Pitch Anything's Oren Klaff: From Spreadsheet to Deal Table

Speaker A: Buyers and sellers want to come together. You know, they want to come that far where they need you to run a 60 or 400 hour model. They don't want to go to meetings, they don't want to contemplate financings that have no chance of working. Buyers and sellers want it to work, so be part of that process. I would land the plane here in that the shortest path to high status is finding something wrong. People being able to trust, rely on you and wanting to have you around to provide insight is to find things that are sensitive and, you know, share some ways that they can be made to work.

Speaker B: Financial Modeler's Corner is the world's premier modeling podcast. It is brought to you by Financial Modeling Institute, the world's leading financial modeling accreditation organization. Welcome to Financial Modeler's Corner. I'm your host, Paul Barnhurst. In this podcast, we talk all about the art and science of financial modeling with distinguished guests from around the globe. The Financial Modelers Corner podcast is brought to you by the Financial Modeling Institute. FMI offers the most respected accreditations in financial modeling. And that's why I completed the advanced Financial Modeler this week. I'm thrilled to welcome to the show. Oren. Oren Klaff. Welcome to Financial Modeler's Corner.

Speaker A: I appreciate that warm welcome and uh, you know, excited to get somewhere technical instead of purely opinion rich about business.

Speaker B: So I was gonna say, do you ever think you'd be on a podcast just about financial modeling?

Speaker A: It was my dream, you know, I started as a financial modeler and uh, it's, it, it's sort of like uh, these kids who, who play video games their whole life and then their, their parents are like, my kid will amount to nothing. Then they get hired by Rockstar Games or whatever to test for a half million dollars a year. So yeah, there is, uh. I never thought modeling would go anywhere, but in fact it does.

Speaker B: Well, you'll get a laugh. Use the video game example. So I have to tell this. So 10, 15 years ago, I interviewed with one of the big gaming companies and I went through the interview and I thought the interview went well, but I wasn't quite sure. And I asked the guy, I go, are there any concerns about moving me to the next round? And at first he goes, no. Goes, just one. He goes, I don't think you're passionate enough about video games. So I joke with kids. I didn't get a job because I didn't play video games enough as a kid. Parents don't like when I say that, but every so often I kind of joke with the kids about that.

Speaker A: So that's good. That's good. Rich. Rich.

Speaker B: All right, well, let's go ahead and take a minute to have you introduce yourself to our audience, tell a little bit about your background.

Speaker A: Sure. Um, again, my name is Warren Clough. I started life in finance really as an analyst in a private equity group, not quite venture, you know, really private equity. And they didn't have really even a modeling job. But there was, you know, I was technical, I understood some of the business issues and they've small firm and they brought me on and really the spreadsheeting just fell to me. And they needed. Right when they needed numbers, when they need analysis, when they need a forward looking thing, it would just be like, who's the lowest man on the totem pole here? Make him do it. You know, the old Mikey will eat it commercials. Your, your guys are probably too young for those. But there were these commercials, uh, for For Life cereal. You know, nobody wanted to try it. And then there was a little kid and they're like, he'll eat anything. Make him do it. And so sort of like, well, Oren will do anything. He's technical, smart, give him the Excel stuff. So I started modeling, you know, bottom up.

Speaker B: Yeah. And I do remember the Mikey commercials. But I'm going to guess half our audience does not. You're right on that. So I have to go dig them up on YouTube. Love the background. I totally get it right. Often the modeling falls to the most junior person. It's interesting. You know, when you work on a deal, you bring in a qualified legal guy, you bring in a qualified auditor. A lot of these people, lawyers, they all have to have a certification. But the modeler is just the guy often who gets stuck with the task. Yet if the model's wrong, the whole deal could be a mess. It's a really interesting dichotomy.

Speaker A: Listen, uh, sort of complete. The complete, you know, the introduction. You know, I went from modeling to into deal making and from deal making, doing so many deals. You know, I got asked to write the book Pitch anything sold a million copies, you know, and it's, it's taught at every. And I think this is important for guys modeling Pitch Anything is taught at every Fortune 500 company on the sales end. And they, you know, many times they book me to speak, I go to conferences, I do a lot of stuff and they are sadly disappointed because I never sold anything. Right. Pitch Anything is from modeling is from understanding what is very likely to happen in the future. In a business case. And so if you roll this forward, I'll, uh, complete the introduction. It's taking a long time. Over the last year, year and a half, you know, I raised $50 million for a deal that I control. And all of that ties back to one thing, the ability to model. And I think that's where, you know, we should spend a few minutes, uh, you know, here talking. This is, you know, this is your subject as much as mine. But if there is anything to ascribe to that success. I enjoy storytelling. I enjoy people. I love people. But if I didn't have that modeling, that couple of years of modeling background and the heat and the pain and the 60 hours a week and having to turn in a model that everybody else tried to break and rely on, I would not be raising money today.

