I used to invest. Now I dad, build community among NYC innovators, and coach emerging VCs.
I take regular meetings with my founders pretty seriously. I push for goalsetting, usually by way of a financial model, a comparison of performance against that, and a discussion of what we're going to do going forward--and I don't care if it's a pre-seed round or if you just raised your A. I've gotten pushback over the years that it's overkill, that financial models are BS, or that prep for a meeting is a waste of a founder's limited time. What do you think? I set out to ask some experts what they think--and how to make these meetings efficient and productive. Join me next Thursday as I talk with: 💰 Melody Koh from NextView Ventures, who co-invested with me in Ten Little 📊 Chris Fenster who runs Propeller Industries and has seen and prepared, along with his team and tech, more financials in more board meetings than perhaps anyone 👨💻 Matt Blumberg of Bolster--a veteran founder who literally wrote a book on startup boards along with Brad Feld (https://lnkd.in/eNZfHbyX) and built a company that matches CEOs with executives, mentors, and board members without the hassle of traditional talent sourcing. RSVP: https://lnkd.in/ePFeRQYv
I think conversations around financial models bring tremendous clarity to the founder/investor dynamic and help actually dispel some of the BS. Even if the model is complete projection, the conversation around the assumptions made can ground things and help reign in founder optimism that borders on delusional thinking. Founders—and investors alike!—can be optimistic in a hand-wavy way about future market sizes, blue oceans, industry opportunities, etc. I've seen founders make great progress in focusing on the right things because someone finally pointed out something absurd in their models. Not in a malicious or 'hiding things' way, just in how assumptions can build on other assumptions and get things carried away. The amount of models I've seen that end in year 5 with a revenue/expense ratio or average revenue per employee that would make Apple jealous...
As with most things in life - it’s not so much about what you do, but how you do it. The conversation you propose can easily go either way. As an advisor to many founders, I take any pushback quite seriously - it means that likely I am approaching it wrong (for them), even if I know the content is ‘right’; ie, something that needs discussing.
Not trolling. As a founder I’d like the answer but don’t have time to attend a webinar.
Lived and died by our financial model at Cipher. If your business is growing fast you really need to understand your math, if you are on plan, ahead, behind, need more capital, can grow faster, can finally pay some people, etc.
This is a great topic Charlie. I've been thoroughly enjoying the content Cassie Young is putting out around how founder's can better prepare for board meetings.
Great question Charlie O'Donnell and good group to answer it. I have a feeling the tl;dr will be "it depends".
I’m really interested to read this. Having built a bunch of companies myself, I have my own views on this topic. Will be interested to hear what Charlie’s experts have to say.
As a founder I would love to have regular time to talk about these with a smart and thoughtful investor. Re: financial models, I think they are bullshit only if you measure the business against whether you were right in the predictions. I think they are super valuable instead as a way of drawing a picture, in numbers, of what you think is going to happen in your business. Then when you review it together, you talk about the insights you’ve gained about how the business operates, how your assumptions have proven right or wrong, and how much you are able to dial up the precision since last time you reviewed the model. A convo that feels like two interested and caring people passionately digging into the quest to figure out how this business really works, so that you can get more skillful at leading it, should feel really exciting and fun