Video: Introduction to financial modelingCopy

In this video, Professor Hachikian introduces the steps involved in financial modelling and crafting a financial ask. 

https://youtu.be/folZXfEsJb8

Transcript

Hello everyone, I’m Christina Hachikian. I’m a clinical associate professor of Strategic Management at the Chicago booth, and I am excited to be here with the impact toolbox community. I’ll be talking about financial models and business drivers for startups. 

Let’s start by discussing a little bit of what not to do. There is a very common thing I see in an entrepreneur’s pitch deck; the hockey stick curve with some revenues and some costs. This slide adds no value. It doesn’t tell me anything about your business other than you’re optimistic that someday you will make money. This slide is even worse, and I don’t ever want to see a slide like this. This doesn’t tell me anything. It just says you can use excel.

The problem is that those are the kinds of slides that we often refer to, and they are ineffective for actually being a useful part of our pitch deck. So, what I want to talk to you today about is what is effective and what is useful? If you can do the financial piece of your pitch deck, and really, the financial piece of your business right, you can use it to raise money to talk about your market opportunity to help people understand the fundament fundamental economics of your business. Also, the kind of funding you might need, and that’s really what we’re going to talk about and unpack today. 

There are really three things that you need to do to paint a financial picture for your potential investors. 

1. The first thing is that you need to develop an optimistic and defendable financial model using options, actual assumptions embedded assumptions. It is really that spreadsheet behind the deck that you want to be able to develop, and we’re going to get into that today. 
2. The second point, and this is I think where many entrepreneurs, sort of, they probably know the answer but they stop short, is that you really need to pinpoint and validate the actual underlying drivers of your business, and you do that in some ways by really honing in on what your unit economics are and then;
3. The third piece is really developing a compelling story, and what that takes is really thinking about how those financial models you have and the numbers that you have compared with the assumptions you’ve made and the business drivers turn into a story really to show investors why you’re an investment company and so we’ll talk about kind of all these pieces together.