May 2024#Cases

Behind the $500k Raise:Crafting Financial Modeling that Transformed Social Trading & iGaming

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Authors

Ekaterina Ivovich

Director, Strategy

Alexey Sidorowich

Partner

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4 min

 

Challenge and Scope

A client approached us with a clear objective: they needed BDC's assistance in crafting an investor-ready financial model. 

Their platform represented a pioneering concept that catered to the interests of crypto enthusiasts and gamblers by introducing a social function-driven approach. Gamified trading topped with gambling calls for a niche shift, blending transparency and excitement to forge an entirely new gaming experience.

Recognizing the value of outsourcing tasks requiring specialized expertise, the project's founder entrusted us, drawn by our proven financial modeling approach and deep knowledge of iGaming.

Client Profile: a prediction gaming and social trading platform boasting a unique product and innovative game mechanics.

As the project neared completion and prepared for market testing, the focus shifted towards attracting business angels. Crafting a robust financial model for the business became imperative, alongside compiling a comprehensive presentation to showcase the venture to potential investors.

Challenges and Solutions

The primary challenge was that the project's gaming mechanics were both new and ambiguous. The profit component of the financial model is based on certain coefficients such as conversion, retention rate, and investment percentage, but a brand-new gaming concept did not provide us with any relevant references. To present actual data, we needed to undertake research and assemble experts from a variety of key fields.

Since there were no analog projects, we used our expertise in iGaming as a basis for planning, and also closely studied Rollbit and 30 other relevant companies, along with their fee structures, since one of the client’s game modes coincided with theirs.

Results

Along with the universal foundation, we created three financial modeling scenarios depending on the three amounts the client aimed to raise. We also prepared an additional simplified pitch deck.

According to our client, even before the investment round, we surpassed their expectations. Following the conclusion of the investment campaign, which resulted in a $500k angel round, the project engaged us to oversee their community management requirements.

We initiated the work process by assembling a model framework (P&L), grounded on assumptions and our expertise, to initiate discussions with the owner. The model encompassed:

  • Income calculations predicated on investments to attract the initial players. This entailed budget allocations for affiliate marketing (CPA, RevShare, Hybrid), media buying, and SEO.
  • Anticipation of a product funnel with conversions from traffic to the first deposit (FTD), along with projections for player retention rates and the accrual of regular customers (Deposits).
  • The expense segment comprehensively considered all team-related data and other operational expenses to ultimately determine investment burden, operational costs, and return on investment (ROI). This facilitated the calculation of optimal terms for collaboration between the owner and the investor.

As a result of our collaboration, the client expressed satisfaction, having secured the required funding amount. They subsequently assigned us the new task of community management.

The Importance of Financial Modeling

In our practice, we've observed numerous projects encounter scalability challenges, often stemming from a lack of clearly defined financial objectives. However, with a well-structured financial model, companies gain invaluable insights into their operations, facilitating informed decisions ranging from staffing requirements to marketing allocations. 

Whether fundraising is on the horizon or not, leveraging financial modeling empowers businesses to proactively strategize, establish KPIs, mitigate risks, and foster sustainable growth.

Despite the instability prevailing in the world and the continuous flux of changes, it is imperative to consider the financial model at the outset of any project, irrespective of its scale. Such consideration offers several benefits:

  • Assessing Idea Potential and Investment Needs. Financial models illuminate the potential of an idea and the requisite investment amount, facilitating comprehensive investment analysis by evaluating returns, risks, and feasibility.
  • Setting Digital Goals. Financial models aid in establishing digital objectives for the team.
  • Forecasting and Planning. By projecting future financial performance, financial modeling enables businesses to plan for growth effectively.
  • Evaluating Business Performance. Financial models allow for the measurement and assessment of actual financial performance against projected or historical data, thereby identifying areas for improvement.
  • Strategic Planning. Financial models play a pivotal role in strategic decision-making by evaluating the financial ramifications of diverse strategies, market conditions, and competitive factors.
  • Enhancing Stakeholder Communication. Financial models serve as a clear and concise means of communicating financial information and insights to stakeholders, including investors, management, and lenders, thereby averting misunderstandings between partners.
  • Risk Assessment. Through the incorporation of sensitivity analysis and scenario testing, financial modeling aids in identifying and assessing potential risks and uncertainties associated with various business decisions, facilitating preparedness for diverse development scenarios.
  • Data-Driven Decision-Making. Financial modeling furnishes a quantitative framework for making informed decisions by evaluating the financial implications of different scenarios and alternatives, thereby fostering an overall data-driven decision-making process.

Book us for financial model set-up, and we will help you gain business clarity through numbers in the shortest timeframe possible.

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