Speaker B: I love that. I love how you tie it all back to being able to model and what you do. It's not. People typically don't think of sales. One of the first things you don't think about is a model, but it can play a big role. Like. Like you shared. So I'm curious, when you started your career, you started modeling, became the spreadsheet, or as you put it, did you picture yourself ending up being a fund manager doing deals, you know, private equity, or did it just kind of happen as your career evolved?

Speaker A: It just happened, right? As situations came up, I think you and I talked. But my, uh, dad was a college professor. I'll repeat what I said to you. And he said, look, the only way you make any money or get any notoriety as a college professor, you know, this is before Instagram, is that, you know, Osama bin Laden, you know, his squared away in some cave, and there's some video of him, and there's some mold or lichen in the background, right? And then I was like, who knows what. What. Where that stuff grows, right? All of a sudden they're looking for college professors who are understanding, like, where. What humidity and what regions and what mountain that particular lichen. And then that guy suddenly becomes, you know, the most important person in the United States. So it's the same thing with modeling. Like, okay, now we have a big deal. Now it's moving really fast. Who understands these numbers, right? Who can look at this and give us some insight? That's the key word for me is who has insight? And if you believe insight comes from numbers, then. Then I think there's one word that matters. It's sort of the freakonomics, right? It's the freaky things about the numbers that are interesting and give the business and the decision makers and the capital holders a way to see things they can't see on their own. And I'll give you one, one visual. Every single disaster movie starts with some analyst, some, you know, spreadsheet jockey holding up a piece of paper and going, wait a second, these numbers can't be right. Whether it's science fiction, whether it's an earthquake, whether it's an asteroid, whether it's aliens, you know, whether it's a, ah, deep sea monster, you know, whatever it is, whether it's a Marvel movie, it's some analyst going, hold on a second, these numbers can't be right. And then you have a movie. And so I just got as I understood how the numbers affect affected business cases, then it just rolled down the hill to me and they go, what do you think? Can you jump in here?

Speaker B: Yeah, no, I, I hear you. So if someone's listening, we have some people early in the career and they want to get into the deal making side, you know, they want to get into the capital raising. A lot of people like, hey, that's the sexy area. I built my share of models.

Speaker A: Any advice you'd offer them a million percent. The advice comes off of signature piece of understanding is that the business, the guys who run the capital, the guys making decisions, the guys who have the entrepreneurial vision, the guys who are saying, hey, let's merge these units, let's launch this product, let's go into this Tam, Sam Som, uh, you know, new market. Their thought process is top down. They think in terms of features, benefits, value proposition and what will people pay for, right? So they think, that's how they think. If you then switch your thinking to saying that has to be built bottom up on assumptions, right? You speak the other half of the language that they are crave. Because I know you should keep the answer short. But Paul, I want to bring this table like the business unit owners that I'm talking about and I don't know if you have lingua franca, you know, a name for them, but they are the private equity guys, the venture capital guys, the business unit owners, the entrepreneurs, the guys who are dream envisioning, dreamscaping, vision boarding. They uh, think a model is something that at the end of the day, after you put the kids to bed, you know, you have a cup of tea and then you build a model. Not one of them will say, this is a 60 to 600 hour effort. They cannot do what, what you do, but they desperately need it. And they have faulty, faulty, faulty assumptions of what it takes to put a model in place. So that is your advantage, right? Which is they cannot do the work that you know how to do secondarily. They think in terms of top down. And when you can start to have a conversation and saying, hey, I modeled this and I found the key assumptions that this is sensitive to, and I've got a model that shows what's possible and what's not. All of a sudden you're in the pole position. Everybody, if you could say those words, everybody needs you.

Speaker B: I love the one you put in there. Like, right, here's the key assumption. Here's what it's sensitive to. Because if you can really focus in on what's the key driver that allows you to explore risk, which is the biggest thing you want to understand is how risky is this deal. I'm, um, proposing I pay this, and if it goes south. And so having that risk, understanding plays a huge role in what you're willing to do.

Speaker A: I'd love for people, you know, that I'm in contact with to think in terms of these movie trope, right? Where whether it's a law firm, you know, whether it's the Avengers, it, you know, uh, they're. They're like. They have this big decision, right? And then they find, you know, changing, or Chad, you know, or Paul or. Or whatever, you know, sitting 19 floors down the basement eating Snickers bars, you know, and drinking Pepsi, you know, soda, and. And that is toiling away obscurity. And then they bring that guy up and they go, you know, tell us what you see in the numbers. That movie trope, you know, if you can find a clip on that. I should have found one. That that movie trope is there for a reason, because it reflects reality.

