EF - 3. lecture - Financial planning

This session covers financial planning fundamentals for startups, including the guest lecture by Ben Bowens (co-founder of Aristotle) on bootstrapping and fundraising, and the theoretical framework from Prof. Tristan De Blick on building a startup financial plan.

Part 1 - Guest lecture: Ben Bowens (Aristotle)

Background

Ben studied business economics at Ghent University and then did a master’s in finance at UAntwerp. During his master’s he started his first venture - a dine-and-dance event company - which sparked his interest in entrepreneurship. He then did a second master in innovation and entrepreneurship at Vlerick (Leuven), specifically to find co-founders with complementary skill sets and a shared entrepreneurial mindset. There he met Louis, his eventual co-founder. Their first startup together was Homely - aimed at making homeownership affordable for young professionals (the upfront cost of ~€60K is a major barrier in Belgium). They quit after ~10 months because the Belgian legal and tech system made it unviable. They then pivoted to Aristotle - initially a B2C AI tutor for statistics students, later pivoted to a B2B lifelong learning platform for companies. Current status: 5 pilot projects running at 5 companies, ~€750K in funding raised, team of 4-5 people.

Bootstrapping phase

Bootstrapping means not raising any money and not spending any money - you just work on validating the problem as fast as possible. Key priorities during bootstrapping:

• Bring a product to market as fast as possible (today tools like Lovable let you build an MVP in hours)
• Get it in front of end users immediately - collect real feedback, not hypotheses
• Talk to as many potential users as possible
• What gets cut:
  • Paid marketing (Ben went to campuses, put up flyers, made DIY TikTok posts)
  • Office space (worked from home for about a year)
  • Incorporation (delayed to avoid fixed overhead costs) Why delay incorporation - in Belgium, starting a company costs roughly €8K/year just in fixed overhead (notary ~€1.5K, accountant setup ~€1K, annual accounting ~€4K, social security contributions). If you incorporate and then fail, closing down costs another ~€4K. So you want to validate first. Their validation target was 250 users on the MVP during the December exam period. They hit it, which gave them the signal to proceed.

The decision: organic vs funded growth

After validating with 250 users, they had to decide whether to grow organically (self-funded) or raise money. Reasons they chose to raise:

• Talent gap - with only 2 people, you can’t compete against teams of 100, and you can’t challenge each other’s thinking in specialized areas. They hired one more finance person (to challenge Ben) and one more technical person (to challenge Louis)
• Runway needs - they needed to cover AWS servers (~€2K/month), wages (very expensive in Belgium), and personal living costs
• Market timing - the pace of AI development means your window of opportunity is shrinking fast. Stories of startups being wiped out by OpenAI/ChatGPT overnight are common
• Risk tolerance - raising money locks you in. You’re playing with other people’s money who want a return within ~10 years (typical VC exit horizon). You need to be comfortable with that pressure

Funding options overview

Equity

• Friends, Family & Fans (€10-100K, ~10% dilution)
  • 10% dilution means that the founder has to give up 10% of the company’s value to raise capital (dilutive funding is about getting share on the value of the company)
• Business Angels (€50-250K, ~15-20% dilution) - ex-entrepreneurs with capital, not regulated, more flexible
• Venture Capital (€100K-5M, ~20% dilution) - focus on early-stage startups
• Strategic Investors - companies active in your sector, more aligned with your vision, longer-term view
• Private Equity / Institutional Investors - for later stages

Debt

• PMV (Flemish investment fund) - starter-friendly, finances ~50% of project costs at a fixed rate. Requires you to fund the other 50% yourself
• Bank loans - traditional, expensive, useful once you have revenue
• Crowdfunding - two flavors:
  • Crowd equity (give investors a piece of equity - clutters cap table, investors don’t love it)
  • Crowd lending (loan with interest payback - good for B2C as it doubles as free marketing)
• Win-win loan - Flemish government program where the investment is 30% backed by the government (if company goes broke, investor gets 30% back), plus a 3.5% tax break. Great for incentivizing (= pobídnout) parents or other private investors

Subsidies (non-dilutive, free money)

Available at multiple levels: city (e.g. Antwerp ~€50K for innovative companies), Flanders (VLYO, Flanders Investment & Trade), Belgium, and EU (European Horizon Fund). Super competitive and bureaucratic, but combinable.

