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Founders: Create a Business Plan VCs Will Love — Aligning Numbers with Narrative for Investment…
- Creating a financial model for your business plan is about demonstrating realistic potential through numbers and narrative, not just creating a perfect Excel file.
- A business plan communicates your story through financial representations and serves key purposes for VCs, such as revealing how your company operates and providing depth for evaluation.
- Financial models are crucial for scenario planning, where VCs test assumptions and project revenue lines for different scenarios to estimate potential ROI.
- Assumptions in your financial model should be grounded in logic, supported by data, and strike a balance between ambition and realism.
- VCs focus on key areas like revenues, costs, and cash flow when reviewing your financial model to assess your business's health, scalability, and resilience.
- VCs expect your financial model to be organized and include key elements like revenue sources, expenses, and funding requirements for immediate insight into your business.
- Assumptions in revenue projections should be both optimistic and realistic, grounded in data and industry benchmarks to build credibility.
- Costs in a financial model expose risks and constraints, and VCs scrutinize them to ensure all expenses are considered and scalability is addressed.
- Cash flow analysis is essential to demonstrate financial stability, with VCs examining runway, burn rate, and projections across different scenarios.
- Founders should be prepared to justify and explain every assumption in their financial model, understanding how VCs analyze revenues, costs, and cash flow.
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