Speaker B: Yeah. There's so many times where someone's found a number and everybody stops and listens in real life as well. I mean, all you got to think is, you know, there's different examples of NASA where someone comes, look, I found this number and we need to stop everything. And they do, because, oh, wait, we gotta, gotta spend the next six months researching what that number means, because it's not good.

Speaker A: And I think a lot of, you know, being an analyst or running models gives you the building of models. At least for me, lets me see the numbers. Kind of like the Matrix. I just see the numbers falling. Here's the magic. It lets you go into somebody else's model and see where it breaks, right? And that is a superpower. And I Think a lot of analysts use it incorrectly. So when I go to a meeting and, Paul, you can, you know, if we'll get off the reservation here, you know, jump in. But when I go to a meeting where there's a 10, 20, 50, $100 million decisions being made, right. The other side brings their analyst. Right. And we know that their analyst wants to make our numbers where the seller, for example, look bad. We know. So what I try and do, you know, is I try and reframe or, you know, make look small or, you know, disintermediate or disconnect their analyst from the situation. It's like, uh, it's not any different from a court show, you know, or a court movie where they have a witness and the prosecutor's job is to make the witness look not credible. So if you come to a meeting that I'm running and you're an analyst on the other side, I'm going to try and make you look not credible. I'm going to find out something, you know, about you. I'm going to see something you did in the meeting. I'm going to hear something you say. I'm going to try and make you irrelevant to the conversation. Because we know their analysts are going to try and make of, uh, find a problem with our numbers in order to make himself or herself look good. And number two, you know, to. To be part of the. Be part of the team and increase their status. Yeah, you really found. So when you see the problems with somebody else's model, I would avoid the temptation to do the analyst thing and saying, hey, um. Which is very high conflict. Hey, you know, we're looking at this, know, as I'm reading through it, you know, this doesn't make sense. You know, you would have to double, by the way, every single model breaks, right? As. As if you pull it apart. We could talk about where, at least in the business units and I mean, where it breaks. It always breaks on December, between December 31 and January 1. You know why I say that?

Speaker B: Why? Uh, give us the answer.

Speaker A: I mean, because it showed you have to hire 100 people, you know, overnight on December 31st in order to make 2027 work.

Speaker B: Yeah. There's always a huge hiring plan at the beginning of the year. I've seen it so many times.

Speaker A: Well, yeah, in order to. In order to increase, you know, a hundred people, you know, uh, by 150 people next year, you have to start somewhere, right? And that starts on, you know, January 31st. Wait, are you telling me you hired 17 people on Christmas and then they started working on January, like so models, you know, really break between the years because you're trying to make a year work and they break it down. Transition, you can pull these models apart. They always break. Now you have, now you have powers, right? But how you use those powers get into how you transition from you. You want to be someone on their side that I want to hire into my company because of the way you comported yourself, poise, grace, style, and the way you introduce these imbalances right. In the model. And I want to be able to, you know, you want to, you want to be. It's very tough to move up infirm, right? I think the way most analysts, you know, increase their notoriety, their notoriousness, their career ladder is somebody sees something in them that the current firm doesn't see and they get hired out into a higher position. So if that's the case, don't antagonize the people who are probably the best path to a higher position. And so the transition is really finding where the model breaks. But, you know, introducing that in a way that helps the buyer and seller or both sides come closer together, not break them apart. If you are seeing inside a deal, inside that trope of, uh, I'm an analyst who tries to make my side look good and the other side look bad. It's, you know, everybody knows what you're doing as a young person. So going back to your question, you know, what's the thing to do? Find the assumptions that are sensitive. Right. Highlight that, but bring an analysis that says, I think I know how to make these work. Right. Buyers and sellers want to come together. They don't want to, you know, they want to come that far where they need you to run a 60 or 400 hour model just, you know, to. They don't want to go to meetings, they don't want to travel, they, they don't want to contemplate M and A. They don't want to contemplate financings that have no chance of working. They buyers and sellers want it to work, so be part of that process. The short I, uh, would land the plane here in that the shortest path to high status is finding something wrong. The shortest path to what? I would say people being able to trust, rely on you and, and be wanting to have you around to provide insight is to find things that are sensitive and, you know, share some ways that they can be made to work.

Speaker B: I'm super excited to share this event with you on September 24th. FMI, the financial modeling Institute will be hosting a free global financial modeling conference. It will be online running for 2024 continuous hours. There'll be speakers at every hour of the day all over the globe. So wherever you are based, you'll be able to join during your working hours or in the evening if you choose. You'll be able to select the sessions most relevant to your role and learn from professionals across the global modeling community. Giles, Mel, Insh, nor myself will be speaking about our Mod Squad experience of testing AI tools. Many other other famous modelers will be speaking at this event, so really encourage you to take the time to attend. Where else can you learn from the best in the world? You can go ahead and secure your free spot@fminstitute.com conference. I look forward to seeing you there. It does find those things that are sensitive and kind of help them understand how to manage that sensitivity.

