The short answer
What makes a financial model suitable for a fundraising conversation?
It is not the model with the biggest numbers or the most worksheets. It is the one where every important result can be traced back to a clear operating assumption. At minimum, it should explain how revenue forms, whether costs are missing, when cash becomes tight, how the raise maps to milestones, and where important formulas and data came from.
- Key results can be traced back to their assumptions
- Historical actuals, forecasts, and management assumptions are clearly separated
- Base, downside, and growth scenarios differ for explainable reasons
- Unconfirmed data is labeled instead of hidden
How to use this checklist
Open your Excel model and review each question. Every answer should point to a worksheet, cell, formula, note, or data source. If the explanation exists only in your head, add it to the model or an accompanying note. This checklist is not an audit and does not replace advice from accountants, lawyers, tax professionals, or investment advisors.
01Revenue and margin
Revenue is more than a line that slopes upward
- 01
Can revenue be traced back to real business drivers?
Examples include customers multiplied by average contract value, locations multiplied by output per location, or usage multiplied by a unit price. A monthly growth percentage alone rarely explains where growth comes from.
Common red flag: Every month uses the same growth rate even though sales cycles, team capacity, and market investment do not change.
- 02
Are historical actuals and future forecasts clearly separated?
Label actuals, forecasts, and the first forecast month. Historical numbers should trace back to accounting records, orders, or another source. Investors need to know what has happened and what remains a management assumption.
Common red flag: Historical months are recalculated by model formulas, or actuals and forecasts use the same formatting with no visible cutoff.
- 03
Does gross margin change with the business model?
Products, cloud services, payments, channels, support, and service delivery can have different direct costs. Gross margin should respond to product mix, scale, and pricing instead of staying fixed to produce a preferred result.
Common red flag: Revenue grows quickly while fulfillment, cloud, materials, or channel costs do not move.
02Costs and cash
Profit growth does not guarantee cash safety
- 04
Is payroll driven by roles, headcount, and start dates?
The model should show departments, roles, headcount, expected start months, salaries, bonuses, and employer costs. Estimating payroll only as a percentage of revenue usually misses the real hiring schedule.
Common red flag: Headcount increases but payroll appears months later, or recruiting and benefits costs are absent.
- 05
Are operating expenses complete and free of duplicates?
Review marketing, rent, cloud services, legal and accounting, insurance, travel, software, support, and compliance. Make sure the same cost is not included in both a department budget and a company total.
Common red flag: Expenses use only a round annual growth rate with no payment schedule, contract, or supporting detail.
- 06
Are capital expenditure, depreciation, and one-time costs distinguished correctly?
Equipment, fit-outs, tooling, and major development work may use cash immediately without entering the income statement in full. The model should explain both timing and accounting treatment.
Common red flag: An asset purchase appears only on the income statement with no cash outflow, or the reverse.
- 07
Is cash flow based on actual collection and payment timing?
Orders, invoices, revenue recognition, and cash receipts may occur in different months. Receivables, payables, deposits, taxes, and payment terms can make the cash curve diverge from profit.
Common red flag: Monthly net income equals the increase in cash, with no opening balance or collection and payment terms.
03Funding and scenarios
What verifiable result will this round unlock?
- 08
Is the raise amount derived from the funding gap?
Work backward from opening cash, monthly cash flow, a safety buffer, and the next milestone. Do not choose a round number first and then adjust the model until it uses exactly that amount.
Common red flag: The raise amount has no numerical relationship to runway, hiring, or product milestones.
- 09
Does use of funds map to months and milestones?
Put product, team, sales, marketing, compliance, and working capital on a timeline. Each category should explain when money is spent, why it is needed then, and how the outcome will be verified.
Common red flag: Use of funds is only a percentage pie chart with no monthly spend or result definition.
- 10
Is there at least one downside scenario driven by assumptions?
A scenario should not simply multiply every number by 80% or 120%. Change explainable inputs such as conversion, hiring pace, pricing, margin, or collection timing, then observe the effect on cash and milestones.
Common red flag: Three scenarios show different outputs while using identical underlying drivers.
04Traceability and explanation
The model must withstand questions cell by cell
- 11
Do key results reconcile across profit, the balance sheet, and cash?
At minimum, confirm that revenue, net income, cash, receivables, payables, debt, and equity funding do not contradict one another. If the model does not include all three statements, state its scope and limitations.
Common red flag: The company reports a loss without using cash, or a funding inflow changes neither cash nor equity.
- 12
Can the founder explain important assumptions, formulas, and sources?
Label inputs, formulas, data dates, sources, and owners. Take one important result and trace it back three levels to confirm that you can explain each step instead of saying that someone else built it.
Common red flag: Extensive hardcoding, hidden worksheets, broken external links, or the same assumption repeated in several places.
Where Tessly can help first
Surface the structures and assumptions Tessly can recognize in your Excel model
Tessly can help identify worksheets, financial line items, periods, currencies, and selected key assumptions, then show mappings and gaps so a founder has a visible model view to review. Every imported item should still be checked.
Tessly does not guarantee formula completeness, numerical accuracy, investor acceptance, or fundraising success, and it does not replace accounting, tax, legal, or investment advice.
Frequently asked questions
Three questions founders ask most often
Is having an Excel financial model enough to start fundraising?
Not necessarily. A file does not prove that its assumptions are explainable, its formulas are traceable, or its cash needs are clear. Review revenue, costs, cash, use of funds, scenarios, and data sources before sharing it.
How many years should a financial forecast cover?
There is no single forecast length for every company. Early-stage teams should first make the near-term monthly forecast reflect cash flow and post-fundraising milestones, then extend it based on company stage and investor needs. Uncertainty generally increases with time.
Will Tessly decide whether my model is ready to share with investors?
Tessly provides structure recognition, assumption mapping, and gap prompts rather than a guaranteed verdict. The founder must decide whether to share based on data completeness, professional advice, and investor requirements.
References
This article is general educational material and is not accounting, tax, legal, or investment advice.
Next step
Do not start by asking whether the model is ready. Start by finding every “why.”
Choose one important result and trace it back through its assumptions, formulas, and data sources. Anything you cannot find is the next thing to fix.