Sadaf Sultan: Fundraising Narratives, Financial Modelling & VC-Founder Realities vs. Projections (Deep Dive) - E156

· Fintech,Start-up,Founder,South Asia,Podcast Episodes English

About 5 years ago, I decided to take a break from investing and move back to Bangladesh and work professionally there. It was an interesting transition in my career and spurred by the need to be an operator as opposed to an investor. I’m so glad that I was brave enough to do it and its something I’d advise investors to do sometime, to sit in the operator seat because it creates a tremendous amount of empathy and the challenges they face day by day despite overwhelming odds.- Sadaf Sultan

Sadaf is the Founder of , a financial modelling resource hub for startup founders. Finprojections seeks to make financial modeling accessible by providing standards-based, rigorous Excel-based templates that can be used to build any kind of startup projections irrespective of industry.


Sadaf brings his extensive experience working as an investor and advising startups in the region. Sadaf worked for DWMarkets, a private equity firm focused on investing in financial services. In a personal capacity, Sadaf mentored startups in SEA as a 500 Startups mentor. Sadaf started his career in investment banking at Goldman Sachs, and transitioned into his investing career with the IFC, the private investment arm of the World Bank.

Beyond investing and financial models, Sadaf is passionate about expanding education access through technology. After IFC, Sadaf took a break from his investing career to return to his home country of Bangladesh to work at BYLC, a social enterprise promoting leadership education for his nation’s youth. He helped BYLC adopt digital channels of dissemination to make leadership education more widely accessible in his country. Sadaf completed his MBA from INSEAD

Jeremy Au: (00:30)
Hi, Sadaf, I’m so excited to have you on the show. You’re one of the few CFO people in Southeast Asia for startups.

Sadaf Sultan: (00:47)
Thank you, Jeremy, for having me on the show. It’s a privilege. Really excited to share about what we’re doing at Finprojections. We’re trying to add some value in the startup ecosystem and excited to share what we have coming out in a few months.

Jeremy Au: (01:04)
Awesome. Sadaf, please tell us who you are.

Sadaf Sultan: (01:07)
I’m working in Singapore as an investor for the last two years. I was born and brought up in Bangladesh and grew up in Dakar. From there, I pursued my undergrad education in Minnesota. Went to college in Carleton, studied math and economics. I was fascinated with the capital markets in the US and did banking for a few years. Started out professionally as a banker and transitioned into an investor, specifically an emerging market investor. Also, Finprojections is a side project that I’m doing to build up for the ecosystem.

Jeremy Au: (02:16)
Amazing. The key thing I want to ask is when did you fall in love with financial modeling?

Sadaf Sultan: (02:25)
Actually, it was in my first job out of college working with an investment bank. They put you through intensive training in Excel and financial modeling. What fascinated me was how you could tell stories with financial models and how you could paint a picture of a powerful narrative with it. My first job in Goldman Sachs in New York was doing a lot of corporate finance transactions, how do you convey that to investors, what are the levers that you need to pull or shift in order to make that transition happen. Later on in my career, I saw the same but from a different perspective – how would a founder convey the same to an investor with a financial model that tells a story and that excites me; it tells a story beyond the numbers.

Jeremy Au: (03:48)
That’s important. Telling a story with Excel and numbers. What does it mean to have a narrative of numbers?

Sadaf Sultan: (04:12)
From a startup perspective, I think it’s telling a story that is focused. Take a step back and reflect – what is the strategy of this business. What entrepreneurs risk is that they typically want to do too much and that’s emblematic of a typical founder who wants to drive and make changes in all kinds of directions, but when talking to investors, it’s best to have a specific vision of the future which can be supported with a financial model and so you have numbers as well to back what you want to achieve.

Jeremy Au: (05:41)
That’s true. But when people start fundraising, there’s not many numbers. However, even as they grow on to Series A, they think it’s all about the narrative and forget about the reality of numbers. I think there are three levels to this – level one: getting the figures clear; level 2: projecting the future; level 3: what are the things we need to de-risk as a milestone. Simply put, if we get everything right, we’re going to achieve this set of results. If we get some things right, we’ll get another set of results. What do you think about that?

Sadaf Sultan: (07:32)
I think that’s perfectly articulated and that’s why even from a founder’s perspective, financial modelling can be such a powerful exercise. It builds an appreciation for the underlying drivers for the business and understanding them. Then preparing yourself for all scenarios. Beyond a tool for due diligence, it’s extremely important to founders in understanding their businesses better.