Speaker A: And I'll give you a specific. We were doing a deal where we're acquiring a, uh, property in Hawaii. And our analyst came up and he said, look, the air conditioners are failing at an increasing rate, right? Which requires a repricing of the deal. We still wanted to buy the asset, right? But we don't want to buy it at the wrong price. So if we go in and say, hey, you guys, you know, we found, our analysts found that the air conditioners are failing at an increasing rate. And this acquisition price doesn't work because we're going to have, you know, $2 million over the next five years of H vac rehab. Uh, if we just poke them in the eye with that, then, then it becomes antagonistic, right? So, you know, we found a way to layer it into the financing, not to reprice the deal. And I think this, for me is the takeaway that begins the journey from a precision focused analyst, you know, to having a stake in deals, to making the transition into the private equity part of private equity, or the, the managing director part of equity or the partner part of equity, rather than the, you know, the analyst or, um, associate part of private equity. And that is, let me see if I can, you know, put it in the, in the, you know, in the best terms possible. In deal making, you can either have price or terms, but you cannot have both when you're an analyst. If you can, you know, if you're trying to. For your side, say, we want, um, we want better terms and we want better price. It's intractable, right? The, the sides cannot come together when one side wants to control price and terms, right? You in Silicon Valley, in You know, uh, Wall street, in the upper echelons of private equity, you get to choose one price or terms. And so as an analyst, if you can help, the sides come together by saying, this side gets to determine price. And I tell you specifically what I mean, gets price and this side gets terms. So what if we argue, hey, the air conditioners are not failing at a failing rate. We, we know this H Vac. We've been running it for 15 years. I understand, like your brand new H Vac company comes in, does the analysis and tells you that, but they're motivated to tell you that. Tell you what, right? We stick with the price. You believe they fail. We believe they're brand new and they're good. Let's do a look back in a year, right? And you know, Paul and Oren here on the analyst team, they're going to build a model that reconciles H VAC pricing. We come back in a year, we look at the model, and if we're right and the H Vac units are fine, then the look back has no adjustment. If through the model shows they are in fact failing an increasing rate, right. Then know we keep the price and there's no adjustment. All right? And that is the way modeling can fix the imprecision of not knowing the future. Your job is to make the future feel more certain and where there's uncertainty, to find a way for price and terms to live together. That's how you make the transition, is when you can guide people through that into deal making through modeling. Then your career just takes, boom, a big bump.

Speaker B: Get it? So it's really, I mean, it's that transition from the modeling to how does that relate to the deal? How do I present it in such a way that, you know, we can move this deal forward versus being antagonistic or attack. Like you said, you got two options, you got price, or you got terms. And what are different ways that you can end up getting, you know, protecting the business interest while allowing the deal to go forward.

Speaker A: Can I give another example of that? So I was in a deal with a, uh, genetics deal with the $83 million valuation, right? And the last round to drive that valuation was a $3 million round from, um, an individual, an out of country, one check individual. And so we went to raise money. We said, hey, it's a $83 million valuation based on the last round. Then the venture guys would say, tell us about this last round. And we go, hey, it's a $3 million round by an individual. And then the venture guys Will say, hey, man, like we get it. But a $3 million round on an $80 million, you know, pre for, you know, whatever, you know, $84 million post, 82 and a half million dollar post doesn't validate an $80 million valuation. $3 million does not validate an $80 million pre. And we go, yeah, but the guy who's putting it in, you know, has done this before, very experienced, you know, knows the technology and, and we think his round is validating. Now you have a situation that this solves. You got a price that the venture guys go, you know this. At 60 million we go, or 65 million, we're in at 83 million, we're not it, right. It's too high. So then the analyst comes in and goes, hey, let's do a three year look back, right? If we hit all of our goals, then you guys would say, yeah, we paid the right price. We like it. If we miss all of our goals. And we say, you were right. Um, the valuation should have been 65 million, not 80. And then the analyst stepped in, which I was part of that team. We built the integrating model where the venture guys said, okay, we get it. We get a look back. If we're right about the 65 million, we get that price. And the entrepreneur goes, if I was right about the 80 million and I do hit all my goals, then I was right. We baked the model, everybody signs it off and the new money comes in. That's the real world application of, um, where an analyst steps into dealmaking.

Speaker B: That makes sense. And I've seen those look backs and all the clawback, the things you're talking about having, uh, been involved in a little bit of corporate deals, so totally understand that one. I think that's a great example. I want to ask you a question. This is something we ask every guest, so you'll get it. Get this question. I'm sure you've seen a lot of models. You've built the models. What's your horror story in working with models? You got to have one. Anyone can claim to be able to build a model. Not everyone can defend one. When the questions start. The Advanced financial modeler puts your modeling under real scrutiny, so, you know, it holds up. Uh, I invite you to become an AFM. Go to fminstitute.com podcast that is fminstitute.com/podcast and use code podcast for 15 off.

