What Investors Want to See When Evaluating a Financial Model

Business plan financial projections are designed to give an investor or banker a feeling for how well your company can perform, typically over a period of either three or five years. Bankers considering whether to extend a line of credit or grant a loan to a new business will typically seek a three-year model (the SBA standard), while angel investors and private investment firms/VCs look for a five-year model. Financial projections are a blend of art and science.  There is always a leap of faith in the modeling process, for example, can you...

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Venture Capital Trends That Might Surprise You

In June, 2011, Fenwick & West LLP, one of the nation’s premier law firms providing comprehensive legal services to high technology and life science clients, published the results of its First Quarter 2011 Silicon Valley Venture Capital Survey.  The survey/barometer analyzed the valuations and terms of venture financings for 122 technology and life science companies headquartered in the Silicon Valley that reported raising money in the first quarter of 2011.  The Barometer includes an initial angel/seed financing survey and also...

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What is An Investor Looking For In Performing a Financial Due Diligence?

Due diligence is a procedure where an investor considering making an investment is provided with an opportunity to examine the asset concerned in some detail prior to providing funds in exchange for shares.   Investors need to be provided with a level of comfort that material information accurately reflects the assets and liabilities of the target as well as the company’s future prospects.  Because a wide range of risks exist, due diligence for many investors is all about risk management. Some investors don’t perform due diligence...

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What is a Cash Flow Statement and Why Is It So Important for A New Company?

Along with an income statement showing that you have a plan to build a large and profitable business, for financing purposes cash flow projections are generally the most crucial aspect of business planing. Investors will almost always look for a cash flow analysis in preference to any other financial statement, because this lays bare the financing needs over time. In larger companies, the cash budget—considering both operating and capital budgets–for a new project or expansion is critical to the overall decision to commit funds and...

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