Business In Founder’s Office

Here’s how you Test if a Founder actually knows his Business.

While founders thoroughly practice their startup pitch for weeks if not months, what they absolutely don’t expect an investor to answer is:

“Walk me through your Financial Model”

Most founders look at Investment Bankers or a Financial Consultant to chip in and power up an Excel sheet to explain the numbers.

However, if a Founder can explain all the assumptions that have gone into determining calculations such as:
- Customer Acquisition Costs (CAC) across different distribution channels,
- Phases of monetization and revenue generation across product streams,
- Unit level economics, and
- How all of these figures inter-link.

You can test his judgment on how well thought out his idea is rather than the obvious presentation of a pitch deck.

As a bonus, you should ask the Founder what would happen if the CAC were to double, or the user churn was to increase by 3x. If the Founder can change that figure unphased in his model and explain the output to you, that’s the level of clarity you want to see if you’re backing someone with your money.

As a practice at our firm, we ensure that the financial models we help founders with are made in a way that the Founder himself can drive it without needing any professional by their side to make him see how his business numbers will pan out in different situations.

For every time that we’re able to successfully see this happen, we know our job has been well done. And that’s a Founder we’d love to take to our network of investors.

Do you know how much term insurance you need? Here’s a simple formula to calculate that-

Here are a few answers-

The main reason for buying a term plan- Security of family. How did you reach your life cover amount- My insurer decided it.

Someone with a ₹25 lakh salary had a cover of ₹1 cr. Someone else with a ₹20 lakh salary had a ₹1.5 cr cover. The numbers were random, and there was zero logic behind them. When buying term insurance, we check every small detail. But what about the actual coverage you need?

That’s an important question but still unanswered. So, here’s a simple formula for it-

1. Find out how much post-tax income you contribute to the household after your expenses.

2. Calculate the total income you will give your family up to your retirement age, including annual salary hikes.

3. Find the present value of the total income (in step #2)

4. Add your loans and future expenses like children’s education and marriage. Subtract assets and existing term plan.

I have added a sheet in the comments. You can use that to calculate your coverage. Insufficient cover defeats the purpose of taking term insurance. Make sure you have enough to take care of your family when you aren’t around.