It's a great example of the first rule of marketing - know what your prospect's needs and wants are, and write to that. Think of the funder as your first customer - they may not be buying your product, but a buying you.
“embarrassing bad assumptions before the market does” is especially true. Financial modelling is one of the few exercises that forces founders to confront the economic consequences of their strategy before committing real capital.
The model is where “we’ll hire a few people and grow quickly” turns into salaries, tax, software, late-paying customers and a sudden need to lie down. 😅
This resonates. I think models are valuable for the same reason writing is valuable.
They force assumptions into the open.
A spreadsheet can't predict the future, but it can reveal whether our thinking is coherent enough to survive contact with it.
I like that comparison. Both writing and modelling force assumptions into the open before reality does
It's a great example of the first rule of marketing - know what your prospect's needs and wants are, and write to that. Think of the funder as your first customer - they may not be buying your product, but a buying you.
Investors really are like the first customer, and earning their confidence starts with understanding what they need to see
“embarrassing bad assumptions before the market does” is especially true. Financial modelling is one of the few exercises that forces founders to confront the economic consequences of their strategy before committing real capital.
That's exactly the value of the exercise. It's far better to challenge assumptions in a spreadsheet than after the capital is spent
The model is where “we’ll hire a few people and grow quickly” turns into salaries, tax, software, late-paying customers and a sudden need to lie down. 😅
Reality has a way of turning simple growth plans into much more detailed operating decisions
Petar, I learned this the hard way.
A financial model isn't valuable because it predicts the future. It's valuable because it exposes the assumptions founders haven't challenged yet.
I've seen investors spend less time debating the numbers than asking, "What has to be true for these numbers to happen?"
The spreadsheet isn't the deliverable. The quality of the founder's thinking is. That's what ultimately builds confidence.
The conversation behind the assumptions is often more valuable than the forecast itself