Driver mapping
The few assumptions that really move the business, identified and agreed before any formulas are written.
Fund What's Next
Financial models that survive investor diligence
Investors forgive a model that turns out to be wrong; they do not forgive one that cannot be explained. We build models from the drivers of your business, so every number traces back to an assumption you can defend, and so you can use the model to run the company, not only to raise.
A startup financial model is a spreadsheet model that projects revenue, costs, cash and funding needs from the drivers of the business, such as customers, pricing, conversion, costs and hiring, so that every assumption can be traced and tested.
What is a driver-based financial model?
A model in which the financial outputs are calculated from the operational drivers of the business: how many customers you acquire, at what cost, what they pay, how long they stay, and who you hire when. Change a driver and everything that depends on it updates, which is exactly how investors will test it.
What it includes
Six parts of a financial model
Revenue model
Customers, pricing, conversion and retention, built up from how your business actually sells.
Costs and hiring plan
Operating costs and a hiring plan tied to milestones, so headcount follows the business rather than the calendar.
Cash flow and runway
Monthly cash, the runway it gives you, and the point at which the next round must close.
Scenarios
A base case, a conservative case and an upside, so you and investors can see what happens when assumptions move.
Use of funds and milestones
What the raise pays for and what it gets the company to, consistent with the pitch deck.
Which assumptions do investors challenge most?
Growth rates, the cost of acquiring a customer, conversion and retention, the speed of hiring and how quickly revenue follows it. Assumptions backed by your own early data or by credible comparables hold up; round numbers with no source do not.
Forecasting
Top-down or bottom-up forecast?
A top-down forecast starts from the market size and assumes a share of it; a bottom-up forecast builds from customers, conversion and capacity. Investors trust bottom-up forecasts far more, because each step can be checked. A top-down view is still useful as a sense check on the result.
| Top-down | Bottom-up | |
|---|---|---|
| Starts from | The size of the market | Customers, conversion and capacity |
| Investor view | Easy to inflate, hard to trust | Traceable and testable |
| Best use | Sense-checking the result | The forecast itself |
Questions
Financial modelling: common questions
How many years should a startup financial model cover?
Typically three to five years, with the first one or two by month and the rest by quarter or year. Early detail matters most, because that is what investors test against your current numbers; later years show the shape of the opportunity.
Will we be able to update the model ourselves?
Yes. Models are built to be used: clearly laid out, with assumptions in one place, documented, and walked through with your team, so you can update actuals and run scenarios without us.
Do you prepare statutory accounts or tax filings?
No. A financial model is a forward-looking planning and fundraising tool. Statutory accounts, audits and tax filings are the work of your accountant, and we work alongside them so the model starts from your real historical figures.
Should the model and the pitch deck show the same numbers?
Always. Any number in the deck should come from the model, and an investor who finds a mismatch will doubt both. We build them together, or reconcile an existing deck with the model, before investor meetings begin.
Build numbers you can defend
Tell us where the company is and what you are raising for. We will tell you which assumptions investors will test first.