Jeremy Au: (08:32)
There’s two levels to that – one, founders understanding their business and the consequences of not understanding or misunderstanding the business. The truth could be that VC’s putting money in but know they’re going to lose three-quarters of their investment so it’s written off in advance. But the founder who loses the company, they lose everything. I think the cost of inadequately financially modelling, capital requirements, and capital inflows is way more painful. It feels like the VC’s are the ones asking for financial modelling when the founder should be the one who’s most invested because the consequences are so asymmetric.

Sadaf Sultan: (09:30)
Absolutely. We’re doing financial advisory for startups and helping them with financial models. The number one trigger point for wanting a financial model is the pressure by an investor. I think it is necessary nevertheless from a financial discipline standpoint to avoid a lot of pain down the line. One of the most painful experiences I’ve seen founders go through is laying off people and it’s not just getting some items off of your P&L statements, there is a real human consequence to this and the more you can lessen that blow, the better the founder’s experience in building that business.

Jeremy Au: (10:35)
I agree. You’re implicitly saying that layoffs happen because you overhired and didn’t financially model. Is that what you’re thinking about?

Sadaf Sultan: (10:45)
Yes, overhiring, but also thinking about the quality of revenue, generally. And if you’re burning cash, why are you doing so from a long term strategy perspective. Those are some questions that can be asked a lot earlier to avoid pain down the line.

Jeremy Au: (11:26)
I love what you’re saying. Tell us what quality of revenue means? Isn’t revenue just revenue?

Sadaf Sultan: (11:34)
Absolutely. Quality of revenue. One way is to think of your customer base and tracking revenue in terms of cohorts. That’s an organised way of thinking of revenue that comes in. Cohorts are taking a set number of customers and tracking how much they are contributing to your bottom line over time of let’s say 12 months. If you’re seeing a lot of drop off from revenue contribution from this particular cohort then, that basically means you are experiencing high churn of revenue; spending a lot on marketing to acquire, but not able to retain them – you could be being very generous with your discounts and promotions. While things are cheap and it attracts them, there’s nothing that compels them to stay. That is poor revenue quality in that it does not sustain the company growth.

Jeremy Au: (13:18)
I agree. If you are doing what you’re saying and getting smarter month to month, then it should show up in the numbers. This also gives a sort of trajectory in that they can use the past and present data to see where things are going in to the future.

Sadaf Sultan: (14:13)
Absolutely. When projecting that the numbers will go up, why would I even believe that the numbers would go up? So, if you’ve done that exercise of tracking cohorts and showing month to month improvements and the numbers to be achieved.

Jeremy Au: (14:45)
What’s interesting is people are asking why should I have these projections and they’re moving stuff around above the line and below the line. So, let’s not look at revenue, let’s look at GMV or gross value, etc. Could you share about why someone might want to move things around like this?

Sadaf Sultan: (15:35)
Purely from an operation standpoint, you want to capture the market – you’re trying to create something that is systematically important in that market. In order to do so, you need to capture a certain amount of market share and sometimes loss-leading strategies can take away market share from those incumbents. This also raises the question if you are capturing market share by burning cash because that is not a sustainable strategy. If you’re burning cash to capture market share, you need to ask yourself how you’ll retain market share in the long term and create value for your customers.

Jeremy Au: (17:13)
That got advanced quickly. We started with three things – how do founders manoeuvre the books, the strategy of negative growth scaling, and the dynamics and tradeoffs. Paraphrasing what we just discussed, companies start with standard P&L, everything is normal, then founders get to financial projections and they start manoeuvring to make their gross margin look better. Where the fork is, is that it’s justifiable if you’re looking to blitz scale or even negative blitz scaling which needs a lot of growth to compensate and a lot of fund-raising to branch out further. There’s a tension between what the founder is promising or articulating versus the reality of the business versus what the investor is thinking. How would you advice the founder to articulate or have that balanced approach to modelling that out?

Sadaf Sultan: (19:11)
I think the most common chart that you see on a startup is this hockey stick growth and that’s emblematic of a VC backed venture. What’s more of an issue is that you have no way to double click into those assumptions or projections and this hockey stick growth that I’m seeing, where is it coming from? What really needs to happen to capture a percentage of the market, in terms of retention, etc. It’s important because then, as a founder, you’re not just saying I’m going to quadruple my revenue over the next two years, you are also explaining from the valid drivers how you are going to get to those numbers and that’s more credible than just saying numbers.

