Last reviewed October 7, 2026 · By the NYBACS advisory team
Short answer
Before fundraising, a founder should have accrual-basis books closed monthly for at least the last 12 months, financial statements that reconcile to the bank, a driver-based forecast whose assumptions trace back to actual results, key metrics that reconcile to the ledger, and a cap table that reflects every SAFE, note and option. Investors use these to test whether the story in the deck matches the numbers, so inconsistencies cost credibility.
Key takeaways
- Diligence teams compare the pitch deck, the model, the financial statements and the cap table; inconsistencies between them are the most common source of tough questions.
- A forecast is more credible when each assumption (conversion rate, price, churn, hiring plan) is anchored to historical data in the books.
- Revenue metrics such as ARR, MRR or GMV should reconcile to GAAP revenue and deferred revenue, with the definitions written down.
- A pro forma cap table showing how outstanding SAFEs and notes convert at the proposed round terms is usually expected in a priced round.
- For foreign founders, unfiled US returns, missing Form 5472 filings or lapsed state good standing can surface in diligence and delay closing.
What investors look for at each stage
| Stage | Typical financial expectation |
|---|---|
| Pre-seed | Clean bank-reconciled books, a simple budget, a cap table, evidence the company is in good standing |
| Seed | Monthly accrual-basis P&L and balance sheet, burn and runway, early unit metrics, 18–24 month forecast |
| Series A | GAAP-basis monthly statements, cohort and retention data, a driver-based model, prepared answers on revenue recognition |
| Series B and later | Often audited statements or audit-ready books, and sometimes a quality-of-earnings review by an outside firm |
The bar rises with the size of the check, but even early investors notice when the numbers in the deck cannot be produced from the books.
Get the historical numbers right first
A forecast is only as believable as the history it starts from. Before building any model:
- Close the books monthly on an accrual basis for at least the trailing 12 months, so revenue and expenses fall in the months they belong to.
- Reconcile every cash account to bank and payment-processor statements.
- Separate founder and company spending, and record any founder loans or contributions correctly.
- Classify expenses consistently into cost of revenue, sales and marketing, research and development, and general and administrative, so gross margin and spending ratios mean something.
- Reconcile intercompany balances if the startup has a parent or sister company abroad.
Investors frequently ask for the monthly P&L in a spreadsheet so they can recalculate margins and burn themselves.
Build a model that connects to the books
A useful fundraising model has three linked statements (income statement, balance sheet and cash flow) driven by a small set of operational assumptions: new customers, pricing, churn or retention, headcount by role and start date, and major non-payroll costs.
The test investors apply is traceability. If the model assumes a 4% monthly churn, the books and customer data should show where that figure came from. If it assumes a sales hire produces revenue after three months, past hires should support that. Show the use of funds and the runway the round buys, with the month the company would need its next raise or reach breakeven.
Keep the model's actuals tab fed directly from the monthly close, so that each new month replaces a forecast month with real figures. Investors who follow the company over several months of a raise will notice whether actuals land close to the forecast, and a model that updates cleanly makes that comparison easy to show.
Reconcile metrics and the cap table
Metrics are where pitch decks drift from the ledger. Write one-line definitions for each metric you present (what counts as ARR, how churn is measured, what "active customer" means) and keep a monthly bridge from the metric to GAAP revenue.
The cap table needs the same discipline. It should list every share issuance, option grant, SAFE, convertible note and warrant, agree to board consents and the equity accounts, and include a pro forma showing ownership after the proposed round converts outstanding instruments. Missing an advisor's grant or a small SAFE is a frequent and avoidable diligence finding.
Clear compliance issues before diligence finds them
Diligence covers more than performance. Investors and their counsel typically check:
- Federal tax returns filed for every year, including Form 5472 where the company is foreign-owned.
- State annual reports and franchise taxes paid, with the company in good standing in its state of formation and any state where it is registered.
- Payroll tax filings and contractor documentation.
- IP assignment agreements from founders, employees and contractors, including any work done before incorporation or through an overseas entity.
- For companies that moved a holding structure into the US (a "flip"), the transaction documents and tax filings.
Fixing a missed filing before the process begins is quicker and less awkward than explaining it to an investor's lawyer.
Common mistakes to avoid
- Presenting cash-basis numbers that make growth look lumpier or smoother than it was.
- Using a forecast with assumptions that cannot be traced to historical data.
- Reporting ARR or GMV figures that do not reconcile to revenue in the financial statements.
- Leaving small SAFEs, advisor grants or option exercises off the cap table.
- Discovering unfiled US tax returns or a lapsed Delaware franchise tax payment during diligence.
- Mixing founder personal spending with company expenses so burn cannot be measured cleanly.
NYBACS 360° support
How NYBACS helps
- Brings the trailing 12–24 months of books to an accrual basis with monthly closes and reconciled cash.
- Builds a three-statement, driver-based model anchored to your historical numbers, with use-of-funds and runway views.
- Writes metric definitions and a monthly bridge from ARR, MRR or GMV to GAAP revenue.
- Reconciles the cap table to board consents and equity accounts and prepares the pro forma conversion view with your counsel's inputs.
- Runs a compliance health check covering US tax returns, Form 5472, state filings and good standing before diligence starts.
Frequently Asked Questions
Do I need audited financials to raise a seed round?
Usually not. Seed investors generally rely on management accounts and their own diligence. Audit clauses become more common in priced rounds and are often triggered after the round closes rather than before it.
How far out should the forecast go?
Typically 18–36 months, with monthly detail for at least the period the round is expected to fund. Investors care most about the assumptions and the runway, not about precision in later years.
Should the model show a best case only?
It is better to show a base case and a downside case, and to identify the assumptions that move the outcome most. That makes the conversation about risks you have already thought through.
What if our books are on a different year-end from our home-country parent?
That is common and acceptable, but present investor numbers on the US entity's basis and explain any intercompany charges. Investors will also want to understand which entity owns the IP and employs the team.
