Early Moves

First Steps

Watching toddlers learn to walk is adorable. This right of passage also reminds us how fresh motivation may be needed when progress seems to stall.

At first, early moves felt natural and crawling has done the job. As children see what’s possible, expectations are raised. With parental guidance, promising signs are filled with excitement and success feels within reach. Time passes though, and sometimes that loving motivation can lose its luster. Progress stalls and concern can start to brew, but what if the breakthrough is just waiting for a fresh source of encouragement? Even when it’s on accident, as new motivation is introduced, almost all at once, progress proceeds. We scramble for the camcorder and those precious first steps are enjoyed by all. Six more weeks of practice is needed, but this achievement renews momentum that keeps our little ones moving forward.

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For parents smiling as they read this, know that Pure Wonder, #1 DAD, Winding Whys, Training Wheels, Playforce, Santa is Real, and many of the emerging episodes from You Don’t Need This Podcast are just as fun!

For students, entrepreneurs, and intrapreneurs building around new ideas, the dance with innovation may also require shifting gears once in awhile. Next time an engine stalls, step back to consider that alternate angle, talk to peers with different perspectives, take a little time away, or show up unannounced to adapt and get back in business.

By Ben McDougal, ago

Tinker

This is your invitation to tinker.

The Headline Trap is real, life can feel busy, and we all have existing responsibilities, but take a moment to hold your arm as high as you can. Go ahead, I’ll wait…

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Need fresh ideas?
Try this daily exercise.

…ok, now…hold your arm higher! I bet you found room to push further, eh? This is a fun reminder that we all have more to give. Tinkering requires initiative, but we all have extra gears to help us avoid feeling like we left something on the table. Yes, comfortable feels safe and easy is easy, but why not turn a few knobs to see your idea twinkle?

When we accept an invitation to tinker, financial capital can speed things up, but time is usually the primary capital required. It’s amazing how much happens by showing up and activating a few early moves. While more of everything will be needed to commercialize an idea, thinking about this exploration through an adaptive lens of seasonality also reduces the weight of side hustles.

If you’re having a hard time finding inspiration, force yourself into environments were others are tinkering too. Community events within an entrepreneurial ecosystem can provide energizing human, intellectual, and network capital, but classrooms, makerspaces, hackathons, and coworking spaces are where people are tinkering together.

Whether it’s at home or in the community, tinkering celebrates pure wonder and will nourish your innovative spirit. Even if the answer is “no”, at least you’ll know.

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Things you dedicate time to will grow.

By Ben McDougal, ago

Fresh Powder

Let’s take a lift to the top.

Whether you ski or snowboard, you’re not getting far without the right equipment. Financial modeling is an important technique that helps you simulate different scenarios for your business. Imagine we’ve made it to the top of the snow-covered mountain. There are endless ways to make it down. Similarly, there are endless ways your business can evolve.

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This caffeinated contribution was written by Jeff Erickson. Based in the silicon slopes of Utah, Jeff is an angel investor, experienced advisor, avid skier, and leads partnership development at Forecastr. Forecastr is a financial modeling platform that helps founders forecast revenue, predict runway, and use dynamic insights to get funded.

Having worked with hundreds of early-stage startups, I often hear founders talk about how everyone knows financial projections will be wrong, so why is financial modeling important?

A financial model is a tool to help forecast the financial performance of their company over time. Financial models are generally based on a combination of the company’s historical performance and assumptions about the future. Financial models can be used by entrepreneurs to help make better decisions when raising financial capital and to assess the potential returns of a given venture. Returning to our mountainous metaphor, think of financial models as your map of the snowy terrain. It provides an overview of the area, routes to explore, and dangers to avoid. Similar to a trail map, financial models use numbers to set the scene, then help entrepreneurs determine the speed and direction of their business. Along the way, they also help identify potential risks and optimize how different types of resources are used.

