Parveen Kaler

Recently, I was forwarded an email from a group of commerce students.  They were assigned a project to startup a new venture that they would pitch to investors.  They had a product plan but they didn’t know where to start with a strategic financial plan.

I quickly scrapped together an email response in 5 minutes.  I thought it may be useful to others:

Hmm, in one email? I could talk about this all day.

They want to build a capitalization table. Value the company at something like $250,000 per founder. Look up the terms pre-money valuation, post-money valuation.

http://en.wikipedia.org/wiki/Pre-money_valuation

http://en.wikipedia.org/wiki/Post-money_valuation

Next would be building a dashboard on how you’re going to make money. Sometimes called your business model.

_________  Status | Conversion % | Estimated Value
Acquisition
Activation
Retention
Referral
Revenue

Then calculate the lifetime value of your customer. How much revenue will one customer bring in? How long will they be a customer?

http://en.wikipedia.org/wiki/Customer_lifetime_value

Another term that they want to look up is ARPU: The Average Revenue Per User

http://en.wikipedia.org/wiki/Average_revenue_per_user

Finally, the goal is to secure a term sheet from an investor:

http://en.wikipedia.org/wiki/Term_sheet

http://www.thefunded.com/funds/item/5936

Also, they need to figure out why they want to take on funding. Usually you take on funding to scale up the business. Would you hire more staff? More equipment? More advertising? They want to put together a cash flow statement. The most important item will be the burn rate:

http://en.wikipedia.org/wiki/Burn_rate

Put together a cash flow statement that takes into account current conditions. Then put together what a cash flow statement would look like after you take on investment.

Anyone else have any suggestions?  Did I miss anything?