MAP Accelerator Program — Week 11
We started the week with someone explaining a mechanism that can not only be useful for a start-up founders, but also for everyday life.
Decide What To Do
This mechanism could not be simpler. Create a list of all the things you want and need to do. So far this sounds like a classic to-do list, but the similarities stop here. Next up, rate each item on your list by (1) customer success impact, (2) sales success impact, (3) overall goal progress and (4) effort required. A scale from 1 (low impact, low effort) to 10 (high impact, high effort) seems like a good approach.
This very quickly allows you to identify not useful tasks and the most useful tasks. You can also accumulate all the impact and progress values (1–3) and then divide it by the effort (4), although you should be aware that this might make critical tasks for one area look like their overall utility is not that great — so use this method with caution.
A lot of the time it’s not quite clear how impactful a task will be. A way to deal with that is to add another column for confidence in our assessment — not just for the impact, but for effort too.
Especially when there’s too many things to do, you can make the best of the situation by focusing on the low-hanging fruits — tasks that are low effort, but have the biggest impact.
Financial Modelling
A few weeks ago I started creating a business plan and I had some help with that, so a lot of this week’s session on financial modelling sounded quite familiar to me.
A business plan or financial model needs to continuously be updated. As you find out new parameters or adjust existing parameters of your business, this needs to be reflected in your financial projections.
The basic financial modelling includes 2 pieces:
- An assumption table, which contains all your parameters, their value and ideally also the source (website, article, study, opinion) that led you to the value and can indicate the confidence level (opinion vs. study).
- A scenario table, that uses the assumptions and plays around with different customer numbers that you can serve and potentially different products, if you sell more than one and prices.
The presenter used the example of a cafe and the assumption table contained things like the composition of cost per cup of coffee (beans, milk, cups, lids, worker), number of customers buying coffee on a busy day vs. on a slow day, fixed costs and more. Then the scenario table plays around with how many busy days, slow days and normal days you expect in a given time period and calculates the amount of revenue, cost and profit/loss, which just comes down to basic maths or Excel formulas.
It was further noted that for the revenue prediction, a top-down total addressable market calculation usually just tells you what the upper limit is, but in most cases is not that useful for a financial model or can even be misleading. This makes sense, because often this is used to justify a higher potential revenue, by simply assuming I can capture 1% of a gigantic market. Instead, a bottom-up analysis should be preferred, where I understand how many customers my product/services can serve and how much they are willing to pay for them.
Pitch Decks
While we had plenty of sessions on investment, very few focused on the pitch deck, which is usually send out to potential investors to get them interested. According to the presenter, a VC partner that makes around 5 investments per years goes through about 1000 pitch decks in the same time period. This means your main goal for your pitch deck needs to be to get to the first meeting.
A couple of useful concepts/rules are: (1) the headers tell a story, (2) get it designed by a professional, (3) use numbers, not adjectives to be precise rather than vague, (4) infographics should be quickly understood, otherwise leave them out, (5) check your spelling, (6) use less than 20 words per slide and (7) the first slide should contain the company name, a one liner and contact info.
If the deck tells a compelling story, investors usually assume that you will have little trouble attracting talent and sell to customers. Storytelling is very valuable.
The most important slides are: (1) a mission slide, which is an indicator of the ROI for the investor, (2) a team slide and (3) a traction slide. For the team slide, a couple of common mistakes people make is to add up the years of experience of the team, which ultimately is meaningless to the investor — the same goes for mentors. It’s also useful to add LinkedIn links and add logos of past employers of the team.
Last but not least, the presenter also recommended to add an “Ask” slide, which contains what you need from the investor: how much money do you want to raise (without mentioning valuation!) and potentially other things (advice, networking). A competition slide is typically not be necessary, as this just distracts from getting the meeting.
Now I think I need to spend some more time on our pitch deck :)
