many that it can be hard to truly hear them all. But, from time to time, an entrepreneur will make a pitch that stands out from the crowd. Investors are listening for a few key things that show you have a real business with real growth. The rest is filler. Every entrepreneur has a story. Many are interesting; some are not. For investing purposes, there has to be five key elements to capture their interest: Real Traction Entrepreneurs who have sales and show it are head and shoulders above the rest. Most talk about the traction they will have in the FUTURE but not what they have today. In an investor’s mind, this equates to “No Traction.” Real Pain Point The entrepreneur has found a real pain point in the market and is filling it. Someone once said, customers pay for pain to go away. They don’t pay for nuisances or inconveniences. Real Team The company has someone building it and someone selling it, and those team members know what they are doing. Real Product The product works and is non-trivial to build. It’s more than just spin marketing. Real Growth Prospects The market opportunity has strong growth potential and will not run out of steam in a year or two. A startup pitching with each of these elements in place will always capture the investor’s attention. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/the-art-of-pitching/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    How to Pitch Investors Through Email

    March 10, 2021

    1 min read To pitch investors online is a skill one can learn. Here are some crucial steps in reaching out to potential investors through email to pitch your deal. Choose investor prospects carefully. Don’t spam an entire list but rather research each lead and identify qualified candidates. Search for connections to those candidates and topics of interest. Then devise strategies for how to reach out to them. Indicate why you are reaching out to them. Show why that person and company could be interested in your deal. They may be interested based on a past investment, a network connection, or a group affiliation. Answering the “why” will keep them reading. Show your connection to the reader. Finding a common link will significantly improve your chance of a response, so it’s worth looking for someone who is in their network that can provide social proof that you are legitimate. Show the problem you solve. And not just the problem, but the solution that you offer and the market that you target. Do this in one or two sentences and not one or two pages of text. Show indications of traction. Use 3 to 5 examples of traction such as leads generated, sales closed, number of users in a beta program, etc. Introduce yourself and show social proof. There’s a tendency to start the email with this information but showing your position in the community and credibility comes after establishing a topic relevant to the investor. Close with a one-sentence ask. Make clear the next step such as a conference call, a meeting, advice, etc. Also, remember the following points: Write in a conversational but business-style tone; not marketing-speak. Keep it short and to the point avoiding long blocks of text. Use numbers to make your pitch stronger as it shows specificity. Remember to attach the executive summary or pitch deck. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/the-art-of-pitching/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Startup Pitch Exercises

    March 3, 2021

    2 min read What are some startup pitch exercises to practice before approaching investors? Entrepreneurs know the importance of the pitch to investors. There are many blog posts explaining tips and techniques on how to communicate your vision, passion, and story to the investor. Keep in mind the best practices. As an exercise in building your pitch, try the following: Give your pitch in numbers. Use only 10 words or less. Present your deal from your customer’s point of view. How would your customer describe your business? What value do you offer the customer? Also, try a pitch from the investor’s point of view. How would the investor describe your pitch? How your business makes money? And don’t forget your employees’ point of view. How would your employee describe your business? What your company does on a day-to-day basis? Lastly, give your pitch from your competitor’s perspective. How would your competitor describe your business? What is unique about your business? Most pitches tell a story Some entrepreneurs use their entrepreneurial journey as the format which goes something like this: I had a problem I couldn’t find a solution So I created my own solution Others started asking me for it So I started a business Walk Through the Executive Summary Another approach is the “Walk through the Executive Summary” which takes the audience through the sections of your one-pager. Here’s the problem and how much it’s costing the world This is my solution to the problem This is the product I came up with for the first version Here’s the advantage of it Here’s how the business model works Etc. As the saying goes, practice makes perfect. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/the-art-of-pitching/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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