How to take a data dump on your fundraising process

Fundraising is a delicate process - no matter how hot the company, how impressive the growth, or how qualified the team. Most fundraising processes follow a similar arc. The following can span months, weeks, or sometimes just days (welcome to 2021!).

• Initial CEO and investor meeting.
• Some data exchanged.
• Pitch meeting.
• More data exchanged.
• Term sheet.
• Financial and legal due diligence.

Throughout the exchange of data, investors never fail to ask for raw data dumps. “Fill out this template. Send us a list of every customer and how much they paid by month. Send us the details of your marketing campaigns, or a list of your active pipeline. Don’t worry, we’ll do the analysis. This is our process internally.”

No doubt it’s simpler for an investor to use their template - they have standard ways of reviewing and comparing companies. They have analysts that can slice and dice the data all 👏 night 👏 long 👏. I would do the same if I was looking at hundreds of businesses regularly.

Similarly, raw data surely gives investors a sense of completeness and control. They have everything they need to understand the business from every angle imaginable. Most importantly, they don’t have to bug you with questions.

I also imagine, particularly for early stage companies, the raw data requests come from the fact that many early stage companies don’t have a finance leader or don’t have one that is capable of answering the questions investors care most about.

However, the minute you as a business share that raw data, you’re on the back foot. You’re reacting and responding to questions from someone on their team (who has no doubt seen many other businesses) but doesn’t have the context on how your business works. As a result, you’re spending time not only building a response but also trying to wrap your head around their analysis. Just don't do it.

Raw data also invites low level questions that spiral the conversation. You’re explaining the billing bug that impacted cohorts 6 months ago instead of discussing the long term outlook for retention. Even worse, assumptions go unspoken. An investor might write the deal off because your 3 month retention is bad. However, you might be aggressively converting free trials to customers and that 3 month drop off is a result of folks who really wouldn’t have converted to begin with.

Fundraising processes crumble easily. For every term sheet an investor sends, they say no hundreds of times. Every point of confusion or unexpected data point (which data dumps maximize) is a dent against the probability of a deal getting done, even when ultimately rebutted. Once an investor starts heading towards a no, it’s almost impossible to pull them back.

As with anything then, context matters. You wouldn’t have the analyst that joined your team last week be responsible for telling the story of your business to investors. Similarly, don’t let the analyst at the VC firm with one week of context (or less!) be the one that crafts your story.

Here's the approach I take and it starts with a ‘Data Deck.’ The Head of Finance should build this with the CEO, and it should happen before any conversations happen with investors. The Data Deck is not to be confused with your ‘Pitch Deck’ and doesn’t address things like your mission, vision, product roadmap, team, etc. Instead, its intent is to preemptively answer every quantitative question that an investor might ask. It’s your business in charts, tables, and story format.

Here’s an outline of a Data Deck we used at Intercom for our Series C:

• Business Overview
  • Executive summary (in bullet format) describing the most important metrics in our business.
  • Historical customer and revenue growth.
• Customer Acquisition
  • New subscriber growth over time
  • Subscriber growth by channel, segment, ACV
  • Unit economics (LTV/CAC, payback period, magic number)
• Monetization and Retention
  • Net and gross dollar retention, logo retention cohorts. Viewed in the way we measured the business (first month cancellations excluded)
  • Various analyses showing the impact of pricing models on retention
• Product Engagement
  • MAU, DAU, average active seats per customer
  • Conversation and data volume
• The next 3 years
  • Our revenue path for the next 3 years
  • Detailed discussion of financial plan for next 12 months
• Appendix
  • Headcount numbers over time, by location
  • Trended balance sheet
  • Trended cash flow statement
  • Trended P&L

Most importantly, don’t just email the Data Deck or drop in a deal room. Walk investors through it. That was our way of ensuring that context landed.

You’ll always have investors that find the Data Deck super helpful and still ask for the raw data dumps. In this case we’d do two things. 1) We’d explicitly say that we’re not sharing raw data for the reasons discussed above. 2) We’d seek to understand the most important questions still unanswered and chase those down.

Finally, one point of clarification - what I’m suggesting is not to be misconstrued with obfuscating or hiding information. It’s never okay to intentionally mislead or hide parts of the business. That’s a good way to get into a lot of trouble. It goes without saying, but I’ll say it regardless, always answer questions and represent your business truthfully. All of the raw data will come out anyways once a term sheet is signed and diligence begins.

Happy fundraising. It’s an incredibly exciting and whirlwind of a time for any company. My belief is that most investors really just want you to tell them the story of your business, and to have their most important questions answered. They don’t actually want raw data.

I’ve had to clean up a lot of data dumps so you don’t have to. 😅