Fundraising Foundations
Startup Business Models: Explain Yours to Investors
Explain your startup business model to investors with a worksheet covering the customer, payer, pricing, revenue, delivery costs, and evidence.
What you will learn
- Separate customer, user, and payer
- Explain how revenue is earned
- Identify the assumption that needs testing next
A startup business model explains who pays, what they pay for, and what it takes to deliver that value. Investors need more than a label such as SaaS or marketplace. They need to understand the commercial exchange and which parts are already observed.
Separate four roles
The user may not be the buyer. A manager may approve a purchase while a team uses the product and a finance department pays. Write those roles explicitly. Then describe the event that creates revenue: a subscription period, a completed transaction, a project milestone, or another defined exchange.
| Role or mechanism | Question to answer | Illustrative clinic-software example |
|---|---|---|
| User | Who does the work? | Front-desk team |
| Buyer | Who decides whether to purchase? | Clinic manager |
| Payer | Whose budget funds it? | Clinic operating budget |
| Revenue event | What creates a charge? | A monthly subscription per location |
Compare models by their operating implications
| Model | Revenue mechanism | Evidence to investigate |
|---|---|---|
| Subscription | Recurring access or service | Renewals, usage, support cost, and collections |
| Usage-based | A charge for a defined unit consumed | Metering, usage patterns, and cost per unit |
| Marketplace | A fee tied to an exchange | Completed transactions, take rate, and repeat participation |
| Services | Payment for a scoped deliverable | Delivery capacity, margins, and repeat demand |
A business can combine models, but explain each stream separately. Do not count a marketplace’s total transaction value as company revenue. Do not describe an annual contract as upfront cash unless that is how the customer actually pays.
Work through one transaction
Illustrative example: a location pays $200 monthly for scheduling software. Direct hosting and support are estimated at $60 per location per month. That leaves $140 before acquisition cost and company overhead. This simplified contribution is not net profit. The next question is whether customers keep using and paying for the service long enough to support the full business.
Now tell the story in plain language: “Clinic managers buy a monthly subscription for their front-desk teams. Our initial pricing test is $200 per location. We are testing renewal and delivery cost before expanding.” The last sentence matters because it separates a test from a settled business.
Copyable business-model worksheet
User: [who uses it]
Buyer: [who authorizes the purchase]
Payer: [budget or account]
Value delivered: [job or improvement]
Chargeable unit: [seat / location / transaction / project]
Price and payment timing: [amount + terms]
Direct delivery costs: [items + evidence]
Observed purchases and renewals: [dated facts]
Largest commercial assumption: [hypothesis]
Next test: [action + owner + date]Ask someone outside the company to explain how you make money using only the worksheet. If they cannot distinguish the user from the payer, or bookings from cash, simplify the explanation.
Further reading: Sequoia’s business-plan guidance.
Put the lesson to work
Use the completed worksheet to connect your product story with the assumptions in your financial model. Explore Finta Academy.
A Finta Field Guide based on our Fundraising Academy teaching. Worksheets and fictional examples are original educational exercises, not customer results or personalized financial, legal, or tax advice.