Ditch the straight line and embrace realistic projections

In today’s newsletter edition, I want to write about a recent conversation I had with a general partner at a venture capital firm.

Amid our discussion on startups, entrepreneurship, and investments, he shared a perspective that truly struck me, and it’s something every founder preparing for an early investment round should consider.

Here’s what he said:

He doesn’t invest in companies with financial models that show a perfectly straight growth line.

Why?

Simply put, he’s seen too much to believe that kind of projection.

A straight, steadily increasing growth line, though tempting, often signals unrealistic expectations.

Real business growth rarely looks so smooth.

Unexpected challenges, seasonality, and fluctuations are part of any venture.

A financial model that reflects these ups and downs shows foresight and a realistic understanding of market dynamics.

What does this mean for you as a founder?

Investors want to see that you’ve thought through multiple scenarios and are prepared for both the good and the bad.

A “jagged” growth line in your financial model suggests you’ve factored in potential challenges, making your projections not only realistic but resilient.

Things to keep in mind:

1. Be realistic, not idealistic: Show growth as it really happens, with some ups and downs.
2. Plan for variability: Highlight scenarios and demonstrate preparedness for fluctuations.
3. Embrace the unpredictable: Investors appreciate a model that’s grounded in reality.

This feedback isn’t about downplaying your ambition but about presenting a growth story grounded in genuine understanding.

As you prepare your financial model, remember: authenticity speaks volumes.