Dilution math and stacking funding

A critical concept: each funding round dilutes your equity. If you start at 50%, then dilute 10% (FFF), 20% (BA), 20% (VC) - you can end up with very little very fast. Ben knows founders who ended up with 1% after 7-8 years of work. Rule of thumb for fundraising costs: everything you think it will cost - multiply by 3. Everything you think you will earn - divide by 3. You typically raise for 12-18 months of runway, and the raising process itself takes 6-9 months. It’s almost a full-time job.

Stacking strategy (how Aristotle does it)

The idea is to layer different funding sources on top of each other to maximize total capital while minimizing equity dilution:

1. Raise €1M in equity from investors
2. Apply for VLYO R&D subsidy (~€1M, matches 45-50% of project costs) - now you have €2M
3. Go to PMV with that €2M, get co-financing of 50% (~€2M more) - now €4M
4. Go to the bank with €4M backing, get another ~€2M loan - total €6M
5. Alternative: cloud credits (AWS gave Aristotle ~€25K with negotiations for €200K more; Google Cloud similar) Timing is critical - e.g. VLYO R&D must be applied within 6 months of your last capital round. Miss the window and the whole stack falls apart.

The VLYO innovative starter support (detailed)

• Up to €50K for validation-stage startups
• The only Belgian subsidy you cannot combine with other subsidies
• But: you can shorten the runway from the standard 12 months to 6 months (€25K at start, €25K after month 6)
• After the shortened 6-month period, you become eligible for other subsidies again
• Eligibility: first 2 years of company life
• Must apply through a partner organization (not directly)
• Success rate is competitive - many startups now applying
• Timeline for VLYO R&D: ~8 months total (start writing in September, finish December, government decides by ~April). 70 pages, ~20% success rate

Why Aristotle pivoted from B2C to B2B

Investor feedback was consistent: they loved the team but hated the B2C EdTech market in Europe. Investors see B2C as:

• Super marketing intensive (need millions of users with tens of thousands paying)
• Students are extremely price sensitive (they’d rather spend €3 on beer than on study software)
• Seasonal churn - Aristotle hit ~5,000 users and 300-400 paying in June, but everything dropped to zero when exams ended The broader pattern: most strong B2C software companies come from America where they get heavy investor backing. In Europe, B2C gets almost no backing. B2B advantages:
• More steady cash flows (year-long contracts instead of monthly payments)
• Larger deal sizes (selling to 1,000 users at a company vs. 1 student)
• Lower churn if software is good
• VCs love B2B B2B disadvantages:
• Much longer sales cycles (Ben had a meeting where the prospect said they’d start using it in January 2027 - over a year away)
• More complex sales process (multiple stakeholders: economic buyer, user buyer, technical buyer)

Strategic investor path

When VCs and BAs weren’t interested in B2C EdTech, Aristotle found a strategic investor - a family company in their sector - through a LinkedIn post. Negotiation took 9 months (December 2024 to August 2025). They negotiated a stacked investment round instead of the typical pre-seed/seed/series A path:

• Investors get 60% equity, founders keep 40% - but no further dilution ever
• KPIs are set every 6-12 months; if hit, the next tranche of investment is released
• First tranche: €100K (August). Second: €250K (January, after hitting pilot/product targets). Further tranches of €250K follow
• This frees up Ben’s time enormously - no need to fundraise every 6 months Tip: let the investor’s legal firm draft contracts, your firm reviews. Their investor paid ~€25K in legal costs, Aristotle only ~€5K.

Protecting yourself as a founder

Equity protection mechanisms

• Anti-dilution rights - if you raise at a lower valuation next round, you don’t lose equity
• Subscription rights - participate in next round at a preferential price (e.g. €1/share vs €1,000)
• Vesting schedules - typically 4 years, 25% vesting per year. Ensures founders stay committed and protects investors. Aristotle’s co-founders have mutual vesting schedules
  • vesting means that the founder gets his/her share gradually over time
  • the founder has 50% share, but gets 25% of his/her share every year (in 4 years)
  • it protects co-founders and investors, that the founder will stay commited and will not bail soon
• Good/bad leaver terms - bad leaver (e.g. fraud): bought out at ~0.1% of share value. Good leaver (e.g. serious illness): bought out at 50-70% of value. Important: negotiate these for investors too, not just founders
• Liquidation preferences - the most dangerous clause. A 2x liquidation preference means the investor gets 2x their money back before founders see anything. Participating preferences are even worse (investor gets their multiple AND a share of the remainder). Multiple rounds with liquidation preferences can leave founders with almost nothing even with a 20% stake
  • liquidation event:
    • company is sold to another company (trade sale)
    • company merges with another company
    • company shuts down and winds up
    • could also be an IPO (depends on the contract)