Jeremy Au: (20:32)
It’s a forcing function to create a logic pathway of how the business works. I’ve seen from my work a pressure to shuffle the structure of that. It’s the same numbers, but in a new flow. I think it has a nice effect of making the business look better. My concern is that it is causing the internal team to lose track of what to do and build. Founders usually say they’ve got two models, one for the investor and one for the internal team. That’s drinking the Kool-Aid somewhat which was a tricky conversation. What do you think about that?

Sadaf Sultan: (21:38)
To be honest, that is a recipe for disaster because if you have two different stories and articulating in a different way to investors and decision making is difficult. What you want as a founder is not just capital, but capital that is on board with the plan that is being executed, not a fictitious plan that is not true after investing. You don’t want that misalignment.

Jeremy Au: (22:33)
About that misalignment, I remember saying to a group – the smarter VC’s will understand this because they see 2000 decks and you get wise to the most common errors, the most common faulty assumptions, the most common slight of hand. The best case scenario, they catch it and they don’t invest in you and the worst case scenario, they go in and then they realise that it’s not kosher and you break the trust which is way worse because you’re stuck to each other building a business with two different stories without a working relationship at the board level.

Sadaf Sultan: (23:29)
It’s very difficult and being a founder is difficult as it is. Ideally, you’d want a board that is enabling you and empowering you and believes in you.

Jeremy Au: (23:52)
There’s an interesting divergence because not all founders are great and not all boards are great. The best case scenario is that you have a great founder and a great board working together. There’s a lot of debate about the fact that people wanted the boards in taking a more aggressive stance earlier around financial controls and governance basically.

Sadaf Sultan: (24:40)
This is why I think that Finprojections is so necessary. I don’t think any VC in the world wants to be completely hands off and add no value. Even to raise future funds to show to their own investors that we’re more than just capital. But it’s really difficult to give adequate attention to all your portfolio companies in an operational way. What you need are external parties to come in and supplement the efforts of VC’s to do that value creation for them and work with founders to create that discipline within their organisation.

Jeremy Au: (26:00)
When we talk about this, the worst issues with fraud is that they didn’t all start out with an intentional goal to deceive.

Sadaf Sultan: (26:57)
Most definitely. A lot of these issues manifest as the expectations build up and the founders need to show progress. Also, I would not recuse the investors as well because if you hand over money to a business without questioning what exactly they’re going to spend it on. If you’re going to give someone a billion dollars, you got to make sure the evaluation is on the level. Investors have to ask the founders about these things.

Jeremy Au: (27:54)
Let’s talk about that. Every founder has a decision, if they can get more capital, they jack up the models. Conversely, the VC’s saying the growth is not high enough, let’s jack it up and keep the capital raise the same. How should founders be thinking about tweaking or tinkering with those things?

Sadaf Sultan: (28:35)
It starts with a fundamental target of what can be realistically achieved and with what kind of support and the founders are the best armed to answer because they are closest to the market and not compromising that outcome. They should push back and say I can’t deliver that kind of growth. That is a difficult thing to do as a founder, pushing back against capital. What they should realise also is that as soon as they take on that capital, it builds expectations.

Jeremy Au: (29:41)
I agree that at the end of the day the founder is closer to the business and the master of the fundraising process. I feel that there’s two exercises to this. The first exercise we talked about is the financial modelling exercise. If the numbers look good or don’t look good, then there’s a second question to that – if the numbers don’t look good, is the business in need of fundamental improvement? It's like trying to put lipstick on a pig and there’s not enough time to improve the business enough. What do you think about that?

Sadaf Sultan: (31:15)
I think the problem compounds. Especially now. You can get away with putting lipstick on a pig and being able to fundraise like a few rounds. But at the seed stage, if you don’t have sensible unit economics, if you don’t have quality revenue, if you’re trying to build on top of that and accelerate that model, you’re just taking that and magnifying it ten times larger and at Series B, you’ve got a much larger problem. What should be done is solving the issue at the seed stage and then accelerating the growth of the business.

Jeremy Au: (32:43)
I agree. Do that financial modelling for yourself. It’ll help you fundraise better and improve the business or figure out what needs to be improved. Why is it so hard for founders to get a financial model if it’s such a vitamin and painkiller for so many different problems?

