How to present your startup financials in just 3 slides

How to present your startup financials in just 3 slides

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  Less is more: Howto present your startup financials in just 3 slides By Omry Ben David, Partner @ Carmel Ventures
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  Less is more: Howto present your startup financials in just 3 slides In one of my recent blog posts on 5 tips for building your startup's financial plan, I talked about why NOT having a sound financial plan – even at an early stage – is a risky business. Not so much because you’ll need one once you’re ready to raise funds, but because financial preparedness serves the long-term interests of your startup way more than it serves any VC meeting. And now, as a follow-up to that post, here are 3 simple slide examples* you could use in an initial investor meeting – when it's absolutely key to nail the financial overview. * Please note that all of the numbers used in the slides are “dummy numbers” (inserted as a demo only)
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  Addressing a Sizableand Growing Market Source: [Insert your source here] $[X] bn Market is Expected to Grow at ~50% X1 customers X2 customers X3 customers
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  Tips for your“TAM” (Total Addressable Market) slide • On the left-hand side of the slide, show the bottoms-up of your TAM or revenue potential under each bucket (=Price x Quantity); larger buckets represent TAM expansions, i.e. either entering new markets or geographies (the Q side of the equation) or a robust tech roadmap allowing upselling which expands the P side of the equation • On the right-hand side of the slide, show the tops-down approach to TAM, i.e. the absolute size and growth profile; try to note segment growth too as this could tell a different story • Source: It’s important to use and footnote a credible source so you can adequately defend your numbers
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  Financial Overview ($M) 2017E2018E 2019E Comments KPI1 (e.g. customers) X1 Y1 Z1 [Insert comment] KPI2 (e.g. channels, locations) X2 Y2 Z2 Revenues $X $Y $Z Gross Margins A% B% C% R&D $(R1) $(R2) $(R3) [Insert comment] S&M $(S1) $(S2) $(S3) G&A $(G1) $(G2) $(G3) Operating Expenses $(OE1) $(OE2) $(OE3) Net Cash Burn $(C1) $(C2) $(C3) [Insert comment] # of Employees A B C [Insert comment]
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  Tips for your“Financial Plan” slide • The financial overview slide needs to be at a high level, clean, rounded to one decimal place (max) and showing in $mm (or $000 as appropriate); it can be annual or quarterly – depending on the fundraising horizon • Choose 2-3 KPIs that you run YOUR business by and show them at the top; make sure you answer the questions “what am I monitoring daily” & “how is success defined” if you’re not sure which ones to include • Revenue: You can break this into segments if it helps to tell a story, e.g. recurring revenue vs. professional services/maintenance or different product lines etc. • Opex: Break down the opex into R&D, S&M, G&A and use the “comments” column to add qualitative rationale or considerations • Net cash burn: Answers the question “what is the pace of burn and how long would the investment last” • # of employees: This is typically the largest cost bucket, it needs to drive the opex above and be realistic in terms of hiring pace • At the bottom, you might want to consider adding other key stats. Examples I have seen include % revenue breakdown by geography, product mix, target customers (b2b, b2c), etc. • Have a detailed Excel backup that can be used for follow up meeting(s) or offline review; it should also include a monthly breakdown
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  Unit Economics –Simple CLV/CAC Calculation Term Definition Example Average Selling Price (ASP)  Annual average revenue per customer  Can be monthly as well as long as consistent across $100 Gross Profit  Profit after the cost to deliver product or service  Gross margins x ASP $80 Customer Lifetime Useful Life  1 / annual churn rate  If annual churn is 20%  1/20% = 5 years 5 Years Customer Lifetime Value (CLV)  $80 Gross Profit x 5 years = $400 Customer Acquisition Cost (CAC)  Annual sales and marketing expenses / gross customer adds $120 CLV / CAC  >3x is considered healthy, sustainable scaling ~3.3x
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  Tips for your“Unit Economics” slide • This is a simple slide that shows you are building a sustainable business that can scale effectively • The slide essentially takes the lifetime gross profit from a customer and divides it by the cost it takes to find and onboard a new customer; if the ratio is 3x+, you are on the right track • Definitions relating to this slide can vary, e.g. some versions might take into account discounting or time value of money. The calculation above, however, should provide a solid foundation for unit economics discussion • If each customer requires capex investment (e.g. a rack in a data center), you would typically add it to the denominator together with the CAC
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  About Omry BenDavid Omry is a Partner at Carmel Ventures (part of the Viola Group). He has over 15 years of technology-focused experience in investment banking, sales and marketing operations, and both institutional and private venture investments. Prior to joining Carmel, Omry was a senior vice president and east coast software sector captain at Goldman Sachs in the tech, media and telecom (TMT) investment banking group since 2008. During his tenure, he sourced, led and executed 30+ transactions totalling $120bn+ across M&A, equity, debt and institutional technology investments. His investment focus at Carmel includes Enterprise / SME Software, FinTech, SaaS, Cloud Infrastructure and related fields. Read more blog posts by Omry