As a startup founder, it’s important to understand why investors ask for financial models. A financial model is essentially your roadmap for the future and it gives investors an understanding of how you plan to generate revenue and scale up over time. Having a solid financial model demonstrates that you have done research into the market, understand potential risks and opportunities, and have thought through the key drivers for success in your business. Ultimately, your financial model helps investors see how you think about your business and whether you understand the levers that matter. It also gives them confidence when they see that you know how to strategically allocate the money they may invest and that you know how to project and manage cash flow.

Most investors speak in the language of finance. Terms like run rate, CAC, LTV, runway and burn rate are common vernacular. Going through the process of building your financial model helps you learn, decipher and understand this language of finance. A shared understanding will help you more effectively work with investors. A common mistake for many founders is thinking that it’s you and your financial model versus the world. Instead of falling in love with your assumptions, consider how you can work with potential investors, by using the financial model to analyze various scenarios. When founders can cruise down the mountain with investors, while explaining different scenarios in real-time, strategic partners will get excited about taking the lift back up for another run.

Ready to create a financial model that’s useful? Most models have historically been built in spreadsheets, but new software tools, such as Forecastr, make it easier for companies to create financial models. Entrepreneurs need to be aware of the changing terrain in order to make the best decisions for their evolving business. Let’s avoid the trees and carve out a few key steps that will land you in a position to know the numbers.

Define

Before you can create a financial model, it is important to define the company’s business model, revenue streams, and financial objectives. This understanding will help determine how you structure your assumptions in order for the projections to accurately reflect what could realistically happen with your startup.

Gather

Once you define company goals, gather historical data relevant to creating accurate projections for your startup’s future performance. This includes information such as past sales, costs associated with running operations, generating revenue, customer acquisition, and any other financial data that may help tell the story of your business.

Build

Using qualitative (e.g., industry trends) and quantitative (e.g., past results) data points, begin building out realistic assumptions to drive your financial model. Here are templates for a jump start! Begin with customer acquisition (e.g., paid ads, partner referrals, reseller channels, sales outreach, etc.). Next, build out assumptions around revenue streams. Consider all the ways you can make money by adding value to your customers (e.g., advertising revenue, product sales, services, etc.). Now you’re ready to build out assumptions in regards to building a team, then focus on projecting the changes in your operating expenses based on the company’s performance. Finally, consider any required expenses to scale your business and how you plan to finance the overall venture.

Validate

With all your initial assumptions in a financial model, it’s important to track the accuracy of your assumptions each month and update the numbers based on actual data. As metrics are consistently tracked over time, your financial model becomes more accurate and reliable. You will notice trends in customer acquisition, identify the most profitable revenue streams, and monitor your expense projections. Additionally, you will be able to run different scenarios using your financial model to help you confidently make better decisions in running your business.

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I hope you’ve enjoyed this month’s theme, dedicated to early moves that help anyone avoid that new business idea from floating toward someday! As you compile the various resources you’ve created into an investor pack, you’ll be astonished at how well you understand your new venture. As you stay committed, the self awareness brews confidence from true understanding and others will be even more excited to join you.

By Ben McDougal, ago

Attention Traps

We’ve spent all month exploring early moves to evolve business ideas into reality. Using your time dedicated to no-code wireframing, actively listening to others, telling customer stories with a colorful business model canvas, and escorting execution with business plans, let’s translate emerging insight into snapshots of your business. The one pager, pitch deck, and investor memo are different types of attention traps entrepreneurs can use to connect with those who care.

One Pagers

The one pager is a punchy asset built to describe the most important elements of your business. Concise is nice, as the goal is to create immediate intrigue from everyone who receives it. Speaking of everyone, a one pager should be ready for anyone. This means you must find a balance between enough details to show substance and realistic potential, without giving away the secret sauce.

While you know a lot about your business, the goal is simple. Create enough curiosity to keep the conversation flowing. For more on how to sequentially guide people through the layers of understanding, scrub to minute 10:45 in this talk I shared at a 2022 raising capital seminar.

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Here’s my guest column on consistency in the Business Record!

As you consider what content to include and how to format so much goodness into such a tight document, here is the FliteBrite one pager from 2015 and there are many other sharp templates online. Once you have a one pager ready to share, let’s connect! I’d love to look it over and can provide feedback if you’d like, but can also feed momentum by sharing your new one pager with strategic investors.

