Redd

Profit

Building a forecast ready for a new round of investment

the project

We helped this financial publisher prepare for new capital funding by upgrading their forecasting model. In the process, we revealed the needs of their future investors.

the client

REDD’s name sums it up: Risk Event-Driven and Distressed Intelligence.

Founded in 2013, the online service gives bankers, advisers and asset managers an edge by publishing corporate special situation intelligence on the emerging markets from Asia to Latin America.

Subscribers connect through a suite of web and mobile applications, where they access news, research and data produced by a team of leading experts – financial reporters and analysts dotted around the world. Armed with this information, they respond to market-moving events to either position themselves for mandate opportunities or to trade special situations in the distressed and high yield markets.

As a tool for trading, research and analysis, REDD is popular with all types of user:
Investors who need to zero in on their chosen markets
Analysts who need accurate numbers to build reports and forecasts,
Advisers on the hunt for new business or fresh insights to bring to regular clients.
With so many applications and growing data banks, it’s become a leading market resource in just a few short years.

the problem

The company was growing, and more capital would soon be needed to keep pace with demand.

Investment to date had come through the founders’ personal networks, together with a number of angels and HNWs. The next step would be Series A funding, but this would require a level of detail they couldn’t yet supply.

The problem lay with their forecasting model. It was hard-coded, taking no account of complex variables, so investors would see their five-year projections as overly simplistic.

It needed an urgent upgrade, so they asked us to take on the project.

the solution

Before we began work on the model, we spent time listening to VCs and private equity firms who’d come forward as potential investors. Their input was crucial, as we needed to pin down their specific criteria.

Then we pulled the company’s previous data and dug into the numbers:
Querying figures with their accountant and senior management team
Liaising with sales to map peaks and troughs against specific strategies
Getting the CEO’s full account of the past, and vision for the future
This allowed us to key in a number of concrete assumptions, with informed estimates around profit ratios, to show investors a realistic scope for return.

To ease doubts, we also ran stress tests – mixing different levels of sales, revenue and growth costs to show the best- and worst-case impact on cash liquidity.

The whole process took around two months to complete. But it didn’t end there, as investors wanted to dig deeper.

We went back on the road, meeting again to discuss financials in more detail and expand on the assumptions that were driving the model. We worked with them, testing their scenarios and tailored our reports so they could explore the business from every angle.

the result

The model is playing a number of important roles in the business:

INTERNAL FORECASTING

As a management tool, it’s allowed them to forecast sales, plan resources and weigh up investment in capital programs – from technical innovations to entering new markets.

INVESTOR CONFIDENCE

Projected returns still need to increase to meet the expectations of VCs and equity firms. But buoyed by accurate forecasts, many are setting timeframes for review – and in the meantime, managers understand the investors’ goals and have clear metrics to aim for.

So the model is edging them closer to the next round of funding.

VALUATION

The CEO has received a number of eight-figure offers, but chosen not to sell – in part because the company’s true value has become more apparent. Looking ahead, they’re in a strong position where they can choose to stay or exit. All because they understand the story – and potential – behind the numbers.

“James and his team came in when we were still relatively early-stage and running in start-up mode. We weren’t in a position to hire a full-time CFO, but needed more sophisticated support than our accountant alone was able to provide as our business became more complex.

James and his team transformed our finance processes and gave us assurance that we have best-in-class financials and systems in place – for today and as our business grows.

Finally, James and his team always provide personalized attention and at no point have we felt like just another of many clients. Overall, I can’t recommend bringing James and his team on more, and suggest doing it sooner than you think you need to.”

Edith Elliott / CEO & Co-Founder, Noora Health

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