Speaker A: Uh, I'm, um, sure my horror story. I can't believe I'm unique to this, but this is the horror story is I have somebody I'm relying on to, to deliver some part of the model that's going to integrate with me. Usually it's on their team, like oh, our guy is going to build the thing, you know, on the day of the presentation he's going to send it to you. Um, I'm confirmed with him, he is going to send it. It's all looking good. And then I get PDF spreadsheets. So PDF output of the model, you

Speaker B: can't validate a thing.

Speaker A: I can't do anything model, I can't touch anything. You know, I'm like uh, oh hey thanks. I now live in the year 800 BC right where, where I, I just, I have a pen, you know, and some dirt and uh, I'm trying to figure all this stuff out, you know and they're, then we're, you know, we, we can't see any of the formulas, right? And then that's my model, that's my nightmare is getting uh, spread is getting.

Speaker B: And how often does that happen to you that you get a PDF?

Speaker A: So in banking it happens a lot from clients. So what will happen is clients over and over again. Listen, if you get into banking, here's what you hear. The client will go, our numbers are perfect. Like that's all we do is you know, I run the numbers all the time, you know, I run the model and you don't have to worry about anything. We, you know, we follow everything closely, you know, down to the last dollar and then you go great, you sign the engagement, you have a presentation to do on the company. Uh, you start to collect the data and they send you QuickBooks output in a PDF. I would say that is a good 25 of the time of the first run that you get is QuickBooks. Look and you say like hey Oren, what kind of uh, lemonade stands, you know or yogurt shops you work with? I have a hundred one hundred forty five million dollar company that I just guided through a sale they to private equity. And this is, you know, why, you know, maybe we're in a $250 million price, they run the whole company on Excel spreadsheet. So you're, this is not just at the small local taco shop level where they have QuickBooks. You'd be shocked at the $200 million companies that run themselves on you know, a three statement model out of QuickBooks and basically a uh, you know, a spreadsheet for apar.

Speaker B: I no longer will. Some of our guests might but at this point I won't I, I've seen enough of that. You're just like talking to somebody, nearly a billion dollar company and Microsoft access databases and an ERP that was no longer supported. And I'm just like, oh, that's a nightmare.

Speaker A: Like, no, that's the horror story is numbers in a PDF.

Speaker B: That's pretty funny. So obviously when you get those, you can, uh, open it up like you said and play with it and get your hands on it. But I'm curious, when you open, when you get the Excel model like you want and you open it, where do you go first? What's kind of your process to kind of look at it? Because obviously you, you're not looking at it necessarily like an analyst would. You're looking at it from a deal perspective. So how do you kind of go about looking at a model?

Speaker A: Uh, the first thing I did, and just, you know, indulge me a digression for 60 seconds. I just bought for my son a Baja Bug. We live in Southern California and we, we have a bunch of cool cars. But I realized like, we don't think true Southern California. So we started looking at these Baja Buggies. You're probably familiar with it. They got like a, uh, an engine sticking out the back. They're down in the front. And so there's, there's tons of them for sale all the time. But what I'm looking for is not, I'm looking for who built it, who built this bug. Not is it built, you know, or does it do anything? I need some, you know, what Southern California shop built it, right? And is it the only one that they've done or do they do these over and over again? So when I look at a model, I go to the bones of it. And the way, the way you look at it, you know, you look at the roll cage and you look at the welds. So in a Baja Buggy, you go to the welds, you go to the, is it four wheel disc brakes? You know, what are the shock mounts look like? How are, how is the wiring, you know, is it a new wiring harness? Was this built by a professional or it was this hacked together, you know, by a do it yourselfer in the garage? Right. And so we found one clearly built by a professional and bought it on the spot. So I go, I immediately dig into the bones of it and trying in terms of model, we're off of Baja Buggies now. Uh, sure. But I, I, I, um, go into the model and I go, what is this? A do it yourselfer, right? Or Was this built by a professional? Right? And professionals build things in a way that somebody who is not familiar with the 600 hours of win in the model, um, can read it and they don't have to go into these, these very complex, you know, algorithmic cells that refer either to another sheet or another tab and have to spend 15 minutes, you know, chasing around how this assumption was built. Right? They allow you to see the numbers. The other thing I do is I look for any hard coded numbers, right? Hard coded numbers drive me absolutely batshit, right? Which leads me to the third thing because, like, where does this number come from? Now, where we do our hard coded numbers is back into the raw assumptions. So is there somewhere that I can change hard coded assumptions and it flows through the rest of the model and I can see the outcome? So really those are the three things it says, built by a professional. This is someone I can work with or, you know, built by Jim, you know, who's the, you know, guy at the bottom of the totem pole that was told, you know, build a model.

