Almost every VC with a blog will, at some point, write an amazing post on how to prepare the best VC presentation. I guess that it makes sense – every venture capitalist would like to see his own wishes implemented in the material he gets from entrepreneurs. (For some examples, check Jens Lapinski, Guy Kawasaki, and David Hornik).
This post is not another VC presentation guide. Well, not a complete presentation guide. I am going to focus not on the full VC presentation, but only on a single (and probably most important) slide – the financial slide.
In the past 7 years, I have seen many presentations. Some are amazing, some are just ok. But one thing is beyond me – even though entrepreneurs are coming to see VCs for money, they don't put enough effort in presenting their financial forecast in a way that makes sense and that is VC compatible. Below, I have listed 6 tips on how to create the financial slide. I also included an example of a financial template that can be used (I think) when making VC presentations (Will be interesting to see how many entrepreneurs will use this in their presentations to Gemini…)
#1: You need a financial slide. I guess this is obvious. I have met many entrepreneurs that come to a VC meeting with no financials. That's like coming to a rock concert without a ticket. In other words: YOU HAVE TO HAVE FINANCIALS.
#2: The Excel file is not enough. One of my favorite quotes is "We didn't prepare a financial slide, but we will be happy to show you our highly complex excel-based model". Usually, the 1-page summary slide is more than enough.
Just a few days ago I had a meeting with an experienced entrepreneur that I appreciate and trust. He was proud of his highly sophisticated financial slide (Copied/paste directly from Excel). He said that a sophisticated financial slide gives all the answers required AND shows strong understanding of the business. I actually agree with those points, but I think that the sophistication should come AFTER a simple summary. Bottom line: THE EXCEL STAYS HOME.
#3: Will you make 68 cents in year 4 of the business? Since financials slides are outputs of sophisticated models, the outputs are always a bit funny. Almost every plans that I see shows that in a few years the company will generate (For examples…) $55,283,189.45. I think that numbers should always be rounded, especially when the budget goes beyond year 2 & 3. In the example above, $55M forecast is more than enough. In other words: ROUND NUMBERS.
#4: No graphs. This one is probably subjective. I think most VCs don't really care for the graphic presentations and are happy to read through a simple financial summary. I always ask the entrepreneur to skip through the graphs directly to the actual table summary. In the same words: NO GRAPHS.
#5: Take the top-down approach (as well as bottom up). Similar to the previous point, many entrepreneurs don't bother to check if the business model they created actually makes sense. This is beyond the rounding errors. Is it really possible in your vertical to triple the revenuers every year? Taking a quick glance at the final summary helps in making big changes that should have been created in the internal process. In other words: DOES THIS MAKE SENSE?
Great post, Dany! This is the hardest piece of any presentation to a VC, aside from the elevator pitch. Having been a VC investor, an entrepreneur and an advisor to entrepreneurs, I know that it is the most painful slide.
Its easy enough to get to a sense that a market is enormous, big enough for a big success. Translating that sense into a concrete number is an artificial process, and is hardest for those most familiar with the sale of the product.
Posted by: Laura Shenkar | June 30, 2008 at 09:47 AM
Dany,
Good post. I think the hardest part of the financial figures is agreeing to the first line, i.e. revenue or # of users :-)
Assuming you believe that line, the rest of the model is easier.
O.
Posted by: Ori | July 07, 2008 at 07:47 PM
Ori - I agree with you. The hardest part in general is filling the right numbers that reflect the business plan. However, I am always amazed how entrepreneurs complicate the presentation layer or sometimes think the whole financial plan is optional.
Posted by: Daniel Cohen | July 07, 2008 at 08:43 PM
Where is the 6th tip?
Posted by: Yoel Kelman | August 27, 2008 at 07:18 AM
Thank you Danny, I will certainly use it.
Y.
Posted by: Yariv | December 08, 2008 at 08:20 AM
Hi, Thank you for that
its so true and so valuable.
couple of questions:
1. should the financial slide be constructed as "P&L" with projected revenue and expenses?
2. when raising funds or determining the amount , should we strategically aim for the "cash flow positive" point? meaning we need $x that will bring us the cash flow positive ?
3. how do you value "user aggregation" business model e.g. YouTube raised $11M without selling single service and was acquired by Google for $1.65B just for its users
Best Regards
Gil
Gil
Posted by: Gil | October 04, 2009 at 08:35 AM