9. Let's talk about money
[Throughout this series of articles to explain how to build an investors deck we are using the example of Pant Station, an imaginary company that sells panties for men, to illustrate the different parts. If you want to read this series of article, I advise you to start with this one.]
Last but not least, in this final article of Bloomr’s “Investors deck” series we will talk about money (shocking!). This article tackles 3 topics: 1) your cash burn rate 2) how much you will need to achieve your goals 3) how you will spend this money.
Money you burn
First things first, what is your cash burn rate? It is [how much you earn] - [how much you spend]. If you are going for a fundraising round it normally means the rate is or will be negative!
In your business plan, you have done the exercise to do your financial projections over the next 3 or 5 years: your P&L. In your P&L you have at the bottom your EBITDA. It represents more or less how much you burn every month. If you follow the EBITDA and draft it over the time, you will be able to get a curve call the “J curve” (because it looks like a J). The J curve shows you when you hit your lowest point which is actually when you will achieve equilibrium and also how much you will need to raise to achieve your goals.
In the case of Pant Station, the curve hits the lowest point in October 2021 which is when it will achieve financial equilibrium.
As I just wrote, you can find the money you need in your J curve! Indeed, the difference between where your curve hits the bottom and the axis shows how much you’ll need for this fundraising round and to reach your objectives for the next 3 or 5 years.
In this slide, called the “Funding round” (or else, it’s just a suggestion) we advise you to 1) explicitly state the amount of money you need and the runaway it gives you (how long you’ll live with it 😅) 2) write what you will be able to achieve with it.
Depending on your business it can be: achieve profitability, the number of product sold, the monthly recurring revenue (MRR), the number of customers, the number of app downloads, your growth Month over Month (MoM), the launch of a new product or a new feature, launch is a new country, etc.
It is important to give a sense of timing to investors, by which date do you plan on achieving these goals. This timing is a good way to see when you will need to go for another fundraising round, giving them the opportunity to cash out or what will be your company’s worth by this time.
In the case of Pant Station, the J curve hits -820K€ in October 2021 which means you will need as much money but better to round up this number for your fundraising: €900K or even €1M. In the end, more money means a “financial cushion” (and investors are not against giving you more chances to achieve those goals).
How you spend your money
Now, how are you planning on spending money to achieve your objectives throughout the next years? In your deck, you can show this easily with a pie chart divided into percentages of spendings. You don’t need to be very precise in this slide and can group certain spendings (advertising with marketing for example).
In the case of Pant Station the biggest budget will be in marketing and production to sell as much as possible of our high quality briefs. These spendings are specific to your business and your objectives, as for the rest of the deck it should reflect your overall strategy (i.e. if you have a Saas company, we shouldn’t see a lot of budget put into logistics 😇).
To conclude this article and this series on “how to build a deck”, it is important to have in mind that different factors will influence how much you will raise:
Your personal objective as a founder: if you are planning on a very rapid expansion this means more spending and money needed.
Your market: if you have to gain a leadership position before making money, this will mean a lot more cash burn for a longer time period (think about Uber which is not profitable yet).
Your product: if you are a deep tech, it will require more money before going into market than if you’re doing an app.
Your momentum: if your product is ahead of its time, you will have to spend some times "evangelising" the market before selling, so end up spending more in the meantime 🎤.
This is not an exhaustive list of the different factors but they can explain why you are going for a fundraising. Don’t worry, depending on your situation you will find the right investors, just make sure to set out your arguments. Everything is understandable if said in the right way 🙃