By Randall Bolten, author of PAINTING WITH NUMBERS: Presenting Financials and Other Numbers So People Will Understand You.
Here’s a curious fact – in almost all startup business plans and investor pitches given to venture investors, the financial section shows exactly the same results: Year 5 outlook revenues of US$80-100 million and operating margins of 30% or more. This sameness is well-known to the people in the VC community; in fact, it’s a source of humor.
But if the financials all show the same results, how meaningful are these numbers? And why are they a requirement when you go out to raise money?
In truth, the financial results themselves are of secondary importance. When you present a financial model as part of your investor pitch, what the audience is really looking for is not really the results you’re predicting, but what it says about your thought process and how you think your business model is actually going to work. (more…)