In investor pitches there are usually 2 types of financial forecasts:
- Short-term: super precise, usually mostly cost
- Long-term: ball park, usually mostly revenue
Why do investors want to see some sort of short-term budget?
- While the long-term revenue outlook of a startup is highly uncertain, the near term cost drain is pretty much set in stone. Investors want to know where her money goes: in development, in an expensive, all-or-nothing/bet-the-company Super Bowl ad?
- Investors want to check the consistency of your story. You say that you are not focused on getting customers right now, so you should not be spending anything on marketing. On the other hand, you plan 25 new features in your product, where are the developers (and their salaries) who are going to make it happen
A short term cost budget does not need to contain 25 lines of Excel, by month. A simple x% of revenues number is a bit too simple though.
Art: Marinus van Reymerswaele, The moneychanger and his wife (1539), Museo del Prado, Madrid
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