Speaker B: It's funny you mentioned that. It's amazing how quickly you can tell if you've looked at a lot of models, if a professional built it, it's structured well. Inputs, outputs, the hard coding, the way the summary is presented to you, as someone put it, you don't have to go through everything to know if it's a good model or not. You can generally get a pretty good idea just by that layout and the fill and a few quick checks to say, say, okay, it was built by a professional. Now let me go understand assumptions, because if it wasn't built by a professional, I'm going to guess you review it

Speaker A: differently because a lot of young people think built by a professional means, you know, algorithms, you know, or cells that do these incredible complex computations that otherwise you would have to jump out to software and do an ARGUS run or something for that, to me, does not, because I'm a business user, right, that's looking at a model and I'm trying to do some scenario modeling and some sensitivity analysis without me also having to put 60 hours into this thing. And that's what a professional really does is they deliver something that a business user can operate.

Speaker B: Half the guests on this show have it. The Advanced Financial modeler is becoming the way modelers signal that the work is real. I took it, it made me better, and it opened doors. What are you waiting waiting for? Go to fminstitute.com podcast that is fminstitute.com podcast and use code podcast for 15 off. Uh, I love that idea that a business user can operate because I've, I've been guilty that where I built some models and you're like, all right, that was way too complex. I should have simplified that. We. Anyone who's built a lot of models has done it at some point. But as you advance in your career, you really realize, keep it as simple as possible. Are, uh, there parts that are going to be complex? Yes, but you still need to build it in such a way that you can walk somebody through it. They don't feel like they have to be a PhD to understand what you did. So I think that's a great point there. So what would be the lesson you would kind of taking that back, you know, what would you tell those people that are building the models? Uh, obviously simplicity, you know, structure matters. But any other advice you'd give them kind of. Now, as you look back, you have

Speaker A: to understand what I'm doing to actually get the money, right? And then you want to support that because anybody who's on your side of the table that's supplying me tools to go get money, I think you have to understand what my job is. And I have to go in, in first meeting. My first meeting is five minutes and I have to be able to give a summary of the numbers, right? Because my side, most people meet a, a software company, they go, hey, I have this great software company. You know, it's, it's got, you know, 40% market share, it's growing 20%, you know, year over year. It's got a great management team. You know, they have an account with Microsoft that is not a finance presentation. That is typically the, the, you know, how people hear about a deal are a bunch of soft numbers and sort of market position, value proposition. Then they go into what it does for me, going to get the money. The thing I have to communicate is good products are not necessarily good companies, and good companies are, uh, not necessarily good investment. I am not going to tell you about the product because that doesn't matter and I'm not going to tell you about the company. We'll get into that later. What I am going to tell you is why this is an investment. If you empower me to meet the money and be able to in five minutes, three minutes, say I have an, I have an incredible investment on my hands, then everybody's going to want to drag you into their team. So I have to go in. My job is not to say great company, good products, software market partners, you Know, uh, Instagram account, good followers, you know, 13 years in business, I have to be able to say the company is rapidly growing in a market in which there is a lot of M and a activity there. $50 million of revenue, $17 million of EBITDA growing 22%, you know, year over year, 8% per quarter and taking 5% market share a quarter away from the incumbents is now being valued at 18 to 20 of ah, forward revenue. Right. Because there are um, three, you know, AI, ah, companies who have just gone public who have holes in this particular gap. If you look at the public company gap in this, they, they have to make a build or buy decision. If they're going to build this, it's going to take three years and $500 million if they buy it. Right. There's going to be competition for this, these, the couple of these companies that have this capability and that comp, you know, and, and, and the acquisition price is going to have to be 20 to 30 times forward multiple because of the supply demand imbalance. That's what I have to do to raise money. And if you can help me run that analysis, then you're going to be a permanent part of my team.

Speaker B: Yeah, as I'm here, you talk about it. It's something we talk a lot about, is the modeler needs to be able to help the business or the investor or whoever it might be make better decisions. Sometimes we feel like my job is to just make the model and then they do whatever they want. And that may be true in a few cases, but not if you want to move up, not if you want to be influential, not if you want to make a difference. You need to be able to bring things forward that give comfort to help them make better decisions, help them close the deal, whatever they may be, which is kind of what you're getting to. And so I'd love to know your thought within that. I think sometimes people think modeling, right, is all about working in Excel. It's writing complex formulas and being the math person, the nerd, so to speak. But one of the things I have guests tell a lot, and obviously you've done a lot around, is the role of storytelling. So what's your take for a modeler? How good of a storyteller do they need to be? What do they need to be able to do beyond just that model? And uh, you've talked a little bit about that, but anything you want to add there around storytelling?