Key thresholds

In Belgium, if you hold less than 25% of voting rights, investors can vote you out of your own company. Ben personally knows a founder this happened to after 7 years.

Key lessons

• Start talking to investors early - build relationships, get feedback, filter incompatible investors. Don’t wait until you desperately need money (they’ll sense weakness and take more equity)
• Have the right team - compatible skill sets but same mindset and ambition. You see your co-founder more than your partner. It’s a marriage
• Subsidies first - Belgian subsidy landscape is exceptionally generous. VLYO, Flanders Investment & Trade (even €7K for trade fair booths), European Horizon, local city programs
• Stay flexible - Aristotle is on their third idea in 2.5 years. You need to be stubborn enough to keep going (90% of startups fail) but flexible enough to pivot based on market feedback
• American VCs are worth contacting - amounts that are standard Belgian raises (€200K) are peanuts for US investors, and they do invest in small European companies

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Part 2 - Financial planning theory

Why financial planning matters

Running out of cash is like a heart attack - it can kill your business instantly. A low profit margin is like cancer - it slowly kills the business. Financial planning is not just a spreadsheet exercise; it’s a strategic exercise. Investors look at financials as a credibility test - they check whether the entrepreneur understands the business deeply, and they look for mistakes.

Key questions a financial plan must answer

• What is the monthly burn rate? How long is the current runway?
• When will the venture reach EBITDA break-even? EBIT break-even?
• What is the profit potential?
• How much total cash needs to be raised, and by when?
• What are the most crucial assumptions? How do they drive financial performance?
• How can the business model be financially optimized?

The growth vs profit trade-off

Reasons to focus on profitability

• Gives degrees of freedom and leverage when raising funds
• Allows more exit opportunities
• Makes the company more sustainable in difficult times
• Proves that the economics of the business work
• Gives you more control
• You can be profitable while losing money - focus should always be on cash flow

Reasons to focus on growth

• Potential to build a highly scalable business (SaaS, pharma, etc.)
• Access to capital from investors willing to fund scaling
• First-mover advantage or winner-takes-all dynamics (network effects)
• Less sensitive to dilution
• Investors value growth

Regardless of which path you choose, focus on cash is always needed. Bills and salaries are paid in cash, not with profit.

Profit vs cash flow - key distinction

The core idea is simple: what your accounting books say you earned or spent is not the same as what actually moved through your bank account.

Revenue vs cash-in. You sell a product for €1,000 in March with 30-day payment terms. Your books record €1,000 in revenue in March, but the money doesn’t hit your bank account until April. So in March you have revenue but no cash-in. The reverse also happens - if you take out a bank loan of €50K, that’s €50K landing in your account, but it’s not revenue. You didn’t earn it, you borrowed it.

Cost vs cash-out. You buy a machine for €60K that you’ll use for 5 years. Your books don’t record a €60K cost in month one. Instead, they spread it as €1K/month in depreciation over 60 months. So every month you have a €1K “cost” on paper, but no money is actually leaving your account (you paid the €60K upfront). The reverse works too - when you repay a loan installment, money leaves your bank account, but it’s not a “cost” in accounting terms. You’re just returning borrowed money.

Profit:

• sales - variable costs - fixed costs = net profit Cash flow:
• cash inflow - cash outflow = net cash flow
• cash flow could be operational (= sales), investments (= real estate (rent), machinery) and financial (= raising capital)

Step 1 - Revenue forecast

This is the hardest part to model. Key pitfalls:

• It takes much longer to generate revenues than expected
• Generating revenues requires investment in sales and marketing
• Scalability of the sales model matters

Top-down approach

Start with the total market size, estimate market share, multiply by price. Example: 10M global users, capture X% in each region, multiply by €100/product = €45M in sales. Problem: this doesn’t tell you where the customers will actually come from. Investors see through this.

