Financial model glossary: seed deck and model terms, each worked on one sample company

Building the model

Where the numbers come from, before any statement is drawn.

Three-statement model

A model whose income statement, cash flow statement and balance sheet are linked by formulas, so changing one input moves all three. A seed model usually runs three to five years, month by month.

Hearthfold's model runs 60 months on three statements. See the first draft's simpler three-year model, live on the home page.

Assumptions tab

The one tab that holds every typed input: prices, start months, salaries, rates. Every other cell is a formula that points back to it, so one change updates every statement.

The live model's assumptions include cost of revenue at 24% and $3,500,000 of equity at the start of Year 1. See the live model on the home page.

Driver

An input that produces an output by arithmetic, such as customers, price or usage. Investors argue with drivers, which you can defend, rather than with totals, which you cannot.

Hearthfold charges $12 per active caregiver a month; each caregiver works 16 shifts a month, and 7% of them open up. See Revenue drivers, seed deck guide.

Revenue build

Revenue worked out from its drivers, customers × price × usage, month by month, instead of typed in or grown by a fixed percentage.

Hearthfold, January 2027: 979 caregivers × $12 = $11,748 of subscription, one of three lines that make $18,918.20 for the month. See Revenue build, startup model guide.

Monthly model

A model that works month by month instead of year by year. Customers join through the year and burn rises as hires start, so the month cash runs out is visible.

Hearthfold's first draft billed each year's closing agencies for all twelve months, so Year 1 revenue read $1,647,072. Month by month it is $0.74M. See the first draft, live on the home page.

Hiring plan

Every planned role with its start month and cost, feeding the cost lines. When the team slide and the costs read from one list, they cannot disagree.

16 funded hires take Hearthfold from 6 to 22 people by Aug 2028. See Headcount, seed deck guide.

On-costs

What a hire costs on top of salary, such as payroll taxes and benefits. Models usually add them as a percentage of salary.

Hearthfold pays from $80,000 in customer success to $140,000 in engineering, plus 20% on-costs. See Costs from headcount up, startup model guide.

The three statements

Each statement line by line, and the balances that connect them.

Income statement

Revenue, less the cost of serving customers, operating costs, depreciation and tax, for one period. It shows profit or loss, not cash. Also called the P&L.

Hearthfold, 2027: $0.74M of revenue against $2.1M of operating costs. See Income statement, startup model guide.

Cost of revenue

What it costs to deliver the product to paying customers: hosting, payment processing, and the staff who onboard and support them. Sales and marketing are not part of it.

The live model uses one rate, 24% of revenue. See the live model on the home page.

Gross profit

Revenue less cost of revenue. It pays for the team, sales and everything else, and it is the right base for payback, because only gross profit can repay what a customer cost to win.

Hearthfold, 2027: $0.74M of revenue less $0.26M of cost of revenue leaves $0.48M. See the 2027 income statement, startup model guide.

Gross margin

Gross profit as a percentage of revenue. The deck and the model should quote the same margin for the same period.

Hearthfold's first-draft deck said 81%; its model used 76%. The rebuilt deck quotes the model. See how the Hearthfold sample was made.

Operating costs

The costs of running the company outside cost of revenue: product and engineering, sales and marketing, and general and administrative. At seed, most of it is payroll.

Hearthfold, 2027: $1.0M of product and engineering, $0.59M of sales and marketing and $0.47M of G&A, $2.1M in all. See the 2027 cost build, startup model guide.

EBITDA

Earnings before interest, tax, depreciation and amortization: gross profit less operating costs. It shows whether the business covers its running costs.

Hearthfold's EBITDA turns positive in Apr 2030. See Hearthfold slide 11.

Net income

What is left after every cost, including depreciation and tax. Below zero it is a net loss, which is normal at seed; investors read its direction more than its size.

Hearthfold: −$1.6M in 2027, −$2.0M in 2028 and −$1.5M in 2029, a smaller loss in 2029 even as the team grows. See the direction of the loss, startup model guide.

Cash flow statement

Starts from net income, adds back costs that use no cash, adjusts for money owed to and by the company, and adds equity raised. It shows how cash actually moved.

Hearthfold, 2027: net income of −$1.6M, yet cash ends the year at $2.1M, because the $3.5M seed lands in Jan 2027. See Cash flow, startup model guide.

Balance sheet

What the company owns, such as cash and receivables, against what it owes and what belongs to shareholders, on one date. The two sides must be equal.

Hearthfold's balance check reads 0.00 on all 61 month-end balance sheets. See Balance sheet and the check, startup model guide.

Receivables

Money customers owe for work already billed. Revenue counts when it is earned and cash when it is paid, so a rise in receivables uses cash.

The live model holds one month of revenue: $137,256 at the end of Year 1. See the balance sheet in the live model.

Paid-in capital

The money shareholders have put into the company. With the accumulated deficit, it makes up equity on the balance sheet.

Hearthfold's $1.0M pre-seed and $3.5M seed make $4,500,000 paid in. See the December 2027 balance sheet, startup model guide.

Accumulated deficit

Every loss to date, added up, which reduces equity. Many models, including the live one on the home page, label the line retained earnings, the name it takes once profits outweigh losses.

