Financial Health

Our Proposition

Venture Capital funds typically invest in young emerging companies usually founded by 1st time young entrepreneurs. These companies while growing very fast, are at times pivoting as they seek to get their PMF right or improve unit economics etc or are fire fighting as they deal with challenges of scaling or regulation/compliance. In the process, information based discussions between the founders and investors tends to suffer VC have large portfolio but small teams. We seek to provide the VC with the muscle to strength the review process, identify problems before they become big and help find solutions. For example, while all or most companies have an Annual Operating Plan or Business Plan,

Bring Structure to Investor–Founder Discussions with Clear, Data-Driven Insights

Break Business Plans into Trackable Milestones for Better Performance Monitoring

Stress-Test Assumptions to Ensure Plans Are Realistic and Actionable

Identify Risks Early and Understand Their Deeper Impact on the Business

Translate Founder-Led Growth into Clear Financial Metrics and Insights

Enable Honest Reviews While Protecting Founder Relationships and Investments

Given the early stage of business, variance of actuals vis-à-vis the operating plan may be par for course, but it is the second order impact of the variance and the second level understanding of what is working or not working that is important. Most Founders understand Tech, Consumer & Marketing very well – but translating the same into financial metrics may not necessarily come naturally. The objective is to avoid being blindsided as the Company/Founder is focused on GTM and thereby avoid mistakes, especially those that can set the business back. Therefore, our role is that of a third party that enables honest and rigorous review while the Investor can protect its relationship with the Founder and more importantly protect its investment in the Company.

Our Proposition

Venture Capital funds typically invest in young emerging companies usually founded by 1st time young entrepreneurs. These companies while growing very fast, are at times pivoting as they seek to get their PMF right or improve unit economics etc or are fire fighting as they deal with challenges of scaling or regulation/compliance. In the process, information based discussions between the founders and investors tends to suffer VC have large portfolio but small teams. We seek to provide the VC with the muscle to strength the review process, identify problems before they become big and help find solutions. For example, while all or most companies have an Annual Operating Plan or Business Plan,

Ensuring rigour in terms of assumptions

Breaking it into milestone that enables tracking performance vs aspiration and

Identifying requirement (resourcing) which then enables a useful or constructive discussion

Given the early stage of business, variance of actuals vis-à-vis the operating plan may be par for course, but it is the second order impact of the variance and the second level understanding of what is working or not working that is important. Most Founders understand Tech, Consumer & Marketing very well – but translating the same into financial metrics may not necessarily come naturally. The objective is to avoid being blindsided as the Company/Founder is focused on GTM and thereby avoid mistakes, especially those that can set the business back. Therefore, our role is that of a third party that enables honest and rigorous review while the Investor can protect its relationship with the Founder and more importantly protect its investment in the Company.

Strong Finance & Business understanding that help understand the signs and traps. Examples of Unicorns that suffered due to upfront revenue recognition for a multi-year services or guaranteed income to their suppliers via long term contract on the market place are well known. Few other examples/scenarios that we would like to highlight

While high working capital could suggest channel stuffing or weak PMF, build-up of Working Capital (Inventory/Receivables) when WC cycle > Profit margin, can also become a cash trap (liquidity stress).

Understanding what is genuinely variable vs semi-variable or fixed cost in context of Unit economics – “fixed” nature of cost can be a positive when growth is strong as that is the source of operating leverage but similarly that can be a big drag if the company is struggling with growth. This becomes an important input for discussion related to variablizing the cost structure, arguably early-on vs backward integration to improve margins when company has established a meaningful and predicable customer demand.

Understanding the Cost of Revenues that are Reflected in Balance Sheet instead of P&L

While growth is very important, understanding the unit economics or the investment behind the growth is equally important. Very often, the discussion is at Contribution Margin or EBITDA margin but does not go to EBIT/PBT to reflect the Cost of Depreciation or capture the inherent financing cost given extended working capital. For example,

Business with say 90 days of receivables should ideally adjust its Gross Margin by 3% (assuming 12% as annual cost of debt) to reflect the true gross margin

Similarly for businesses where there is an upfront loss which is recouped through revenue from customers over multiple years (such as life insurance), IRR based approach is more appropriate to check economic viability or appropriateness of pricing. Further, the assumptions (given revenue will be earned over longer period) need to reflect the ground experience (customer churn, cross-sell of other products or value add services etc)

Understanding the Revenue growth

For companies that have made significant or multiple acquisitions, extracting organic growth (to the extent possible) is important to understand the true growth trajectory, need or importance of M&A and capital requirement for future M&A. RoE profile of the company itself is different if M&A is an integral part of growth

Incorrect extrapolation of demand during extraneous periods such as COVID or extrapolation of demand from early adopters can be misleading from planning perspective.

