Financial Engineering Review
"We need to know how the math works. The VC's technical term sheet jargon affects our net worth years later for decisions made today. Our lawyers aren't financial engineers. We need to know what the real impact is so we can cut the best deal for all of our shareholders."
CEO Problem Creating
a financially engineered model that represents the complete business
to aid in negotiating with new investors, as well as reporting
status to the board.We
are not concerned about the CEOs ability to model the details in
depth. We are concerned that the CEO knows how to connect the demand
model from its customer marketplace, within the same spreadsheet, to
the shareholder and investor returns model that governs the equity
customer marketplace. Completeness in terms of the ability to model
both customer viewpoints is the issue. Incomplete models leave CEOs
in a precarious position when it comes to being successful with
investors.
Program Features
VenLogic provides review of financial models for completeness, in terms of demand modeling, shareholder accounting, and deal modeling.
Program Benefits
Inclusion of critical models often omitted, can drive significant results in negotiations.
Recommendations
VenLogic brings advanced skills in financial model development that can tie "term sheet math" into bottom line results in negotiations. For example, CEOs can learn the impact that "broad-based weighted average anti-dilution clauses" have in terms of specific numbers of shares, that enable them to approach investors from a position of strength and wisdom.
Macro-driven models tie a CEO's dashboard to rapidly allow for what-if analysis, enabling them to answer questions such as:
Exactly, how much capital will you require if demand doubles your market share?
Exactly, what is the IRR to the next round investors in order to raise the total amount you are seeking if we buy in today at $1.25 per share?
Exactly, at what price should current investors provide the bridge financing if the next round does not invest on time?
These and other common investor questions can take days to compute without the right model. To know your customer's needs also means to know when to renegotiate if the terms aren't right. Financial engineering can make the difference.
