Gate 3

Goals of Gate 3

Gate 3 focuses on the financial aspect of our startups. Now that we have all come to our decisions about our ideas, problem-solution fit, marketing and sales strategies, and revenue models, we can now determine our financial models. In this gate, we were asked to come up with our unit economics, eight quarter projections, and five year projections. Through this exercise, we had to understand assumptions about our business, such as pricing, profit margins, number of customers per period, variable costs, and fixed costs.

Finding Information and Assumptions

The first step in creating our unit economics and financial projections was to understand the assumptions needed. We need to think through the costs and revenues that we would incur. From our platform, it was pretty simple to determine what types of revenues and costs we would have:

1. Revenues are the investment of the money managed
2. Costs include many things such as:
   1. The dividends repaid
   2. Employee wages
   3. Office space, and
   4. Legal fees.

We found these numbers by estimating the number of customers we would have per period based on the trajectories of similar companies like Robinhood and also by estimating our needs in order to handle the surge in customers over time. We used resources like checking WeWork’s fees and legal firms in order to further specify our costs. We also made certain assumptions about the amount of money college students would be able to invest based on demographic averages and applying what we had seen with ourselves and our peers.

Verifying Attractiveness to Investors

After determining our assumptions and finding relevant information, we had to check whether or not it made sense in terms of the amount of money we managed over time, how our costs changed over time, and whether or not the final net income figures seemed to make sense. It is not just about understanding whether or not these figures would intrigue investors and convince them to invest. We adjusted our numbers based on what the professors have explained in class about what a range of good numbers is for investors.

Presentation

This was by far our best presentation and there was very little that the professor and mentors had to say about improvements that could be made. We worked hard to check our assumptions and make sure our models were feasible. That they would be attractive to investors – possible but not an exaggeration.By thoroughly understanding what goes into a company like this, we were able to better present it to our class, the professor, and the mentors.

Takeaway

Gate 3 was by far the most interesting gate for me to work on because as an economics student, I have learned a lot about financial statements, such as the profit and loss statement on which we created our financial projections. This is my opportunity to put what I had learned in my classes to practice. As the only one in my group with prior experience with finance, I really got to take the lead on this gate, helping my teammates through this presentation. It was also a good way to understand researching similar startups and helped me to learn more about the condition and growth of companies in this sector.

Looking forward, I am excited to bring together all three gates to make a final pitch presentation for investors. The work we have done in these gates has helped us understand what is needed to plan out a company and pitch to investors.

#ieor191 #gate3 #entrepreneurship