Case study of target Series B company

Ah, the festive season of deal-making doesn't take a break, does it? Let's dive into your case study conundrum:

1. Assumption Methodology for S&M, R&D, and G&A:

   • Using industrial benchmarks is a solid starting point, especially if you're looking at companies within the same ARR range. This gives you a comparative baseline that's grounded in reality.
   • However, consider the growth stage and specific strategies of the target company. If they're aggressively expanding, S&M might be higher than the median. If they're innovation-driven, R&D could be a larger slice of the pie.
   • Don't forget to factor in the company's historical spending patterns and any strategic shifts they may be planning post-funding.

2. Balance Sheet Assumptions (AR Days, Inventory Days, AP Days):

   • Benchmarks can be elusive for these metrics, but you can infer some insights from the revenue segments and business model.
   • For AR days, consider the payment terms typically granted to customers in the industry and the company's historical collection efficiency.
   • Inventory days might be influenced by the production cycles and supply chain efficiency, especially for the hardware segment.
   • AP days will depend on the company's bargaining power with suppliers and its cash management strategies.

3. Financial Health Presentation:

   • Growth: A compound annual growth rate (CAGR) chart for revenue segments can visually demonstrate growth trajectories.
   • Margin Profile: Use a waterfall chart to show the contribution of each revenue segment to the overall margin.
   • Cash Flows: A classic cash flow statement format or a bridge chart can illustrate the inflows and outflows effectively.
   • SaaS Metrics: Including the SaaS magic number and Rule of 40 is a great idea. These are key metrics that VCs love as they encapsulate efficiency and growth potential.

Remember, the VC fund will be keen on sustainability and scalability of the business model, so any insights that can highlight the company's path to profitability and market dominance will be valuable. Also, consider the qualitative aspects such as the management team's expertise, competitive positioning, and market trends that could impact future performance.

Good luck with your presentation, and may your forecasts be merry and bright!

Sources: Biotech finance part 2: valuation methodologies and modeling considerations, Idea Generation... and Why Wall Street Sucks at It, PE professional, what's your process while judging an investment?, Why a lack of advanced modeling techniques? Anyone who uses probabilistic modeling justification for this?, On the Job With Simple As… My Research Process