Sadaf Sultan: (33:10)
There are a lot of resources out there and they can do it themselves if they so desire. The real challenge is trying to customise a model to form. To that end, what we’re doing at Finprojections is we’re building a lot of customised models for ecommerce, SAAS, logistics, and even Fintech. Secondly, the other problem is founders resorting to freelancing websites to build a financial model for them which often just build the cheapest model possible. What you really want is an experienced modeller who sits down and understands your strategy and aligns with your strategy and builds on the basis of the strategy that has been agreed. Not off the shelf story but one that articulates your vision. At Finprojections, we work on both sides of the table. We sit with founders but we have that investor mindset as well.

Jeremy Au: (34:53)
The thing about discovering someone like you is that it is usually pretty late in the process already.

Sadaf Sultan: (35:01)
I agree and it really should be earlier.

Jeremy Au: (35:09)
What about the issue of cost? Like it or not, the reason why people go for financial models is to get it ready for investors and they’re looking for money or they are in need of money. How do you think about it?

Sadaf Sultan: (35:39)
We want to create a product that is form-fitted for startups at every step of the journey. As we’ve said at the initial stage, at the seed stage a startup needs a model to have investor conversations. At that point, founders are not looking for something complicated. They could even go on to our website and download a template sorted by their industry so that it is closer to what they’re doing. We also have video tutorials to guide founders how to use these templates. On the other end, we also offer advisory consultations where we come on board and help them custom build a model.

Jeremy Au: (36:59)
When talking about that, what is the best way for founders to engage someone to handle numbers?

Sadaf Sultan: (37:25)
I think the best way for them to outsource it and keep that model updated as time goes on. Retaining the same company would be beneficial because they would be used to the business and the financial model. One other thing that is needed is also a monthly feedback based on the models to know where they are underperforming.

Jeremy Au: (39:01)
So, the question now is how do I know who’s good and who’s shit. How would you test and verify?

Sadaf Sultan: (39:19)
It’s simple. Judge the quality of the questions they’re asking. Are they asking interesting follow up questions? Are their questions thought-provoking? That’s how you know you got a service provider who is paying attention to the details.

Jeremy Au: (39:47)
I agree. That’s a good dynamic. I’ll probably add two things to it. One is that they are slow maybe they have a lot of work. I think the speed is important. The other thing that jumps out is future orientation, the commercial sense. I’ve seen people build models that are high velocity, high judgement, but low commercial sense. It’s like the models are almost too heavy. They paint the company as it could be but not what needs to be done. I think that’s an interesting dynamic. What do you think about that?

Sadaf Sultan: (41:50)
Absolutely, I agree with both points, particularly that last one. How do you use the models you create for internal discussions? Investors want a lot of detail, but for a practical perspective to use that model. That is one setting where I think having two models is useful. A detailed one for investors and a simplified one for internal discussions.

Jeremy Au: (42:54)
That’s a good point and I think I share a similar bias in that a simpler model on average is better than a more complex model because if everybody doesn’t understand it the moment they open it up then it’s useless. If it’s simple and describes 80% of reality, then you can always add on more stuff.

Sadaf Sultan: (43:34)
One thing that Finprojections does to address that is that the workings of the model can be very complicated but the outputs don’t have to be. So, the outputs typically come in the form of financial statements. Now, how can you take those outputs and make them even easier to understand. Sometimes charts can be a great way of telling that story and pick out the right charts for each sector. Getting the crux of the story to the investor in a simple way is a great way of communicating.

Jeremy Au: (44:10)
One thing to add to that would be making sure that what the investor and the leadership team want to change should be changeable.

Sadaf Sultan: (44:39)
Absolutely. That’s where I think the model organisation also makes sense. Some of the models we see are just well built, but the assumptions are all over the place and it’s hard to see where things are. And simplicity helps not just the organisation but also for investor audits.

Jeremy Au: (45:12)
It reminds me that now a lot of founders are presenting to me after 20 minutes and asking “Am I running a good business?” I don’t know because I can only evaluate two things. What is the actual business multiplied by how well you communicate the reality of this business. If I’m struggling with how well you communicate the reality of this business and I give you feedback about that, that doesn’t mean I’m talking about the reality of your business. If you’ve got a great deck which explains your business then I can talk about the business.

Sadaf Sultan: (46:05)
Absolutely. Even before you build a model, it’s important to craft that story very clearly. A lot of times founders have a B2B and a B2C which they’re driving at the same time. As an operator, it’s impossible to drive two businesses at the same time. Essentially it becomes a defensive conversation about the fundamental strategies instead of an elevated one.