• the addresable market should be big enough
• = if we sale to X% of the market, we will make Y (but we have to estimate the X)

Bottom-up approach

Start from a database of specific leads, estimate conversion rates, model the sales cycle (how many calls, visits, man-days per sale), and work up to total revenue. This is what investors prefer because it forces you to think about the actual sales effort required. Best practice: use both approaches. Top-down gives you the upside potential; bottom-up gives you the realistic path to get there.

• this represents “effort needed to sell”

TAM, SAM, SOM

Always make a clear distinction between Total Addressable Market, Serviceable Addressable Market, and Serviceable Obtainable Market.

• TAM is everyone in the world who could theoretically buy your product. SAM is the slice of that you can actually reach given your geography, language, distribution channels, etc. SOM is the realistic portion you expect to capture in the near term given your resources, competition, and sales capacity.
• Presenting TAM looks good, but SOM is the real thing that makes the revenue

Step 2 - P&L statement (Profit & Losses)

Cost classification

Costs can be classified along two dimensions:

• Direct vs indirect: direct costs are attributable to a specific unit of product (e.g. flour for a biscuit); indirect costs are shared across products (e.g. building rent)
• Variable vs fixed: variable costs change with volume (e.g. raw materials); fixed costs stay constant regardless of volume (e.g. machine rent)

P&L structure

  Sales
- Variable costs (raw materials, variable salaries, ...)
= Gross margin
- Fixed CASH costs (salaries, rent, ...)
= EBITDA (Earnings Before Interests, Taxes, Deprecation and Amortization)
- Depreciation
= EBIT (Earnings Before Interest and Taxes)
- Interest charges
= Earnings Before Taxes
- Taxes
= Earnings After Taxes

Key cost categories for startups: personnel (biggest driver), manufacturing, marketing, third-party services (patent attorneys, lawyers, PR), and operational costs (travel, communication).

Depreciation

Assets are depreciated over their useful life. In the QualiPro case:

• Lab/R&D equipment: 5 years (60 months)
• Moulds and other capex: 3 years (36 months)
• PCs: 3 years (36 months) Monthly depreciation = purchase price / depreciation period in months.

Deprecation vs. amortization

Depreciation is for physical, tangible assets - machinery, vehicles, buildings, lab equipment. Things you can touch. The asset wears out or becomes obsolete over time, so you spread its cost over its useful life.

Amortization is for intangible assets - patents, software licenses, trademarks, goodwill from an acquisition. Things you cannot touch. Same logic: the asset has a finite useful life, so you spread its cost over that period.

Step 3 - Cash flow statement

Structure

  EBIT
+ Depreciation, amortization and non-cash expenses // because they are subtracted in the P&L as cost
= EBITDA
- Change in Net Working Capital
= Cash flow from operations
- Investments (capex)
= Free Cash Flow of the Firm (FCFF)
- Interest expenses
- Loan repayments
- Dividends
+ Capital increases (money coming in from investors)
+ Loans
= Cash flow of the period
+ Beginning cash
= Cumulative ending cash

Net working capital (NWC)

Working capital = operational current assets - operational current liabilities. Strict definition: inventories + accounts receivable - accounts payable. If NWC increases from one period to the next, the company needs more cash to grow. If it decreases, less cash is needed. The operating cycle matters: the company gets financed by suppliers (accounts payable) but needs to finance production, inventory holding, and the customer credit period (accounts receivable).

• = a cash needed for day-to-day operations
  • so if this increases over time, this means that the company needs more money for operational needs (the company has more cash tied in the operations (e.g. inventory grew, customers are taking longer to pay etc.))
  • if NWC decreases, the company is freeing cash from operations, so this gets added to the free cash flow
  • growing companies often have growing NWC, because more sales mean more inventory, more staff, more marketing spends etc.
    • that is why the company needs cash even though the P&L looks good
• = short-term financing to maintain current assets

Growth and financing need

Revenue growth implies asset growth (fixed assets + working capital), which creates a financing need. At low growth rates, internally generated cash flow may be sufficient (External Financing Needed < 0, i.e. surplus). At higher growth rates, EFN > 0 (deficit) and external financing is needed.

