Investor Presentation Development – Financial Projections

Financial projections (Profit & Loss and Cash Flow) are best presented in initial meetings with a one page spreadsheet showing units shipped, revenue, and etc. In some cases, projections can not yet be made for some reason. In that event it is better that this be stated in a believable way as opposed to creating fallacious data. Projections are typically for 5 years in the US. Investors will not expect that the projection for year five is highly accurate. However, the assumptions, detail, and reasonableness for year one will receive serious examination. Investors know that the natural tendency is to overstate achievable revenue and understate expenses.

Investor Presentation Development – Financial Projections

This section/slide should address:

  • Revenue. See the Market Opportunity Post. Investors prefer bottom up forecasts that are supported by real plans. They will consider what is the time line of customer interaction to achieve a given revenue assumption? Is the near term revenue projection supported by the necessary pipeline activity today? How does the long term projection compare to the total market size? Is the projected share unrealistically high or uninterestingly low?
  • Expenses, the monthly “Burn Rate” for both the current period and after investment should be shown
  • Profits before taxes.
  • EBITDA (earnings Before Interest, Taxes, Depreciation, and Amortization)
  • Cash Flow
  • Capital investment
  • Proceeds from sale of equity
  • Current debt of $0.00. The Company should not accrue salaries if it wants to raise money! Investors prefer to invest in future growth as opposed to past debt of the Company. As the total amount of debt (especially accrued salaries) increases the company becomes less “fundable” by Tier I, and then by Tier II Investors. Companies that already have a revenue stream may well have working capital financing lines in place which will not present a problem so long as the line is truly used for working capital needs and the line will not be paid off with the proceeds of Investor financing.

Notes

  • Key assumptions and useful related information should be available on backup slides.
  • Financial projections must be based on more than a one page spreadsheet.
  • Company can compare forecast revenue ramps to revenue ramps previously achieved in their sector.
  • The technology company has performed a preliminary IRR calculation and is prepared to discuss it and how it compares to what is expected in that industry sector.
  • While discussing this slide, the CEO wants to briefly project that he understands key tasks including how to manage cash flow, IRR, and its meaning to investors in early stage startups, valuation, etc.

John Gale’s White Paper on Business Plans is Available for Download

This Post is based in part on John Gale’s White Paper, Startup Presentations to Angel/Seed Stage Investors and Partners: Recommendations for Best Practices  This White Paper can be downloaded from:

  • The Business Plans page on this Website
  • It can also be downloaded from this page on the Angel Capital Association website.  The Angel Capital Association is the leading professional and trade association supporting the success of (US) angel investors in high-growth, early-stage ventures

Please See Also The Related Posts

Please See Also

 

  • For a discussion of financial plans for startups, see Chapter 2, pages 23-40 of Funding and Financial Execution for Early Stage Companies by Rod Hoagland

 

 

 

 

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