Every growing company eventually has to get money to grow, introduce new goods, or improve its infrastructure. Although raising funds is thrilling, it also modifies a business’s ability to track its figures and arrange its plans. The way a company predicts, budgets, and assesses its performance changes in financial modelling is one of the most significant changes.
A financial model is a story told in numbers about how a business makes money, spends, and expands. Financial models, usually simple and centred on survival, are sometimes used before fundraising. They become more profound, arranged, and investor-ready following financing. With useful advice for founders and the financial team, let’s examine step-by-step how financial modelling changes before and after a fundraise.
What Is Financial Modelling?
Financial models are used to project a firm’s future financial results. Often developed in Excel or Google Sheets, it offers vital information like revenue, expenses, profit, and cash flow.
Financial modelling seeks to address issues like:
- How much will we make next year?
- Can we manage to grow or bring on more people?
- Should sales fall by 10%?
Financial models boost investor confidence in a company’s financial planning and enable companies to be more wise.
Before a Fundraise: Focus on Basics and Survival
Before raising funds, most startups or small businesses focus on running lean. Their financial models are usually simpler and built for internal use.
Here’s what a pre-fundraise financial model often looks like:
1. Basic Structure
At this stage, the model mainly tracks:
- Sales projections
- Direct costs
- Operating expenses
- Simple cash flow
Founders use it to understand if the company is profitable and when it might run out of cash. It’s more about managing survival than impressing investors.
2. Limited Data
Early-stage companies often have short operating histories. As a result, their models depend on estimates and assumptions rather than actual performance data.
For example, future sales might be based on market research, rather than past records. This makes the model flexible but also uncertain.
3. Short Time Frame
Pre-funding models usually cover one to two years. The focus is short-term because founders are still experimenting with product-market fit.
4. Simple Valuation Approach
Valuation before funding is often done using basic revenue multiples or comparable startups in the same industry. The goal is to show potential rather than precision.
5. Attract Investors
Even though the model is simple, it must clearly show the company’s growth potential. Investors use it to decide if the business idea can scale.
After a Fundraise
Once funding comes in, everything changes. Investors expect the company to plan, report, and execute with precision. Financial modelling becomes more detailed, structured, and forward-looking.
Here’s how it evolves after fundraising:
1. Detailed Forecasting
After the fundraise, financial models expand to include:
- Multi-year forecasts
- Product-wise or region-wise revenue streams
- Marketing and customer acquisition costs
- Team hiring plans and payroll structure
- Profit margins, burn rate, and runway
The model shifts from short-term survival to long-term growth planning.
2. Real Data and Metrics
With funding, companies start tracking real performance metrics. These are plugged into the model to make forecasts more accurate.
Examples include:
- Customer acquisition cost (CAC)
- Lifetime value (LTV)
- Churn rate
- Unit economics
This level of detail helps founders make informed decisions and report transparent data to investors.
3. Investor Reporting
Post-funding, financial models are also used for investor updates. Every quarter, the company compares actual performance versus projections.
The model now serves two purposes: internal planning and external communication. It must be clean, auditable, and based on verified assumptions.
4. Scenario Planning
A mature financial model includes some scenarios.
Example:
- What if sales grow 30% faster than expected?
- What if marketing costs double?
- What if a key client drops out?
This helps management prepare for both good and bad situations. It also gives investors confidence that the company is managing risks wisely.
5. Advanced Valuation Methods
After funding, valuation is often updated using professional models such as:
- Discounted Cash Flow (DCF)
- EBITDA multiples
- Comparable company analysis
These methods give a realistic picture of enterprise value and are used in future rounds or M&A discussions.
6. Compliance and Audit Readiness
As companies grow, financial data must follow proper accounting and audit standards. The financial model must match audited statements and comply with local tax and reporting laws.
Investors expect transparency, so every assumption should be traceable to a valid source or document.
Key Differences
| Aspect | Before Fundraise | After Fundraise |
| Goal | Track survival and growth potential | Track performance and growth results |
| Data Type | Estimates and assumptions | Actual and verified metrics |
| Forecast Horizon | 1-2 years | 3-5 years |
| Model Detail | Simple and short | Detailed with scenarios |
| Valuation Method | Revenue multiples | DCF or comparable analysis |
| Reporting Use | Internal only | Internal + Investor reporting |
Why Financial Modelling Matters for Founders
For founders, financial modelling is about telling your business story in a logical, believable way.
Before funding, it shows where your idea can go. After funding, it shows how well you can deliver on that promise.
Investors look at the quality of your financial model as a sign of how well you understand your own business. A solid, transparent model can make or break your next funding round.
Summing Up
Financial modelling evolves from a simple planning tool before fundraising to a powerful management and reporting system afterwards. It grows from predicting possibilities to proving performance.
If you want expert help with financial modelling, valuation, or investor reporting, reach out to Valuation India. Our team specialises in startup valuations, M&A financial models, and due diligence reports. Visit our site today to build investor-ready financial models that bring accuracy, trust, and value to your business.