What’s the real difference between a pitch deck that gets funded—and one that doesn’t? Often, it’s the financial model behind it.
At Projects RH, we’ve seen how the right financial model can transform a fundraising journey. Whether you’re crafting a teaser for early-stage investors or building a full information memorandum for institutional capital, your model is more than numbers—it’s your story in financial form.
What is a financial model?
A financial model is a structured representation of a business’s financial performance. It uses assumptions, historical data, and projections to forecast outcomes and guide decision-making.
Purpose of financial models
Forecasting business performance
Financial models help estimate future revenues, costs, and profitability. They’re essential for planning growth, managing cash flow, and setting realistic goals.
Supporting fundraising, mergers, and acquisitions
Investors and acquirers rely on models to assess potential returns. Whether you’re raising capital or preparing for a merger, your model is the foundation of your pitch deck, teaser, and information memorandum.
Risk assessment and valuation
Models help identify risks and calculate valuations. They allow stakeholders to test different scenarios and understand the financial impact of strategic decisions.
Key components of a financial model
Assumptions and inputs
These include market size, pricing, cost structure, and growth rates. Good models clearly state their assumptions and allow for easy updates.
Financial statements
Most models include projected income statements, balance sheets, and cash flow statements. These show how assumptions translate into financial outcomes.
Output metrics and scenarios
KPIs like EBITDA, IRR, and break-even points help investors evaluate performance. Scenario analysis shows how changes in assumptions affect results.
Common types of financial models
Three-Statement Model
Links the income statement, balance sheet, and cash flow statement into one dynamic model.
Example: A startup uses this model to understand how a change in pricing strategy affects cash flow and working capital over the next 12 months.
Discounted Cash Flow (DCF) Model
Estimates a company’s value based on projected future cash flows, discounted to present value.
Example: A renewable energy company uses a DCF model to justify its $50M valuation in an information memorandum shared with institutional investors.
Merger Model (M&A)
Analyzes the financial impact of a merger or acquisition, including synergies, dilution, and accretion.
Example: A mid-sized logistics firm uses this model to evaluate the acquisition of a regional competitor, assessing whether the deal will be earnings-accretive.
Comparable Company Analysis (Comps)
Values a company by comparing it to similar public companies using valuation multiples.
Example: A SaaS startup includes a comps table in its pitch deck to show how its revenue multiple compares favorably to industry peers.
Precedent Transactions Model
Uses data from past M&A deals to estimate valuation benchmarks.
Example: A biotech firm preparing a teaser for Series B funding uses this model to show how similar companies were valued in recent acquisitions.
Leveraged Buyout (LBO) Model
Evaluates the feasibility of acquiring a company using a significant amount of debt.
Example: A private equity firm uses an LBO model to assess the internal rate of return (IRR) on a potential acquisition of a manufacturing business.
Budget Model
Used for internal planning, this model helps allocate resources and track performance against targets.
Example: A nonprofit uses a budget model to plan annual program spending and report to donors.
Forecasting Model
Projects future performance based on historical trends and assumptions.
Example: A fintech startup uses a forecasting model to estimate monthly active users and revenue growth for the next 24 months, supporting its Series A fundraising.
Option Pricing Model
Calculates the value of options using methods like Black-Scholes or binomial trees.
Example: A CFO uses this model to value employee stock options and include them in the company’s financial disclosures.
Sum of the Parts Model
Values each business unit separately and adds them together to get a total valuation.
Example: A conglomerate preparing an information memorandum for divestiture uses this model to show the standalone value of each division.
Industry-Specific Models
Tailored to the unique metrics and structures of specific sectors like energy, real estate, or SaaS.
Example: A solar-to-hydrogen project uses an energy financial model that includes capacity factors, PPA pricing, and hydrogen conversion efficiency to forecast returns.
How financial models support fundraising efforts
Building investor confidence
A clear, well-structured model shows you understand your business and market. It builds trust and credibility.
Structuring the pitch deck with financial models
Your pitch deck should highlight key metrics from your model—growth projections, unit economics, and funding needs. This makes your story tangible.
Linking models to information memorandums
The information memorandum expands on the model, providing detailed context and assumptions. It’s the investor’s deep dive into your business.
The role of fundraising consulting services
Customizing the right model for your business stage
Early-stage startups may need simple forecasting models, while growth-stage companies benefit from DCF or LBO models. Consulting services help tailor the approach.
Avoiding common modeling mistakes that scare off investors
Overly optimistic projections, unclear assumptions, or missing cash flow details can derail fundraising. Consultants ensure your model is investor-ready.
How consultants streamline investor communications
From teasers to pitch decks to full information memorandums, fundraising consultants help align your messaging and financials. They make sure every document tells a consistent, compelling story.
Case study: Using financial models to secure funding
A renewable energy startup in Southeast Asia partnered with Projects RH to prepare a teaser and pitch deck for a 100 MW solar-to-hydrogen project. By using a tailored forecasting model and linking it to a compelling information memorandum, they secured interest from three major investors within weeks.
The model included energy-specific metrics such as capacity factors, hydrogen conversion efficiency, and PPA pricing. It also featured scenario analysis to show how different funding structures would impact returns. This clarity and customization helped investors quickly grasp the opportunity and move forward.
Best practices in financial modeling for fundraising
– Keep assumptions transparent and realistic
– Use visuals to simplify complex data
– Align your model with your pitch narrative
– Stress-test scenarios to show resilience
– Update models regularly as conditions change
