I've got a thorough financial model. Every expense is accounted for, but it's a little more difficult to determine at what point revenues will start flowing in. Should my raise be based on:
A) a reasonable scenario for when revenues flow in
B) a moderately conservative scenario
C) an extremely conservative scenario
Is it possible to raise based off of A but have emergency funds at hand in case B or C becomes more realistic?
If anyone here consults on financial models for startups, I'd love to get in touch for a quick convo.
As long as, you don't end up in death valley in the financial model, you should be ok. You will become ok only if the revenue kicks in or the investment comes in or both. Since you said that you did not know when the revenue would come in, I'd suggest you take scenario C right now to shore up the cash-in-hand.
To answer your second question: it all depends on your story telling skills to convince the investors when, how, and with what target customers you would start making money and of course how big the market is.
Usually we always show a conservativr scenario to investors. The financial model is always sane and most realistic whih captures the real life picture of the business in terms of flow of revenue wrt to timining even an a month level and expenses which must be always be a.little on the givher side to account for exigigencies n miscellaneous issues. The funds to be raised should cover the business for atleast first 2 yrs or till break even happens. Pl get in touch on email if you want to consult in detail.
Go with A). The story is important- i.e. market positioning/resourcing etc. is well understood by the early round guys. They will be more interested in pilots/interest generation that already exists and an understanding of the gotomarket as opposed to exact $
I can be reached on email@example.com. I run a CFO Services Company . To answer your question- Create a All Expense and Capex model and plug that to multiple revenue scenarios, Raise resources based on conservative or thereabouts...Ajay Nair
How can I start my business have zero in hand?