Speaker A: A million percent. When I go to pitch a deal to sell financial instrument, when I Go to sell a security, right? What I always start with is there is a very rapid and dramatic change in this market. The story is always about change. You cannot sell things easily when nothing is changing, right? Because if nothing's changing, they're just going to buy from Target, use Microsoft, use Oracle, get it from Amazon, like if, uh, you know, I'll give you an example of change that's very easy to understand. Now today all, basically all college students are using AI to complete their work so they can more beer, you know, talk to more girls, you know, play more football and, and you know, just avoid the rigors of having to do academic work. Right. And so the, the entire system of academia is changing today underneath our feet. And so the value of a Harvard diploma, right, is getting revalued on the market as we speak. Like I don't have a business that's in the. But you know, when you, when so I have to lead with change. And that is a story, right? Uh, you know, so, so what else is changing?

Speaker B: Sure.

Speaker A: SaaS companies, you know, are losing 30, 40%, you know, the value in the public markets because of the fear that AI can just duplicate the SaaS company. You know, if you saw this press release, some, you know, venture firm duplicated the, every one of the last 15 or 20 Y Combinator companies, you know, using AI, right? And so super scary. What's going to happen in SaaS companies? So that is the story, the narrative. Things are changing and the tectonic plates are shifting in this industry and there are big gaps in which we can step in, you know, with our um, you know, with our technology, you know, typically, um, into this new market. If you, so I'll give you another, I don't want to talk too abstractly. So the concrete example of that is you, if you look at AI, right, um, first it was the models and then it was the chips and then it was the data centers. So what's happening is as AI is the use of AI exploding and the business. And then it, then it became tokens and token management. You keep drilling down to going, what is the constraint? Right? Where is the next constraint? And then you can see what technology is going to be relevant next. The next constraint is going to be fiber cable, right? Can't get enough throughput out of the data centers through the fiber cable reliably. And so now people with the highest quality, highest throughput, highest redundancy fiber cable are going to be the next explosive companies, right? They're going to go from industrial manufacturing firm, basically irrelevant Like Nvidia was, you know, in just a graphics processing chip to be the next thing that manages the constraint that AI is going to go through so that you're going to be able to say, hey, the fiber optic cable industry is changing, the tectonic plates are shifting and uh, the new technologies, you know, are going to be the glass, you know, whatever, whatever. And that is going to be able to open up the constraint and, and anybody with that technology is going to be doing, is going to step in and going to have explosive growth. That's the business story, right. The job of the modeling is to provide the easy understand data that makes that narrative true. And that is where story and numbers marry each other. And I would leave you with this, right Me as the guy out there in front of investors having to tell the story. Your if you can make it so I can make this, this true. I have this mantra, never say anything without a number in it. And if you can let me tell stories that have numbers in them, I win in the pitching business.

Speaker B: I love that you mentioned you know, a number with it because one of my favorite books is effective data storytelling. And one of the things that you know, you see a lot with storytelling is you see this idea that well, numbers speak for themselves. And I always say BS numbers don't speak for themselves. You choose, yes, you don't want to lie, but you choose what visual to show. You have to interpret and that's part of the story. And you know, you have to share that in a way that's forthcoming but they don't just, you can't just lay it out and oh, we're done. There's always a story behind it no matter what the numbers say. And so I really, I like how you shared that. I think sometimes people don't realize that. All right, so I want to ask one ah, more question then we're going to do a kind of abbreviated rapid fire. I want to get your thoughts on some areas based on where you're at. So tell us a little bit about your book. I'm sure some of the people may be familiar with it. Some shouldn't. I know, uh, some, some will not be if I can speak. Right. So tell us about the book you wrote, kind of how you wrote it, what it's about, what people should take away from it. So give us a little bit about the book.

Speaker A: So look, I think pitch anything I wrote because of my journey from analyst into raising money and running the end. You can, you, you can see the journey in the book from I was an analyst. And the analyst occupies the low status position in every deal. And, and so I became incredibly focused on status. And the book shows the game that is really happening in every room beneath the numbers and the conversation. And that's why salespeople, that's why Fortune 500 companies, that's why private equity, and that's why banks love pitch anything, because it shows you how to play the game that's really being played in every room. And I'll give you a quick example. We may have talked about this when we showed up. As you become more advanced in your career, you're going to have to take calls with people who like, I have to take calls with guys who run, you know, billion dollar funds. I work for two billionaires. I worked for Marvin Davis, right? And those guys are high status. Why? Everybody wants their money. Everybody supplicates to them. Um, they can do anything they want. They have armies of people that work for them and just, you know, they're celebrities in, in finance and money. They're rich. The outward, you know, Marvin Davis worked in the, you know, he owned the Fox building in Los Angeles where many, many movies were filmed. And just, you know, everybody treats him as the highest status person. And so when I, uh, have to deal with those people and as analyst, you have to deal with those people when they come to a call or they come to a zoom, one thing is they always come late. Listen, if they're getting, if they're getting $15 billion from Masayoshi Son or they're getting, uh, you know, $20 billion from the sovereign wealth fund of the UAE, they don't come to that meeting late, but they come to meeting with you late to hear about your numbers and stuff, right? That is the status game happening for sure. And the way to correct that is you go, hey, Marvin, you know, welcome to the 1005 meeting. Let me catch you up on what happened at the 10 o' clock meeting right now. That seems like something you would not say to a billionaire. But billionaires understand in our society we value time. Whether you're the valet driver, whether you're the, you know, the gulf, uh, you know, the guy with the golf caddy, whether you're the barista, it doesn't matter. You treat everybody the same as time because our society runs on time and they always apologize. And that is the way to start a call. Thirty seconds into it, a billionaire apologizing to you for being late. And that's what pitch anything is about, is making sure you have equal status with the Other people in the room because you cannot sell anything from the low status position. That's what pitch anything is about.

