Scenario modeling
Fundraising scenario modeling
Scenario modeling means running several credible versions of the same round — different amounts, valuations, pool sizes and conversion assumptions — against one accurate base cap table, then comparing the ownership outcomes. The point is not to predict the round; it is to know which terms you can concede cheaply and which ones you cannot.
What to vary
| Variable | Realistic range to test | What it reveals |
|---|---|---|
| Amount raised | The ask, and the ask minus 30% | How much runway each point of ownership buys |
| Pre-money valuation | Your number and the investor's | The true cost of the valuation gap |
| Pool increase | None, target, and target plus a refresh | How much of the round the pool absorbs |
| Pool treatment | Pre-money vs post-money | Who actually funds hiring |
| Convertibles | Cap vs discount, one instrument vs all | Whether existing SAFEs dominate the outcome |
Amount raised
- Realistic range to test
- The ask, and the ask minus 30%
- What it reveals
- How much runway each point of ownership buys
Pre-money valuation
- Realistic range to test
- Your number and the investor's
- What it reveals
- The true cost of the valuation gap
Pool increase
- Realistic range to test
- None, target, and target plus a refresh
- What it reveals
- How much of the round the pool absorbs
Pool treatment
- Realistic range to test
- Pre-money vs post-money
- What it reveals
- Who actually funds hiring
Convertibles
- Realistic range to test
- Cap vs discount, one instrument vs all
- What it reveals
- Whether existing SAFEs dominate the outcome
A disciplined process
- 1Fix the base: a fully diluted cap table reconciled to signed documents.
- 2Define three or four scenarios only. More than that and no one compares them.
- 3Hold everything constant except the variable under test.
- 4Record the founder, employee-pool and investor percentages for each scenario.
- 5Identify the terms with the largest ownership swing and negotiate those first.
Common modelling errors
- Modelling on outstanding rather than fully diluted shares.
- Applying both a cap and a discount to the same SAFE.
- Placing the pool increase after the money when the term sheet places it before.
- Copying last quarter's cap table instead of the current one.
- Presenting a single scenario, which removes the ability to trade terms.
Prepared by Perseids for general information. It is not legal, tax or investment advice — confirm your specific situation with your advisers.
Frequently asked questions
- How many scenarios should I model?
- Three or four. A base case, the investor's proposal, and one or two variations on the terms you most want to change. Beyond that, comparison breaks down.
- Can I model scenarios in a spreadsheet?
- You can, and many founders do. The difficulty is keeping the base cap table in sync: once options, transfers and convertibles move, spreadsheet scenarios quietly model a company that no longer exists.
Put this into practice with Perseids.
Model your next round in Perseids