Ask HN: Early angel/seed investors asking for detailed financial projections? | Hacker News Reader

Ask HN: Early angel/seed investors asking for detailed financial projections?

6 pointsanmol5 comments

We are a 3-person, mobile social (east-coast) startup. We had a great meeting with angel investors today. They love the tech and team, but want to see a real economic model-- revenue sources, cost of user acquisition, ad revenue estimates, cash-flow positive time-line, customer segmentation.

For companies that have raised seed rounds in the valley (100-200k range), is this common? With all the talk about pivots and launching quickly, how much do west coast seed investors care about financial projects? Or is this an east coast thing?

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I could imagine a seed investor asking about such things informally, but it would be unusual to ask for a written analysis. East coast investors are more conservative though.

Doing financial or other KPI modeling can be really illuminating. At minimum, it can help you verify your assumptions about market size and opportunity.

For instance, check out this great article from the founders of snaptalent:

http://jamiequint.com/lesson-one-know-your-market

"I think we are going to pass on SnapTalent. I like the guy and the concept, but the model we put together just doesn’t play out the way we would like it to. I’ve attached it here, and you can see that if we assume $5k cost per hire, we get to a very reasonable $2.50 eCPM. But I don’t believe $5K is the right number. I believe it is somewhere between $75 (what Craigslist charges) and, say, $2K. At the high end, that leads to an eCPM of $1 which is not going to get over the bar of most publishers. As the low end, the eCPM and the CPC converge....way bad ;) I’m sure we screwed something up and you are going to make a ton on this deal, and I thank you for giving us time to look at it, but it is not going to work for us right now."

If they are putting their money into you and your company they should be comfortable that you have at least thought about making money.

Fair enough. We'll suck it up and do the detailed financial projections.

It just sucks from the perspective of pivoting the product/tech if the first version doesn't work out as planned.

I find these financial models to be very informative. I set them up with an assumptions sheet that I can edit and see how the numbers change. I learn from them where some of the biggest risks and pitfalls are.

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