Built Ventures’ business model focuses on early-stage startup investments, providing capital and strategic support to promising ventures. This model presents unique financial modelling challenges, as it involves assessing and projecting the performance of nascent companies with limited historical data. The diversity in startup business models, revenue streams, and growth trajectories necessitates sophisticated and adaptable financial models to accurately evaluate potential returns and risks. Effective portfolio modelling is crucial for Built Ventures to make informed investment decisions and manage their portfolio's risk, growth and profitability.
To create a portfolio construction, operating cash flow model and forecasting based on the investment returns of a high risk asset class. The articulation and visibility of the model should facilitate their ability to raise additional investment funds.
Limited Historical Data: Early-stage startups lack extensive financial histories, making it difficult to model forecasted projections and risk assessments based on historical data.
Diverse Business Models: The variety in startup business models and revenue streams requires adaptable and sophisticated financial models to accommodate different growth trajectories, regulation factors (i.e. with health tech) and valuation methods.
Long-term Nature of Investment Results: The typical hold period for an investment before any return is seen is anywhere between 5-7 years, add to this a high failure rate, means forecasting cashflow is difficult.
Data Quality and Consistency: Ensuring the accuracy and consistency of financial data from multiple startups with varying reporting standards and practices can be challenging.
Performance Monitoring: Continuously tracking and evaluating the performance of portfolio companies to identify potential issues and opportunities requires robust, real-time data integration and analysis capabilities.
Market Volatility: Rapidly changing market conditions and emerging trends can impact startups significantly, necessitating frequent updates and adjustments to financial models.
Regulatory Landscape: The current portfolio consisted of business assets that SEIS & EIS which requires adherence and compliance to these government backed schemes
We worked with Built Ventures to execute a comprehensive portfolio modelling exercise, enabling them to outline fund expenses, operating fees, and future capital calls for their team and shareholders. By understanding their investment strategy, including check sizes, follow-on reserves, and deployment timelines, we built a model reflecting realistic benchmarks and expectations.
We streamlined their tech stack using Causal, Xero, and Google Sheets, with custom adaptations for forecasting versus actuals of capital reserves and operating budgets. This standardisation across portfolio businesses facilitated efficient planning for capital deployments, hiring, and operations.
We integrated various trusted data sources with the team's own and refreshed data live during calls to ensure robustness and external validation. Despite limited historical data, we created a model that now contains grounded expectations of investment returns and highlights the unique characteristics of their fund. This provides a solid plan for deploying capital in line with their investment thesis, making their fund attractive to investors and portfolio businesses.
Increase in annual investments deployed
Increase in frequency of investor reporting
Increase in engagement on investor portal
Fewer spreadsheets used in the creation of forecasts and reporting
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