Anthony Nassar, Founder & Principal, Venture
In This Issue
Happy New Year! I hope that you’ve enjoyed the
holiday break and that 2006 is off to a great start.
In this issue, I will review a powerful new
planning software called Alight Planning, and share my
notes on an event I attended last week during which 3
VCs discussed their 2006 investment predictions.
Finally, I am giving you my 10 picks from recent
posts in the blogosphere to kick start the year. I am
interested in your feedback: please e-mail me to let
me know if you find these picks useful, and if I
should produce them on a regular basis.
All the best for a very successful 2006.
Founder & Principal
Venture Momentum, Inc.
Last month I attended a 2-day training bootcamp for a
new planning software called
Planning. This product offers a methodology,
features and analytics that set it apart from
traditional spreadsheet-based planning. Most of all,
its architecture and tools allow a user to develop and
compare multiple scenarios, monitor key measures, and
analyze which variables most significantly impact the
results of a plan. In this article, I’ll briefly
discuss what makes Alight a compelling financial
planning solution for entrepreneurs and investors
- Building Financial Models Using Stages
Alight is fundamentally based on this powerful
methodology, which enables you to think about each
stage of your company and build a model for a
typical period in that stage. For a start-up, these
stages could be product development, product launch,
breakeven, growth and maturity.
This approach is important because it drives you
to focus on the input assumptions and metrics of
each stage, and what you’d want them to look like in
abstraction of other stages. In other words, the
results of each stage are intentionally generated,
rather than influenced by a “fill-right” operation
in a spreadsheet. For each stage that you define and
build, Alight will generate a standalone snapshot
that includes all financial and non-financial data,
as well as a P&L and Balance Sheet.
You can view an illustration of
marketing expenses displayed by stage using an
Alight demo of a software company.
- Time Periods and Scenarios
You’re probably wondering at this point: so what
do I do with all these disconnected stages?
Obviously the purpose is to create a continuous
model over the planning horizon. Alight allows you
to assign each time period to a stage
with literally a click of a mouse. For instance, you
can assign periods 1 to 12 to the development stage,
periods 13 to 22 to the launch stage, etc., and
smooth the data points between time periods in many
different ways using spread functions. You have now
created a plan Scenario. A “slow start”
scenario may consist in delaying product launch by,
say, 5 months, while a “fast start” scenario could
result from shortening product development by, say,
2 months. You can produce as many as 100
scenarios and use Alight to analyze the impact of
each scenario on your financial statements, cash
flow and funding requirements.
This functionality provides you with a definite
advantage in gaining an in-depth understanding of
your model and the impact of changes to your
assumptions on the plan. And it can be achieved with
great speed and ease for multiple scenarios.
- Key Measures
Alight lets you see, in one place, important
metrics called key measures from the P&L
(such as sales, gross margin, EBITDA, etc…), Balance
Sheet (cash, accounts receivable, working capital,
ratios, etc…), and other financial and non-financial
variables such as customer acquisition cost, revenue
per employee, consulting hours, conversion rates,
etc. Key measures can be viewed in stages or time
periods. And you can add or remove variables from
the report as needed. You also have the ability to
modify variables that are input assumptions to the
model on the fly directly in the report. It’s like
having an integrated dashboard for your financial
plan that you can operate and customize.
Key Measures illustration
- Sensitivity Analysis
You can pick any line item in the P&L or Balance
Sheet, and Alight will instantaneously show you a
list of all the variables that have the greatest
dollar impact on this line item for a percent change
and a dollar threshold that you set. For example,
you’ll see the variables that impact Profit After
Tax in month 25 by $1,000 or more, with Unit
Software Licenses having the greatest impact of
$28,862 for a 10% increase in units. The ability to
perform an in-depth analysis of the sensitivity of
the model so quickly is a very powerful feature of
The analysis module also includes a goal seek
function which computes the value of an impact
variable achieving a certain goal, such as
Impact Analysis illustration
- Objects Defined with Units, Rates and Amounts
An important characteristic of the Alight
framework is that each variable is defined using
units, rates and amounts (URA). For example,
Consulting Revenues (amount) = Consulting Hours
(unit) x Consulting Hourly Rate (rate). And units or
rates for one variable can be chain-linked by
formulas to other variables. While this architecture
requires some discipline, it allows for more robust
modeling through systematic linking of variables.
As variables are defined, they automatically
become standalone objects
that are referred to throughout the
model by their names instead of cell formulas.
Complex formula structures in Alight, such as cross
time period relationships and accumulations, are
especially useful when modeling deferred revenues,
bonuses or sales commission accruals.
line item structure with URA
- Built-in Financial Statements Structures
As you start entering revenue and expense data in
a blank file, the balance sheet is updated
automatically because the financial statements
structures are built-in the software. You can
certainly develop complex relationships for balance
sheet items (prepaid expenses, accrued expenses,
deferred revenues, etc….), but the integrity of the
structure between the P&L and the Balance Sheet is
already there. If you’ve ever had to wrestle with
broken structures in the financial statements, I’m
sure you’ll appreciate the usefulness of this
- Integration of Actuals
Whether you’re developing a long range plan, an
operating plan or a rolling forecast, the
integration of plan data with actuals is critical.
