The Deal Model is another tool frequently skipped over by most CEOs raising capital, again to their disadvantage. Even a basic Deal Model can separate the "A" quality deals that get funded from the rest of the pack.
Just as certain investors will model the entrepreneur's business case before deciding to invest, the savvy executive will model the investor's fund model to decide if they should take their capital. When combined with the Demand Model, Financial Model, and Shareholder Model using macros, the Deal Model enables the entrepreneur to negotiate from a position of greater wisdom.
For example, a well developed Deal Model will easily note the differences between a corporate venture development company and an boutique seed venture fund. With some basic research, a few key interview questions, and analysis of the fund web site, the Deal Model can be adjusted to determine: operating budget estimates, next round hurdle rates, and minimum step ups required to meet the next round expectations.
To the CEO, this translates to understanding exactly what resources that can expect to receive in reality - versus what was offered to them during negotiations. Many funds are winding down because they were not able to get their portfolio companies safely to next stage funding. Pre-money, this analysis is critical to understanding if the investor is the right fit. Post-money, this analysis helps guide the CEO and their new investor partner along the same path as they repeat the Equity Marketing process again to the next stage investors.
VenLogic provides unique advanced macro-driven models that tie into the "Executive Dashboard" by forecasting multiple rounds forward through IPO or liquidity event. Integrated Deal Models become a powerful negotiating tool that can have a multi-million dollar impact on a venture financing.