Elements of a Crowdfunding Pitch #1 – Financial Forecasts

In this series of posts we take a look at some of the building blocks of a successful equity crowdfunding pitch, to try & provide some guidance to entrepreneurs who are hoping to build a successful campaign. We begin with financial forecasts, which often causes confusion for companies.

Why does InvestingZone ask for a financial forecast?

InvestingZone understands that no serious investor will back a company without some idea of how it will perform financially in future. This is where a set of financial forecasts comes in. Broadly speaking, these forecasts allow potential investors to assess:

What the potential scale of the business could be, if all goes according to plan

  • The investor might like the basic business idea and the management team, but if the company is never going to reach a scale which could make it an acquisition target then he/she may well decide not to invest.

When the business could reach a scale which might make it an attractive acquisition target

  • There are no guarantees that a company will be targeted for acquisition at any point, but a good set of forecasts will allow an investor to work out when he/she thinks the company might be big enough to be a real disruptive force in its market and so potentially become a target.

Whether additional funding will be required in future and if so, how much

  • InvestingZone’s investors understand that unlisted equity investments carry the risk of dilution if the company needs to raise further funding in future. To assess and manage this risk they need an idea of how much more money a company might need to raise after they invest.

Whether or not the entrepreneur has identified the key drivers of revenue and profit

  • One of the key things I personally look for in examining financial forecasts is an indication that the entrepreneur understands the business and what drives it. This varies a great deal from company to company, but for example it could be checking to see that there’s a sensible link between user numbers, average revenue per user (“ARPU”) and revenue, or a sensible movement in gross profit margins as the business matures.

Whether the company’s plans are realistic

  • There are any number of things which might cause concern here – for example if a company forecasts increasing revenues without any corresponding increase in staffing levels or conversely if staffing levels increase more rapidly than people could actually be recruited in reality. Overall the investor will understand that the forecasts are the product of a number of assumptions, some of which may be very optimistic, but will be looking to see that the company has presented a plan which is at least possible!

Although this post is primarily focused on how investors use forecasts, it’s worth noting that the process of preparing them can often be very useful for entrepreneurs too because it forces them to think through what will drive the business, what it might take to reach an exit and when it might get there. If, by going through the process of preparing your forecasts, you can honestly convince yourself that the potential payoff is worth your blood sweat and tears for the next few years, then you stand a good chance of convincing investors that it’s worth their money too!

What should you bear in mind when preparing your forecasts?


  • The most important attribute of any financial forecast is clarity. A lot of work goes into preparing them and it’s all wasted if no-one can understand!  Numbers should be presented clearly, with enough granularity (eg in terms of different revenue lines) to allow investors to see what’s going on without bogging them down in excessive detail. Use text boxes or comments to explain what items are if it isn’t immediately clear, and don’t be afraid to use colour to make things more readable (although you should stick to the convention that black/green = good, red = bad!).


  • Your forecasts should cover a period of at least 3 years from investment. If you feel that this isn’t long enough to show the full potential of your business, then you can extend this but bear in mind that most investors will be looking for a viable exit (and therefore reasonable scale) within 5 years.


  • This is often the most difficult thing to get right in preparing your forecasts and something we often see companies struggle with when they apply to InvestingZone. You need to strike a balance between demonstrating to the investor that your company has the potential to become something big on the one hand, and staying within the bounds of reality on the other.
  • We usually see one of two things happen – either the entrepreneur is too optimistic and produces the classic “hockey stick” or he/she presents a picture which is unappealing to investors because it never gains any real scale.
  • In my time working for VC fund managers, the solution to this issue tended to lie in the use of multiple “what if?” scenarios, which allowed the investor to see the hockey stick outcome (ie “what happens if everything goes right?”) but also showed what would happen if certain key factors changed.
  • This is probably overkill for most crowdfunding pitches – the best course in this context is probably to aim for a sensibly optimistic scenario – ie one you’d be happy with and which you feel shows the potential of your business, but not one which assumes everything will go 100% your way.

What should a good set of financial forecasts include?

A Profit and Loss (“P&L”) account

  • This shows your revenue, direct and operating costs, as well as the key drivers behind those items.  We don’t expect you to have it audited, but as far as possible it should comply with accounting standards in the way that things are presented.

A cash flow forecast

  • This item can often cause confusion.  Whereas the P&L follows accounting standards in the way it treats revenue and costs, the cash flow does just what its name suggests – it focuses on when the cash comes in and goes out of the door.
  • You should make sure to include your current fund-raise in this forecast as well as any further fund raising necessary to keep the company in the black.

A balance sheet forecast

  • This is perhaps of less interest than the P&L and cash flow to many investors, but some like to see it, and for a company which might eventually be valued on its asset base it can be particularly important.

By following the suggestions above, you should be able to produce something which will be an asset to your pitch, get funding.

You may also be interested in:

Richard Brockbank, Director and Co-Founder | InvestingZone