Step 4 - Balance sheet

The balance sheet is a snapshot (photo) at a point in time, unlike the P&L and cash flow statements which are movies over a period.

• it has to be balanced at all times (all assets are funded somehow)

ASSETS                          | EQUITY AND LIABILITIES
---                             | ---
Fixed assets:                   | Equity:
 - Intangible (brands, patents) |  - Capital
 - Tangible (land, buildings)   |  - Reserves
 - Financial                    |  - Retained earnings
                                |
Current assets:                 | Liabilities:
 - Inventories                  |  - Long-term debt
 - Accounts receivable          |  - Short-term debt
 - Cash                         |  - Accounts payable

• fixed assets = what the company owns (and is not selling as products)
  • e.g. financial assets = long-term investments in other firms, shareholdings etc.
  • they are deprecated / amortized each year, so their value decreases over time in this balance sheet
• current assets = things that the company has and expects to turn into cash within a year
  • inventories = inventory in the warehouse waiting to be sold
  • accounts receivable = money coming in from customers who didn’t pay yet
  • cash = what is actually in the bank account
• equity and liabilities = where the money for assets come from (how are the assets funded)
  • equity = what the owner’s have (money that does not need to be paid back)
    • capital = money that the shareholders originally put in to buy shares
    • reserves = earnings set aside for reserves
    • retained earnings = accumulated earnings from previous periods that stayed in the company
  • liabilities = everything that the money owes to outsiders, it needs to be paid back
    • long-term/short-term debt (payable in less than a year)
    • accounts payable = owning to suppliers but not paid yet

Total assets = Total equity + liabilities (always) (that is the balance) The ratio between equity and debt (liabilities) is very important when assessing the risk profile of the company

• if the company’s assets are 80% financed by debt, it is very risky
• but if the company’s assets are 80% financed by equity, it is very safe (important to banks for example) Break-even = EBITDA is positive

Step 5 - Burn rate and runway

Burn rate = amount of money the company spends (gross burn = total cash-out) or loses (net burn = cash-out minus cash-in) per month.

• the gross burn rate is easier to predict
• if net burn is 1M and I have 12M in the bank account, I have runway of 1 year

Runway = cash balance / net monthly burn rate = number of months of cash remaining. Key rules:

• Be careful when runway drops below 6 months
• In early seed stage, keep burn rate low - money is expensive
• Be open with investors about burn rate and runway
• Start raising money 6-9 months before flame-out
• Link fundraising events to milestones

Staged financing

Funds are released upon achieving specific milestones. Benefits:

• Investors: overcomes uncertainty, tests entrepreneurial skills, reduces information asymmetries
• Entrepreneurs: less dilution
• Both: reduces overinvestment if the project doesn’t succeed
• Milestones increase the company’s valuation over time (concept completion → prototype → first customers → significant sales → profitability), so each subsequent round is raised at a higher valuation, meaning less dilution per euro raised.

Unit economics

• Am I making money out of one unit (one customer, one product, one store)?
  • if yes, then scaling is the way to go (investors love this)
  • if no, this cannot make money at scale
• A business losing money, but having good unit economics is a good business (it is just too small and the fixed costs are crushing, but if it scales, the fixed costs will spread among many units and the business will make money)

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Part 3 - QualiPro case study

Company overview

QualiPro was a life science instrumentation spin-off from UGent and IMEC (2006). They developed ProSample 16 - a benchtop spectrophotometer for high-speed quality control of DNA, RNA and protein samples in laboratories. Key innovation: patented microfluidic ProPlates that process 16 micro-volume DNA samples in a fully automated workflow. Initial equity: €340K from Fidimec (IMEC’s seed fund). They attempted to raise €3.5M in Round 1 but failed due to insufficient investor interest. The management team then prepared a revised, more conservative plan.

