Ya, sorry...but no financials for year 5

[convmedia]

I’m sorry, but the only reason any investor asks for your projections or valuation in 5-6 years is to see how crazy you really are. There is no possible way for anyone to predict where a company will be in that time frame; there are way too many unknown factors. It’s just impossible, it’s pure guessing. If you get an investor to seriously believe in your unaltered numbers you produce for 5-6 years, I would love to meet you. Now, if you’re an investor who has believed in these numbers, I’d like to meet you even more so. My number is 407 716 6237 :) .<p>Now, I refuse to provide numbers past 3 years, and to me, that’s even stretching it. The best you can do to convince an investor is to come as close to providing the numbers that they are typically looking for as is possible in 3 years. Now, that doesn’t mean your numbers can be pure bullshit…just a little. What matters most is applying consistent growth and adoption rates backed by other known numbers. These rates then become your goals and milestones that you need to hit after financing. Now I still do believe you have to be a bit crazy ambitious with your goals– without that you can’t get anywhere far. I believe that as an entrepreneur you have to shoot for the moon and hope for the stars. But in doing so, you face the risk or investors seeing you as a risk because your numbers don’t look good without shooting for incredibly high rates. A much better philosophy to put forward when dealing with investors is to shoot for the clouds and hope for the moon (while you are secretly still hoping and working towards the stars :) . Good news though, once you’ve found numbers that you don’t feel will be embarrassing to show to investors, you can use those numbers to double-check and even reverse engineer your costs. In fact, I think it may be better to start with your revenue drivers and then work back towards your expense drivers. Why? Because you then have your numbers you have to hit and it’s much easier to determine the number and type of employees necessary to hit your target revenue numbers than it is to determine how much revenue or how many users you can derive from your team. I would share my financials with you so you can see how I’ve organized them, but that would be crazy. So the best I can do is explain my method for getting to those numbers. Also, don’t forget how incredibly important your financials are to investors. However, what is even more important is your explanation of the financials and your strategy for hitting your milestones. This is where you convince investors that, yes, the numbers are high, but here is how we achieve those high numbers. I will be writing another blog post very soon on what I feel you should include in your presentation materials to any investor without writing a full business plan (which I see to be a waste of two times the amount of paper you should actually need). Hope this helps.