Alight is currently in Beta for version 3.0, which
provides integration of actuals and accounting
architectures from general ledger systems. In
addition, units, rates and amounts are being
extended to actual data, providing the means to
perform insightful analyses of operating results.
Starting a plan in a blank file is intimidating,
regardless of the tool used. Alight offers profiles
for a number of industries (software, life sciences,
retail, consulting, advertising, financial, legal,
etc.) to help you get started with the proper
format, which you can then adjust or fine-tune to
suit your needs.
- Training & Help
The product is delivered with 2 hours of
professionally produced video training. What I like
most about Alight’s help module is its contextual
feature which allows you, by clicking on a question
mark or a film icon, to launch a help screen or a
video sequence covering the functions you’re working
A free reader version will be available soon to
enable sharing of a file with individuals who do not
have a paid license of the software. The reader is
fully functional except that changes made to a file
cannot be saved. The reader facilitates
collaboration between various parties involved in
developing, analyzing and evaluating a plan.
In summary, Alight offers a compelling approach to
planning, with a solid framework and powerful analysis
tools. Alight comes in 3 flavors including single and
multi-user, and is offered as a perpetual license or
on a subscription basis. If you’re interested in a
demonstration, please let me know and I’ll be happy to
arrange one for you. For more details about the
product, please visit
Interested in some 2006 predictions? Here’s a summary
of an SVASE event
I attended last Thursday in Palo Alto, CA, during
which 3 VCs discussed their views on what’s hot in
2006 with a focus on IT. The speakers were
Susan Mason of
Onset Ventures, Warren
Fisher Jurvetson, and
Barry Eggers of
Venture Partners, with Ed Lambert of
Susan emphasized investments in companies with
long-term standalone capability. Start-ups that just
have a feature product, and which are seeking flip
acquisition deals by major players should bootstrap.
She highlighted opportunities in the mobility space
including partnerships with wireless carriers. She
also pointed out increasing capital efficiencies being
achieved by entrepreneurs through open source and
offshoring. Customer acquisition costs have also been
lowered considerably thanks to online search
Barry outlined several areas that are attractive
for VC investments:
- Enterprise Datacenter Infrastructure covering
computing, networking, storage and security. For
example, we’re seeing low cost standard platforms
replacing proprietary systems, which is drastically
changing the cost dynamics of enterprises. In
general, this area is undergoing significant change
and consolidation, thus presenting a huge
- Enterprise Automation focusing on areas such as
compliance. CEOs will invest in solutions that keep
them out of trouble.
- Internet 2.0
- Digital Media. These are consumer solutions
aimed at enhancing currently existing devices by
providing software or semiconductor components for
them to reduce costs or help those devices perform
- Emerging technologies involving products with
high technology risk.
- Communications are still alive, especially at
the enterprise level where communications problems
continue to exist and application performance
enhancements are needed.
Warren discussed a number of potentially hot
- Voice over IP
- Web 2.0 (RSS, social networking, consumer
collaboration on the internet, etc.).
- Location-based services involving cell phones,
enhanced GPS, local search, social search and
- Clean tech, novel coal technologies, water
power, wind power, etc.
- Novel process technologies involving
nanotechnology, high density chips, materials
manipulation, and next generation materials
Don’t go chasing a hot area just because it’s hot
or hyped. The field may be crowded by too many players
competing in the same space. Differentiation and
business models are key.
Here are my 10 picks from recent blog posts. There
is no scientific methodology to the selection process.
Just a short list of posts I found informative and
often enlightening. Please let me have your feedback.
At Venture Momentum, Inc., we work with start-up
entrepreneurs who wrestle with finance and accounting.
We help you put together the pieces of your financial
puzzle by providing a solid foundation from which to
successfully raise capital, manage growth and achieve
liquidity. To learn more, give me a call at
1.415.897.0195 or visit
Disclaimer: The information in the e-zine (the
"Information") is current as of the date of the issue shown at the
top of the e-zine. The Information is intended solely to
illustrate general concepts and guidelines on various business
subjects. It may not apply to specific situations. The Information
does not constitute accounting, financial, tax, legal or other
professional advice. You are urged to consult with a qualified
professional who can understand your specific situation and advise
you accordingly. No Information creates a warranty. All
Information and links to other websites are provided on an ‘as-is’
basis without any warranties, express or implied, including
warranties of merchantability or fitness for a particular purpose.
In no event shall Venture Momentum, Inc., its authors, publishers,
contributors and editors be liable for any indirect, incidental,
special, consequential, or punitive damages of any kind whatsoever
arising out of your use of this e-zine, the Information, and/or
links to other websites regardless of the cause of action.
Copyright ©2006 Venture Momentum, Inc. All
All marks are the property of their respective owners.