Revenue model

Four revenue streams:

• Device sales: ProSample 16 at €10K/unit, ProSample 96 at €20K/unit (one-time)
• Consumables: ProPlates (single-use, recurring) - ProPlate 16 at €2/plate (44/month/device), ProPlate 96 at €8/plate (44/month/device)
• Maintenance contracts: €1K/device/year, 30% adoption rate
• Payment terms: 30 days Key insight: ProPlates as a percentage of revenue grows over time (from ~1% to ~14%) as the installed base increases. This is the classic razor/blade model - the recurring consumable revenue becomes increasingly important.

Cost structure

• Variable production costs: ProSample 16 = €5K/unit, ProSample 96 = €7K/unit, ProPlate 16 = €1/plate, ProPlate 96 = €4/plate
• Maintenance costs: 50% of maintenance revenues
• Fixed production: €5K/month (2007), dropping to €2.5K (Aug 2008), then €3.5K (2009), €9.3K (2010)
• R&D: employees (€10K/month growing to €40K in 2010) + other (€7K/month) + subcontracting (€24.5K initially, varying by year)
• SG&A: sales costs, admin, sales manager (€8.3K/month from 2008), admin employee (€3.75K/month from July 2008), CFO (€8.3K/month from 2010), other admin (~€17-21K/month with 7% annual increases)

Key financial milestones from the case

• Monthly burn rate in early phase: ~€68.5K/month (2007, no revenue)
• EBITDA break-even: May 2009
• EBIT break-even: July 2009
• Maximum cumulative cash need: ~€3.9M in April 2009

Working capital impact

The biggest cash flow challenge is working capital, particularly inventory:

• Devices manufactured in batches of 100, ordered 3 months in advance, paid upfront (manufacturer won’t give credit to a startup)
• Consumables manufactured in batches of 50,000, ordered 1 month before needed
• This creates massive cash spikes when batches are ordered (e.g. October 2008: cumulative FCF jumps from -€1.8M to -€2.6M due to ProSample 96 inventory order of €700K)

Recommended funding strategy

• Raise ~€1M at startup (gets to approximately March 2008, with milestones: working prototype, active market approach)
• Raise ~€3M in March 2008 (provides 1.5-2 years of runway)

Critical assumptions to watch

• Costs might be underestimated
• Timing of first revenues (often later than planned)
• Number of customers (market adoption)
• Price that can be charged (requires market study validation)

Business model improvement suggestion

The investment in working capital (inventory) is enormous. Better negotiations with manufacturing partners (batch sizes, payment terms, lead times) would significantly reduce cash needs.

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Part 4 - Unit economics

Why unit economics matter

Understanding the profit-making logic of your business model at the unit level tells you how much gross profit one unit generates and what the minimum efficient scale is (the number of units needed to cover fixed costs).

4-step framework

1. Determine the relevant unit of analysis - could be a customer account, a user, an operating unit (vending machine, store, seat), a transaction, a product, or infrastructure (windmill, charging station)
2. Map the unit-level revenue and cost drivers - what revenue does one unit generate? What are the variable/semi-variable costs to operate one unit?
3. Calculate contribution margin per unit = revenue per unit - variable costs per unit. Then:
   • Break-even in units = fixed costs / contribution margin per unit
   • Break-even in sales = fixed costs / contribution margin ratio, where contribution margin ratio = (sales - variable costs) / sales
4. Identify key assumptions - what are the known knowns vs unknown knowns? How can you discover them?

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Part 5 - Key takeaways and common pitfalls

5 common issues in financial planning

• Not understanding revenue drivers and leverage points
• Underestimating time to generate revenues (costs come before revenues)
• Underestimating costs (leads to cash crunches and failure)
• Lack of comparable data (VCs check industry standards)
• Top-down-only sales forecasting without a bottom-up path to those numbers

Rules for raising cash

• Rule 1: raise money before you need it
• Rule 2: it will always take longer than you think
• Start raising 6-9 months before flame-out
• Build relationships with investors and bankers now
• Link fundraising events to milestones
• Always consider a worst-case scenario

What makes a good early-stage financial plan

• Relatively simple (no endless Excel sheets)
• Realistic cost and revenue forecasts (bottom-up, not just top-down)
• Highlights key financial drivers (CAC, LTV, churn, lead times, gross margin)
• Allows easy parameter changes for sensitivity analysis
• Clearly distinguishes between cash flow and profit
• Considers business model design to lower financial needs
• Acts as a compass for strategic decisions, not just a reporting tool