Key Highlights: 5 common mistakes in financial modelling during startup fundraising
Sam Lee Chengyi
Fractional CFO who specializes in SME M&A and Series A Fundraising | M&A Advisory | Seed and Series A Fundraising | Exit Planning | Growth Strategy | Performance Dashboarding
As a founder, your financial model is your startup’s story in numbers. It’s the bridge between your vision and an investor’s confidence in your business. Yet, too often, critical errors in financial modeling derail even the most promising startups during fundraising.
Based on my recent article on e27, “5 Common Mistakes in Financial Modelling During Startup Fundraising”, here are the highlights that every founder should keep in mind:
1. Overestimating Market Size
Overinflated market size estimates might grab attention but can cost credibility. Investors want precise, segmented data showing your realistic share of the total addressable market (TAM).
Tip: Focus on your niche market where you can truly lead before scaling further.
2. Ignoring Unit Economics
Metrics like customer acquisition cost (CAC) and lifetime value (LTV) often get overlooked. These numbers are critical for proving your business can scale profitably.
Tip: Showcase strong LTV-to-CAC ratios to demonstrate sustainability.
3. Unrealistic Revenue Projections
Over-optimistic projections can alienate investors. Your numbers should align with industry benchmarks and market realities.
Tip: Balance ambition with credible data and conservative assumptions.
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4. Underestimating Funding Needs
Many startups fail to accurately account for growth costs, working capital, and CAPEX. This oversight can leave you short on runway.
Tip: Build a detailed plan that fully addresses your funding gap.
5. Lack of Scenario Planning
Models without contingency plans leave investors concerned. What happens if your growth slows or unexpected costs arise?
Tip: Include best-case, base-case, and worst-case scenarios in your model to show preparedness.
Why This Matters
Investors don’t just look at your projections; they look at your preparedness. A well-crafted financial model isn’t just about numbers—it’s a reflection of your strategic thinking and professionalism.
Dive Deeper For a detailed breakdown of these pitfalls and how to avoid them, read my article on e27: 5 Common Mistakes in Financial Modelling During Startup Fundraising.
Have you faced challenges with your financial model? Share your thoughts and let’s create a dialogue to help founders navigate the complexities of fundraising!
Building Merchaint.com | Sharing my journey as an 8-figure wholesale and traditional business owner | Free products and tips on growing B2B businesses
3 个月Yess!! Investors look for realism, strategy, and adaptability.
Founder at Solesco - Finance Content Writer I Finance and Fintech Marketing Specialist | Personal Branding I CA I Lawyer I Ex - Deloitte
3 个月Great insights! I agree that the financial model plays a critical role in securing investor confidence. It's not just about big numbers or fancy projections, it's about being realistic and showing that you understand your business and its potential growth.
CITO | IT Governance | IT Strategy | ISO | CISA | CDPSE | CCSP | Pragmatic to a fault
3 个月This sums up what I felt many many years ago (esp 1-3) , I was hand-wrang (wrung?) into creating unrealistic financial model. Needless to say, it failed spectacularly.
Driving Sustainable Innovation | ESG Reporting | Head of Finance | ISCA member | GHG Protocol | ex-Sembcorp | Lecturer, Mentor | Digital Transformation |
3 个月Yes, i have experienced this before, the LTV must gel with CAC in order to scale in the right way. Excellent article. Have a great weekend ahead! Sam Lee Chengyi