Jeremy Au: (47:08)
At the end of the day, for VC’s, out of 200 investments, they make one. It’s a judgement dynamic and now that I’m older, I’m more understanding. It used to be more adversarial trying to convince someone how I saw the world. It isn’t great because every VC is thinking how much they want to work with you as much as you are thinking how much you want to work with them. In parallel, it also lowered my ability to search for VC’s who wanted to work with me on the business because the conversation didn’t go that way. Just a thought. How do you think about it?

Sadaf Sultan: (48:38)
Absolutely. I think that tone is really important. It’s good to see founders with conviction. If they don’t believe in what they’re doing then who else would. What becomes an issue is when you’re trying to address issues and they’re being ignored and that raises some red flags as to whether or not this is a person who takes feedback well. It’s a balance between having conviction and trying to answer questions to the best of your ability.

Jeremy Au: (49:44)
At the end of the day, it’s in good faith. The founders are doing such a hard job of bringing the future into the present. If you ask me what’s the speed of gravity, I can Google that. If you ask me if this business will grow 10x in the next few years, it’s not a yes or no answer which creates a more open discussion.

Sadaf Sultan: (50:30)
Absolutely. It’s also crucial to what degree are founders willing to brainstorm ideas and entertain possibilities. You also need flexible investors. It’s important to clarify what that dynamic is going to be.

Jeremy Au: (51:25)
That is important because at the end of the day, that’s how VC’s are hiring founders by putting capital. The truth is founders are also hiring VC’s. You should pick someone you like working with for the long haul. Wrapping things up here, could you tell us about a time you have been BRAVE?

Sadaf Sultan: (51:58)
I love that question, Jeremy. We talked so much about financial models which I love, but didn’t get to share too much about my personal story. I grew up in Bangladesh and spent most of my formative career years in the United States. About 5 years ago, I decided to take a break from investing and move back to Bangladesh and work professionally there. It was an interesting transition in my career and spurred by the need to be an operator as opposed to an investor. I worked with a social enterprise launching social initiatives in the country. I think I’ve learnt a lot more from that experience of what it is to invest and that’s something I’m so glad that I was brave enough to do and something I’d advise investors to do sometime, to sit in the operator seat because it creates a tremendous amount of empathy and the challenges they face day by day despite overwhelming odds. Now, as an investor, I am much more empathetic and understanding of the founder’s needs and how they want to be guided and want to be mentored. That’s something I’m glad I was brave enough to do.

Jeremy Au: (53:30)
Amazing. When you think about that. Why is it important for you that this is your moment of bravery?

Sadaf Sultan: (53:39)
It was important because up to that point, I had a very one-track mindset to my career. Do three years of investment banking and then I’m going to go to the buy side and that’s where I’m going to be the rest of my life until I make partner. That was cognitive dissonance for me to leave and join a social enterprise, but if I didn’t then I would be locked into a very traditional way of thinking, but I wanted to experience something different and explore a broader world. Sometimes, in your career, I think you need to pursue what is right instead of what everyone else wants you to do. Often times, you find rewards by taking risk which requires bravery to do so.

Jeremy Au: (54:52)
Thank you so much, Sadaf, for sharing. I’d love to wrap things up by paraphrasing the three big themes that I heard from you. The first is, thank you so much for talking about your domain of expertise of financial models; how founders should be thinking about financial modelling, financial tradeoffs, the dynamics of one story versus another story, I think that was really sound advice. The second thing I really enjoyed was the deeper subtext around the conversation between the founders, the VC, the leadership team, how they operate, how they behave, how to present reality and how to think about the future. That was a great conversation not just in content, but in terms of frank tone. And, thirdly, I appreciate you sharing about your personal story about what Bangladesh means to you as home and a place that you love, and you building your set of assistance for other founders in Southeast Asia.

Sadaf Sultan: (56:00)
That was a wonderful summary. It was a real pleasure to speak to you, Jeremy, and really excited to roll out interesting products and services for founders. Hope it will value add for them.

Jeremy Au: (56:14)
Awesome. If they want to find you, where should they go?

Sadaf Sultan: (56:17)
You can just look me up on LinkedIn under the name of Sadaf Sultan or contact me through

Jeremy Au: (56:24)
Thank you.

Sadaf Sultan: (56:25)
Thank you so much.