Hearthfold, December 2027: equity is $4,500,000 paid in less a ($2,340,919) deficit, or $2,159,081. See equity at the end of 2027, startup model guide.

Cash and the raise

How long the money lasts, and what it has to buy.

Burn

The cash that leaves the bank in a month after customers pay you, also called net burn. Take it from the cash flow statement, not the income statement.

Hearthfold's net burn averages $156k a month over the first 20 months. See monthly burn from the cash flow, startup model guide.

Runway

How many months the cash lasts at the planned burn. Read it from the first month the model's cash falls below zero, not from one average.

With no Series A, Hearthfold's cash crosses zero at month 23.3, in Dec 2028, so the deck says 23 months. See Runway, seed deck guide.

Cash low point

The lowest month-end cash in the plan. In a seed plan it usually falls just before the next round is expected, which is when a late round would hurt most.

Hearthfold's cash bottoms at $0.64M in Aug 2028, the month it meets its Series A gate. See Hearthfold slide 14.

The ask

The amount you are raising, the months it lasts and the milestone it reaches, in one line. I put it on slide 2, so every slide after it reads as evidence for one plan.

Hearthfold: $3.5M takes it from 11 pilot agencies to the $3.0M ARR Series A gate by Aug 2028. See Hearthfold slide 20.

Use of funds

How the raise splits across the work it pays for, each line tied to what it buys. The lines should add up to the raise.

Hearthfold: 40% to product and engineering, 33% to sales and marketing, 19% to G&A and 8% to implementation and support. See Use of funds, seed deck guide.

Milestone

The result the raise must reach before the next round, written as a number the model produces, such as ARR or a customer count, with the month you reach it.

Hearthfold's Series A gate is $3.0M of ARR and 150 agencies; the plan reaches $3.03M and 163 agencies in Aug 2028. See Hearthfold slide 16.

Customers and unit economics

What one customer is worth, what it costs to win, and how many there are to win.

Unit economics

What one customer brings in and costs, before the company's fixed costs: revenue, gross profit, the cost to win them and the months they take to repay it.

A Hearthfold agency brings in $1,806 a month at 76% gross margin: $1,378 of gross profit. See Unit economics, pre-seed deck guide.

ARR

Annual recurring revenue: one month's recurring revenue times 12. It leaves out one-off fees, so it shows the size of the subscription business on a given date.

Hearthfold counts subscription and filled-shift fees and leaves out onboarding fees; its ARR reaches $3.03M in Aug 2028. See Hearthfold slide 2.

ARPA

Average revenue per account: revenue in a period divided by paying customers, usually per month. It turns a customer count into revenue.

Hearthfold's average agency pays $1,806 a month in Dec 2028. See Unit economics, seed deck guide.

Churn

The share of customers who leave in a period. Logo churn counts customers; revenue churn counts the money they took with them.

Hearthfold assumes 1.0% logo churn a month. See Hearthfold slide 12.

Customer acquisition cost

Sales and marketing spend in a period divided by the customers won in it. Say which year your deck quotes.

Hearthfold's 2028 sales and marketing, spread over 157 new agencies, comes to $11,292 each, shown as $11.3k. See Hearthfold slide 10.

Payback

The months of gross profit needed to repay what a customer cost to win: acquisition cost divided by monthly gross profit per customer. Use gross profit, not revenue.

$11,292 ÷ $1,378 = 8.2 months for a Hearthfold agency. See the payback sum, seed deck guide.

LTV

Lifetime value: the gross profit one customer brings in over a stated period. Name the period, and compare LTV with acquisition cost only on the same gross-profit basis.

Hearthfold states five years: $62k per agency, 5.5x its acquisition cost. See the tiles on Hearthfold slide 10.

Bottom-up market size

A market counted from the customers you could sell to, times what each pays in a year, rather than an industry total. The share your plan needs is then a number investors can test.

16,400 agencies × 95 caregivers × $19.32 × 12 = $361M a year. See Hearthfold slide 8.

Checking the numbers

How to tell whether a model holds up before an investor tests it.

Tie-out

The check that the deck and the three statements describe one company: every number on a slide matches its cell, and the balance check reads 0.00 in every period.

The footnote on Hearthfold's slide 11 says the statements reconcile in all 60 months. See Tie-out, seed deck guide.

Balance check

One row at the foot of the balance sheet: total assets minus liabilities and equity. It should read 0.00 in every period, at every input you can type.

The live model reads 0.00 at every price on its slider. See the live model on the home page.

Typed-over cell

A formula replaced by a typed number. It balances while the inputs stay the same and breaks when one changes, which is exactly what an investor does in a meeting.

In the live model, Year 3 receivables typed in as $850,626 balance only at $1,806 a month. See the switch in the live model.

Sensitivity

The model run again at other values of one or two inputs, to show which inputs move the cash most and where the plan stops being funded.

Hearthfold runs 25 cases of price against closes per seller; the seed reaches the Series A gate before cash runs out in 18 of them. See Hearthfold slide 13.

Have your own numbers checked

Knowing the words is the start. The harder part is whether your deck and your model use them the same way, with the same numbers.