Inadequate build-out of team for the sales (suggesting unrealistic productivity metrics) resulting in missed revenue opportunity and/or more likely incorrect unit economics maths

BOUQUET OF SERVICES INCLUDE:

Streamlining MIS, including Financial analysis and Problem Solving

CFO support including helping companies build Finance & Control systems

Internal Audit, Legal, Tax and Compliance

Financial success goes beyond revenue growth. A deep understanding of business fundamentals helps identify operational inefficiencies, cash flow risks, and strategic blind spots. Below are some critical financial indicators and business scenarios that often determine long-term success or failure.

High working capital = warning sign

Could mean:
○ Over-pushing products to show sales
○ Weak demand

Slow cash recovery + low margins

Cash gets stuck

Leads to cash shortage despite profits

Know which costs are fixed vs variable

Fixed costs help when growth is strong

Fixed costs hurt when growth is weak

Early stage → keep costs flexible

Stable demand → shift in-house to improve margins

Don’t just look at EBITDA / contribution margin

Include depreciation & financing costs (real profitability)

Delayed payments (e.g., 90 days) reduce true margins

Adjust margins for cost of capital

Long-term revenue models (e.g., Life Insurance Industry) need IRR-based evaluation

Use realistic assumptions (churn, repeat sales, add-ons)

Organic growth = growth from core business; Acquisition growth = growth by buying companies

Separate organic vs acquisition-led growth

M&A-driven growth needs more capital and impacts returns

Early demand ≠ sustainable demand

Weak sales team / unrealistic targets → missed revenue & flawed unit economics

High working capital = warning sign

Could mean:
○ Over-pushing products to show sales
○ Weak demand

Slow cash recovery + low margins

Cash gets stuck

Leads to cash shortage despite profits

Know which costs are fixed vs variable

Fixed costs help when growth is strong

Fixed costs hurt when growth is weak

Early stage → keep costs flexible

Stable demand → shift in-house to improve margins

Don’t just look at EBITDA / contribution margin

Include depreciation & financing costs (real profitability)

Delayed payments (e.g., 90 days) reduce true margins

Adjust margins for cost of capital

Long-term revenue models (e.g., Life Insurance Industry) need IRR-based evaluation

Use realistic assumptions (churn, repeat sales, add-ons)

Organic growth = growth from core business; Acquisition growth = growth by buying companies

Separate organic vs acquisition-led growth

M&A-driven growth needs more capital and impacts returns

Early demand ≠ sustainable demand

Weak sales team / unrealistic targets → missed revenue & flawed unit economics

Our Services

Venture Capital funds typically invest in young emerging companies usually founded by 1st time young entrepreneurs. These companies while growing very fast, are at times pivoting as they seek to get their PMF right or improve unit economics etc or are fire fighting as they deal with challenges of scaling or regulation/compliance. In the process, information based discussions between the founders and investors tends to suffer VC have large portfolio but small teams. We seek to provide the VC with the muscle to strength the review process, identify problems before they become big and help find solutions. For example, while all or most companies have an Annual Operating Plan or Business Plan,

Streamlining MIS, including Financial analysis and Problem Solving

CFO support including helping companies build Finance & Control systems

Internal Audit, Legal, Tax and Compliance

Given the early stage of business, variance of actuals vis-à-vis the operating plan may be par for course, but it is the second order impact of the variance and the second level understanding of what is working or not working that is important. Most Founders understand Tech, Consumer & Marketing very well – but translating the same into financial metrics may not necessarily come naturally. The objective is to avoid being blindsided as the Company/Founder is focused on GTM and thereby avoid mistakes, especially those that can set the business back. Therefore, our role is that of a third party that enables honest and rigorous review while the Investor can protect its relationship with the Founder and more importantly protect its investment in the Company.

Financial Health

Our Proposition

Our Proposition

While high working capital could suggest channel stuffing or weak PMF, build-up of Working Capital (Inventory/Receivables) when WC cycle > Profit margin, can also become a cash trap (liquidity stress).

Understanding the Cost of Revenues that are Reflected in Balance Sheet instead of P&L

Understanding the Revenue growth

BOUQUET OF SERVICES INCLUDE:

Our Services

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