Denice R. Preston
The following is a Toptal Case Study detailing how one founder collaborated with a Toptal consultant in financial modeling to ensure confidence and accuracy in her financial projections.
The issue: A founder trying to close a seed round must have financial projections based on research presented in a manner investors can comprehend.
Amy Divaraniya, CEO and co-founder of OOVA cre,ated an item she believed the market needed – an instrument for fertility testing that brought the precision of a medical clinic into your home. However, when she pitched to investors to close her seed round, she discovered that financial projections needed an objective eye. Divaraniya recollects, “When financial projections came into conversation, I thought that the projections were weak. They were not supported by evidence. Additionally, it was a format I could comprehend; however, it was not something VCs weren’t familiar with.”
Although Divaraniya enjoyed great connections with other startups, she could not get an appropriate template. “That’s the one thing nobody wants to share.” Even if she could, however, she felt that she didn’t have the experience to draw logical, factual assumptions. “What’s the current rate of growth I should expect to pay legal expenses? Taxes? What is the typical CAC for a business like ours? What is our uniqueness?”
How Divaraniya Found the Right Consultant
Divaraniya worked with a Toptal developer since 2018 and saw that Toptal also provided finance-related consulting. She decided it was the right time to take the plunge and began interviewing potential candidates.
The Toptal matching team picked two consultants with suitable backgrounds, and Divaraniya picked Jeffrey Fidelman during the interview. “With Jeffrey, he understood what I wanted. He’d ask, “Have you thought about these issues? What he said I had been asked about, but I had not thought of it.”
Quick Kickoff Process
Fidelman joined the process right away. “The interview took place towards the close of the week. on this weekend, he emailed an example that he thought a budget forecast could appear to be. He was able to respond to everything he received during the weekend, in just only a couple of hours.” The two had the first meeting on Monday. They then spoke every week at least twice throughout the following weeks. In just two weeks, Divaraniya was able to create a model.
Understanding the Bigger Picture, Not Just the “Ask”
The project could have stopped there. However, Fidelman continued to ask questions that exposed more holes Divaraniya hoped to fill with her efforts to raise money. In addition, she realized that she wanted to include the flexibility of her model to evaluate the effect of various strategies (e.g., different distribution methods). Even though Divaraniya believed she was looking for an elementary Financial model, she worked with Fidelman for around 100 hours. In the final analysis, she had a highly adaptable financial model and six reports totaling about 25 pages each, substantiating each assumption.
A Flexible Financial Model
While Fidelman was constructing the financial model, Divaraniya was working on the economic model. Fidelman and Divaraniya were still figuring out the ideal selling channel for OOVA. “At the same time we were working on product development. The sales model was constantly changing. Do we need fees for affiliates? One-time fees? Jeffrey was extremely flexible. Whatever I wanted to do, we could achieve the desired result using the model he developed.” Fidelman came up with an assumption tab that contained the different sales techniques Divaraniya was contemplating so that she could plug and play once she had decided on the best model.
Market Research to Create Fact-based Financial Model Inputs
The quality of your model depends on the inputs. Fidelman wanted to develop an image that was as close to the actual business as much as it was possible. While the cost side was simple, the topline figures required some digging. Fidelman used his contacts to investigate such questions as: What’s the average markup? What’s the size of the US market for fertility? “Yes, it’s a medical technology, but it’s also consumer products. Therefore, many studies I conducted were related to items such as heart rate monitors, contraceptives, and baby monitors,” noted Fidelman.
Fidelman looked into the unique place of OOVA. “It’s tech-enabled, yes. But they’re still Ovulation Sticks and you’ll require replenishment. Where do you look for this OTC? Could it be located in the Personal Care or Family Planning section? Do you think it will be in the back of the pharmacy? We needed to consider who we would like to have a conversation with.”
The results: A flexible financial model based on extensive market research helped OOVA when it was closing its seed round.
With a flexible financing and market research model in place, Divaraniya has successfully concluded her seed funding round. “Conversations between investors and me were much more easy. When I was fundraising, I felt that I could stand up in my place.”
About OOVA: OOVA is a fertility diagnostics company spun off Mount Sinai Hospital in New York City. With patent-pending biochemistry and artificial intelligence, OOVA determines the fertility status by precisely measuring the hormones important to her through urine samples. By monitoring this crucial hormonal balance, OOVA will aid women in becoming pregnant, determine why she’s having difficulty, and identify reproductive health issues such as PCOS.
The story of Jeffrey Fidelman Jeffrey Fidelman has served as a trusted advisor for several years. He has been working with entrepreneurs to help them develop and expand their businesses, usually from scratch. Jeffrey has successfully assisted entrepreneurs in raising over $ 1 billion. The ability of his to operate in an array of industries is a result of his broad background in investment. The freelance work allows him to collaborate directly with the leadership team to produce effective and successful outcomes.
