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How To Use A Financial Model in Your Pitch Deck: 3 Tips

Wednesday, June 29th 2022 (about 1 month ago)

As an early-stage founder, you know how difficult it can be to raise capital. Sometimes it feels like an impossible task. First, you fight tooth and nail to prove your concept. Next, you spend endless hours trying to find the right investors. And then, finally, you get one chance to sell them on your deal.

It feels like you – and your presentation – need to be perfect every single time.

Let’s be honest… you’re not going to nail every single presentation. You’re human. We all have good days and bad days. But you can make sure that your pitch deck is always on point.

Investors see the same pitch over and over. They know all the tricks and they’ve probably used a few themselves. So how do you set yourself apart from the pack?

Your best approach is to make a concise, compelling, and accurate presentation that introduces them to the investment opportunity without going into too much detail.

It’s a fine line to walk, but we’ve got some helpful tips that will show you how your financial model can help you nail your pitch and successfully raise the capital you need.

Illustration: Using a financial model to raise capital

Table of Contents

What Is a Financial Model?

A financial model combines the information from your three primary financial statements into one central location and creates future projections for all of that data.

Building a working financial model is a notoriously difficult task. But when it’s done well, you gain invaluable insight into the inner workings of your business.

Volumes of disparate financial data are consolidated into one friendly dashboard, allowing you to identify problems, opportunities, and important future events with clarity and accuracy.

It’s not exactly magic, but it’s the closest thing to a crystal ball for your business that you’re likely to find.

With this new insight, you can start to manipulate different factors to determine how changes in strategy, staffing, or competitive landscape would impact your startup.

You get nice bars and graphs to visualize your outcomes in different scenarios. And your investors get a detailed and interactive view into the cogs and sprockets that make your business work.

But, as you’re about to learn, it’s important not to share too much information, too soon. Let’s take a look at some subtleties you should keep in mind when you’re raising funds.

Pitch Deck Best Practices

When you’re creating your pitch deck, it’s essential to keep a few things in mind:

  • Keep it short and sweet. Don’t overload people with information that they won’t retain anyway. Give a straightforward presentation from a high-level perspective.
  • There are a few slides that you must include. Show what the problem is, show how you solve it, and spell out your competitive advantage.
  • Don’t cram your slides full. Scrutinize your presentation and remove any data or information that’s not absolutely necessary. Leave room for questions. If an investor doesn’t have any questions at the end of your pitch – you’ve failed.
Illustration: Checklist with 3 check boxes

3 Tips for Using a Financial Model in Your Pitch Deck

As we’ve seen, a financial model is fairly complicated. But you’re supposed to keep your pitch extremely simple. So, how do you work your complex financial model into your simple pitch? It’s a bit of a catch-22.

But there is a way to present your model to investors effectively. It’s all about timing, and these three tips should help you pull it off.

Tip #1: Visuals (Less Is More)

Don’t risk confusing investors with many charts and graphs. They’re simply not ready to digest that level of detail at this stage. Pick the one visual that best supports your narrative, and let it sink in.

It’s better for your investor to remember one high-level data point than to forget many fine-grain details.

When you’re presenting in person, you’re there in the room to help interpret the numbers and provide additional depth as appropriate. So keep the slides simple and elegant.

If there’s a photograph, an illustration, or even a screenshot that supports your narrative, use that as your visual. Reserve your charts and graphs for the slides where they will make the most impact, such as market research, market penetration, and key metrics.

If there are supporting data points that you need to include, use bullet points rather than additional charts and graphs. This allows you to include the numbers you need to make your case, without overwhelming the investor.

If you have essential charts and graphs that you need investors to know about now, include them as an appendix in your presentation and deliver them in a PDF after the pitch.

Tip #2: Narrative, Not Numbers

The average adult can store between five and nine items in their short-term memory. So when you’re pitching an investor who has a busy schedule full of complex meetings, you’re trying to claim some very precious real estate.

We’ve already discussed what you shouldn’t do. You won’t stake this claim by presenting a flurry of data and numbers so complex that you spent weeks memorizing them.

What you need to do is to tell the investor a compelling story.

A successful pitch should hook the investor on the story you’re telling, not the numbers that back it up. For your numbers to be understood, you must give them context. Your story provides that context and the numbers will come later.

There are a few key metrics that do belong in your pitch deck. Aside from these few high-level figures, you’re better off focusing on the big picture – the narrative that explains why this opportunity is unique, exciting, and lucrative.

Tip #3: Use Your Financial Model as a Teaser

When you’ve got an awesome financial model, it’s hard not to show it off. You’ve put a lot of work into your assumptions, you believe in the vision, and you’re ready to show them how well you know your business.

Not so fast! If you dive into the nitty-gritty too soon, you risk losing your big picture narrative in a tiny detail.

If you do a good job of hooking the investor during your pitch, they’ll have lots of questions afterward. If you know your financial model well, you’ll be able to answer most of those questions on the spot.

During this time you should talk about your financial model but hold it back. Use your model to get a follow-up meeting. If they’re asking you questions, and the answers to those questions are in your financial model, then the next logical step is to set a follow-up meeting to dive into the model together.

This gives the investor a chance to process the information you delivered in your pitch and start to articulate any concerns or doubts. Answering those concerns in a follow-up meeting is the perfect opportunity to showcase your financial model.

Your pitch deck is the alley-oop, the set-up. Your financial model is the slam dunk. It’s where you show them that the story you told in your narrative is real, data-driven, and attainable.

After You Raise the Capital

So you nail your pitch, you successfully defend your model, and you close the big round. Take a little time to celebrate, but don’t make the mistake many founders make and begin to neglect your model after the raise.

A financial model becomes more useful and more accurate, the longer you keep adding fresh data to it. If you let it cool off, it gets further and further away from reality the longer you wait.

If you update your model every month, it quickly becomes an invaluable tool for you as a founder when you’re evaluating your runway, allocating resources, or just making daily decisions about the business.

If you want a great financial model, reach out to Forecastr today. We provide an intuitive interface that makes your model easy to understand and easy to share. As a Forecastr customer, you’ll get access to a team of experienced financial analysts who work with you to help you get the most out of your model.

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