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What is scenario modeling?

Decision makers usually create hypothetical scenarios of events and then analyze the various outcomes of each scenario. Doing this helps the decision maker to have an overview of the likely impact of a course of action, the potential consequences, risks or rewards of taking an action and also help to plan for contingencies.

Cap Tables & Equity
Fundraising

Abiola Seriki

December 13, 2022

In various fields such as finance, public policy, and economics, scenario modeling  is used to analyze and evaluate the potential consequences of specific actions or events. Decision makers usually create hypothetical scenarios of events and then analyze the various outcomes of each scenario. Doing this helps the decision maker to have an overview of the likely impact of a course of action, the potential consequences, risks or rewards of taking an action and also help to plan for contingencies.

In the startup world, scenario modeling  use is also prevalent. It’s quite useful for startups interested in evaluating the impact of different investment opportunities. For founders & investors, scenario modeling  tools help them view the likely impact of investment into the business thus helping them make more informed decisions. Multiple scenarios of an investment can be conducted and both the founder and the investor can be able to view and analyze the potential outcome of each scenario conducted, thereby opening the room for more effective decision-making. 

With Raise’s scenario modeling  tool, a founder can try different hypothetical situations; for example, a scenario in which an investment is accepted and another in which an investment is declined. It helps give founders a choice to select alternative solutions that are more beneficial for the company in the long run. 

  1. View the impact of a fundraising round on your shareholders

Using the data that you’ve already provided on your cap table within Raise, you are able to answer a few questions to help you see the impact of the terms of you new fundraising round on your shareholder structure. Your investment term sheet pre-provided also gives you an opportunity to see the effect of the round.

  1. Understand Dilution better

Dilution is where a shareholder’s percentage ownership in a company decreases. With the scenario modeling  tool, you are able to see what the dilution of all the current shareholders of your company looks like following an investment.

The Raise scenario modeling  helps you plan better for the future. Learn more about how to use the scenario modeling  tool in this video.