Pitch Decks

The pitch deck is like a slide deck used in a verbal pitch, but with more information to help recipients (often investors) learn about your venture. Within 10-15 slides, present the story of your business with eye-catching visuals, data-driven details, and links to more supportive content. A concise pitch deck showcases your storytelling skills while entertaining an audience who is about to learn more about the market, problem, your solution, traction, moat-digging differentiators, the team, vision, and how to contact you.

Knowing this attention trap is most often needed by founders raising financial capital, even if it’s in a closing appendix, it’s good to include more data-driven details in a pitch deck. Like handy back slides during the Q&A portion of a pitch, clear financial projections, existing market research, how money will be spent, and customer discovery results are all good ways to prove you understand your business plan and how the numbers work.

That said, don’t numb readers. Avoid small font and word salads. Incorporate imagery that supports a captivating story. Translate your mission while making it clear how this venture will deliver serious returns. Like the one pager, pitch decks are not crafted to secure an investment. They are designed to fuel curiosity and more conversation.

Investor Memos

Commanding a dynamic investor memo keeps people informed with the ongoing progress of your company. Along with sections you include in a pitch deck, investor memos create space to highlight the evolving details of your fundraising campaign, key performance metrics (KPIs), data visualizations, recent milestones, multimedia, current needs of the team, and future goals for the company. Platforms like Carta, Build Memo, Visible, Paperstreet, and Notion make it easy to manage accurate, updated, and communicated investor memos. The quick-to-digest, but also real-time information is why investor memos are popular among well-articulated founders raising venture capital.

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If you can’t explain it simply, you don’t understand it well enough. -Albert Einstein

As we finish sipping on these three different types of attention traps, let’s commemorate how alternate versions of each document may help you share the most impactful details with the right audience. For example, a pitch deck for local angel investors may be different than a pitch deck for a global venture capital firm. Connecting everything can also add efficiency, but maintaining a well-organized data room is not for the faint of heart. As any company evolves, so will the need to update documents that tell its story.

By Ben McDougal, ago

Escorting Execution

After a few early moves, developing a business plan is a hearty exercise. Business plans are less pivotal than some scholars preach, but writing a business plan does force you to pick through the details of your business. This deliberate planning will help pave a path toward sustainability. The understandings will also help you articulate honest details to potential co-founders, investors, and early adopters.

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I considered sharing the original FliteBrite business plan from 2016, but decided to keep this detailed document offline. That said, if you’re building and would like to look at this multimedia masterpiece, send me a note and we’ll look at it together! If you’d like feedback on your emerging business plan, I’d be happy to discuss that as well.

This first version of a business plan does not need to be super long, but it should include a handful of key elements. While this can feel heavy, the work you previously put into wireframing and canvasing will lighten the load as you flesh out details. Below are the traditional elements to include:

  1. Executive Summary
  2. Company Description
  3. Market Analysis
  4. Products & Services
  5. Marketing & Sales
  6. Operations
  7. Financials
  8. Appendix

While using a standard form may add efficiency for readers, one size does not fit all. Consider how you’ll be using this dynamic document and who will be reviewing it. There are more details and endless examples online, such as this guide from the U.S. Small Business Administration, which will help you cater a business plan to your needs.

Creating a business plan is rarely a waste of time, but they do become a required asset when you’re raising financial capital. A few situations where you’ll likely need a business plan include grant applications, traditional bank loans, equity financing, and pitch competitions. Entrepreneurial support organizations (ESOs) may request a business plan to activate their services as well.

As you build a business plan, use a clarifying framework, concise content, and mark areas that may need to be frequently updated. This makes the document interesting, more digestible, and easier to maintain. Along with keeping this evolving asset fresh, consider how your business plan connects to support other emerging resources that collectively paint the picture of your company.

Stay tuned as we’ll look at one pagers, pitch decks, and investor memos next week, then explain how to weave everything into a forwardable investor pack as we conclude this month of themed tactics geared to keep your idea from slipping toward someday.

By Ben McDougal, ago