How to handle the request
Here’s how to deal with a request for financials if you get one:
Ask for a call to talk about it. Ask what their concerns are, and try to get a sense of what they really want. Do they want to know if you’ll be around? How can you help them understand that? Who needs to make the judgment? What criteria will they use? A certain amount of runway? Is this requirement actually optional and they just ask everyone?
Propose alternatives. “We’re a private company, we don’t generally share financial information. Could I have you talk to my investor instead? Are you concerned about our financial sustainability? You know we have over 25 customers, five in the Fortune 500, and expect to close 10 more this year — and we’re backed by the same VCs that backed big company X and Y.”
If they insist on financials, compress/redact them to get just to the point of whatever they’re looking for. If they’re looking for sales volume, only show that. If they want to know runway, show cash vs burn. Can you compress income and expenses to one line? Do they need it broken out for some reason? It’s really normal for financial folks to have long conversations about how much detail and what formats of information they’re going to share with each other.
Enlist your investors to help you. They are often masterful at explaining your company to their investors who are not usually knowledgeable about the particular market. Even getting them on the phone with your customer to help them feel a financial person’s excitement for the business and how they would be excited to invest more money if the customer consummated their purchase.
Find social proof. Enlist your other customers if you can to help explain why they found your product essential. Point to news articles, analysts, and other companies they may have heard of to help explain the wave you are riding. In our case with Makara, we were able to point to EMC’s purchase of VMware as a trend that illustrated how our business was riding a wave that would be around for a long time.
Explain your product’s usefulness without jargon or technical terminology in a way that sounds plausible to this purchasing person. Explaining how we were “just like Heroku but for enterprise Java apps” was lost on our customers’ purchasing departments. But teaching them how the latest Turbotax was being delivered on the web instead of in a box and how we would help that effort to scale up was something they could relate to.
The bottom line
Unfortunately few startups are in positions such as Notion, Preset, or Lattice where they have tens of millions in the bank that they don’t need and can just hand over their balance sheet and P&L statements without worrying how they might be perceived. Most are in situations where they have 6-18 months of cash in the bank, are losing money, and the income stream (in these times) is a bit unpredictable, as even stable longtime happy customers may suddenly go out of business.