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Managing and communicating Financial Model, Cap Table and Financials.

Last year, I helped a startup raise $26M Series B. It was exciting and painful, exciting as I was meeting some of the brilliant minds in VC space, and painful because startup/VC space has no standard way of communicating information.

Question: Has anyone else struggle to manage and communicate changes in Financial Model, Cap table and Financials? What was your solution?

13 Replies

Allison Rosenberg, Ph.D.
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Allison Rosenberg, Ph.D. Entrepreneur • Advisor
CEO, posed2,Inc.

+1 x 1000000!!

Navneet Sandhar (Ricky)
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Advisor at Totally Square Records
Sorry Allison, I don't understand your response.
Allison Rosenberg, Ph.D.
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Allison Rosenberg, Ph.D. Entrepreneur • Advisor
CEO, posed2,Inc.

That just means "me too" by a million. GREAT QUESTION (and baited breath).


Michael Brill
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Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
Crap, I just added $1 million to all my numbers. I guess I misunderstood Allison's response as well.

Actually Navneet, I'm not sure I understand your question. Could you clarify whether it's the basic form of financial information presentation, business model mechanics/assumptions or specifically how to communicate changes to previously-presented information?

Navneet Sandhar (Ricky)
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Advisor at Totally Square Records
Sure, I can explain.

Startup CEO's are constantly updating Financial models with changing business needs. These changes lead to change in expense, revenue and cash flow.

During the series B round and after that, investors wanted me to send them list of changes made to financial model and their financial impact. That was difficult, I wasn't able to track changes with 100% accuracy because excel model can't be setup to highlight changes to financials. Additionally, model file was huge and was difficult to share via email and due to the file size model kept getting corrupted every week. Too much time and resource was wasted in maintaining and sharing financial model.

Financial Model contained business assumptions, financial forecast and headcount details.

Please let me know if this helps.

Peter Weiss
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Peter Weiss Entrepreneur
President at American Outlook, Inc.
Separate the communicate and management issues. Also separate the model, financials and cap table pieces.

Cap tables should not change that often. The only times you should see material changes in the cap table are when you do a new financing; do a major revision in the equity comp plan; cross a major threshold with conversion of debt or option/warrant exercise/expiration; or have a recap. Minor changes due to the grant or revocation of options and warrants would not normally be a material change and don't merit special communication.

As a CFO you should be maintaining your cap table continuously and update it constantly. One technique I use (but rarely see used by anyone else) is to have the vesting and expiration dates all falling on the first or last day of a calendar month or, better, calendar quarter. I also prefer to have all Notes in a class mature on the same day. By doing this it gets easier to manage the vesting, expiration and maturity processes and the cap table stays cleaner. There is also less room for dispute about the proper definition of maturity dates, anniversaries, etc.

Ideally the financial model is driven from an assumptions table and even more ideally, a summary of major assumptions inputs and key results are presented in a nice table so scenario analysis is made easier. This is helpful as long as you are not changing the way the model itself works.

Each time you change the underlying model I recommend saving it as a new, numbered or dated version. Make sure you keep a list of the changes you've made. If you are using Excel or an equivalent designate a sheet with this list of changes. This gives you the history to know what happened to the model and when.

Financial statements probably come out your accounting/bookkeeping system. Almost all such software produces standard financial statements and offer lots of ways to customize. I always start with QuickBooks Pro and when the company becomes complicated enough to merit something more robust than QuickBooks Enterprise we look for software which may be more customized for the industry. If you have good disciplines you should be locking prior periods as time passes and changes to history should require administrative access and sign-off.

As for communication, minor changes to the cap table or model generally don't get discussed beyond management and the Board. Major changes to the cap table are usually something shared with shareholders as the funding round is planned and generally require approval or at least notice to shareholders. You need to describe major terms and outline the financial and ownership impact.

Major modeling changes are generally shared only with the management team, Board and shareholders who have the right to get this level of detail, normally only VCs or strategics and Directors. Normally I would send out a summary of changes and the results of some key assumptions and the summary results. Unless an investor has the right to have access to the model I do not recommend sharing the live model - there are too many ways for someone who does not understand how the model is built to have something go wrong. I will do a live session with someone who has reason to play "what if" scenarios.

All financial information including model results and financial statements should be shared periodically with everyone entitled to see them but all documents should be PDFs, not live Excel, Word or Powerpoint documents.

Hope this helps.

Peter Weiss


Jill Hodges
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Jill Hodges Entrepreneur
Founder and CEO, Fire Tech Camp
Good comment Peter.
Have a look at some data room providers, so that you put all the documents on the cloud with a password that you can give to live investors. These give you some trackability. You can do it on the cheap with less functionality in dropbox so that you are not emailing across huge files.


Peter Weiss
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Peter Weiss Entrepreneur
President at American Outlook, Inc.
Jill is correct. If you are sharing large files there are a number of tools available which not only allow you to overcome the limitations and challenges of e-mail attachments, they also allow you to track who has looked at the material and sometimes even control the extent to which they download the files. (once a file is downloaded you cannot know where else it goes.)

That said, I am not a fan of sharing the big, underlying files, models and spreadsheets except in very limited circumstances. Most consumers of the information need and want well constructed summaries - burying them under tons of detail can hinder communication. If I understood Navneet's original question he was looking for ways to communicate effectively and efficiently which means giving the important data in readily digested forms, not huge quantities of detail which by virtue of sheer volume can become what I call the illusion of information.


Warren Sidosky
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Warren Sidosky Entrepreneur
Financial and Operations Executive

Peter and Jill offer good suggestions. Key is to have "one version of the truth" to keep everyone on the same page, save time and avoid confusion. Three principles that I follow are:

1. Have a secure, cloud-based, repository for sharing Excel files (e.g., Google Drive, Dropbox),

2. Use a sound naming convention for version control (e.g.,Company Name Financial Model v1-1), and

3. E-mail a bulleted summary of the changes/assumptions to key management/users. Attach a PDF version of the latest five-year financials and key statistics reports. Provide a link to the underlying supporting file.

Rachel White
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Rachel White Entrepreneur
CFO at Flamingo Customer Experience Inc
Hi Navneet,

I'm a CFO focussing on technology startups and the issues you raise are relatively unique to that industry. Peter's tips are good advice.

I always setup a cap table and retain control of it. I communicate using PDF's, never the actual model, as the underlying calculations required to remove any circular references create no end of confusion.

Peter's tips on the model itself are also very valid. Adding a new number for each version (ie finmodel8.0, following by finmodel9.0) are very helpful.

I use Excel to build the model and Google doc's to communicate if we're not face to face as then people can see where I am in the model.

The big change I've made this year in models is to swap around the rows and columns. I have the assumptions now going across the screen, with time going down the rows.

This allows me to put all the drivers, assumptions and outputs up the top where people can immediately see the impact a driver change has.

This has worked well with founders, who have never seen a model before. I've not roadtested this yet with a VC or their analyst, I suspect I may need to turn it back around into their familiar format once we get that far.

While that sounds like duplication of effort, if your primary purpose of the model is communication then it isn't - you're using the layout that best explains your message, using the tools you have.

I truly look forward to the day spreadsheets are disrupted!! For now, it's what we have.
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