Speaker B: I have not read it. It's uh, been added to my list. I'll have to have to pick that up. Obviously. I do a lot of selling running my own business. I'm curious to dig into it. More rapid fire incoming. 20 questions, yes or no answers, no hedging allowed, circular references, vba, the future of Excel and more. Let's find out what our guests are really thinks. So here we go. First one I uh, want to ask you is do you think Excel will ever die?

Speaker A: Excel will never die. Rock and roll will never die. And Excel will never die.

Speaker B: All right, I'm going to ask you two here. First, for the modeler, which financial statement is most important? Income statement, balance sheet or cash flow? From the modeler's perspective, income statement. What about from the investor's perspective?

Speaker A: Income statement.

Speaker B: Okay, what's your favorite LLM like Claude? Copilot ChatGPT or is there something else?

Speaker A: Claude. Claude.

Speaker B: Claude. Not surprised. If you could. I'm really curious to see what you say on this one. If you could only have one for the rest of your models, would you pick sensitivity or scenario analysis Sensitivity? I thought you would say that, but I wasn't sure. What do you think is the most important financial metric? If you had to pick one, what's your most important one your go to cost to acquire? Do you believe financial models are are the number one corporate decision making tool?

Speaker A: No.

Speaker B: What is bad judgment. That's a fair way to say that. I had someone answer with politics, which would be close to bad judgment. All right, that wraps up the kind of the section there for the questions for you. I won't ask your opinion on circular references and you have a model, ask me my opinion. Okay. Circular references, yes or no?

Speaker A: No, like deals, deals over. If I have to open something and it starts with, you know, circular reference, you know, or, or external spreadsheet not found.

Speaker B: You know, external links are the worst internal language.

Speaker A: I'm like, I, I, I can't work with this.

Speaker B: Good, I'm glad you said that. All right, so as we wrap up here, any parting thoughts? Anything you want to leave the audience with before we let you go?

Speaker A: You know, if you re pitch anything, the thing you want to do is you empower the people you work with to tell stories using numbers. And those numbers don't unravel once somebody starts unpacking it. Right. So what happens is when we get handed a model, we start pulling on threads. If we pull on two threads and three threads and they hold, we start to build confidence in this thing. If I pull on a thread and it unravels, right, and something that doesn't feed all the way through, I find integers instead of formulas. I find, you know, I find formulas, uh, that were just dragged out, you know, times 1.05, you know, percent for the next three years. I understand you can't model five years out with any kind of integrity. What's the point of putting four point, you know, 5 7, 31271, you know, as a sell, you, uh, know, five years out. I get that. But as I start pulling on threads and I see, you know, either the, the obvious mistakes, and you guys are probably covering them here, you know, pulling cells all the way out, you know, using integers. I need, you know, complex formulas that I can't adjust, you know, no summary page, but that's one thing. But as I start pulling on threads and things start to fall apart, then I got to put on more threads and I lose confidence. And so give the business owner the ability to talk through numbers in a model that doesn't fall apart when people start pulling on threads. That would be the number one way that I would see you lifting your career.

Speaker B: Love it. Thank you. All right, so last thing. If people want to get in touch with you, learn more about you, check out what you do, what's the best way for them to do that?

Speaker A: The best starting point is to read pitch anything. Because then you go, I'm a true believer, or, orange head is full of dead insects. Right. I don't want to read anything else that he's saying. Right. Then once you go, I agree. Try one thing that the book tells you to do. And this is where most of my, you know, millions of readers come from. And they go, I tried one thing and it worked. And then people go, I stuck the book under my pillow just hoping that all of it would just, you know, enter my head. And now, you know, I'm raising money on my own. Start with the book and then we follow up, uh, from there. Pitch anything.

Speaker B: All right, perfect. Well, I'm going to read the book and I'll let you know if I think there's insects or value.

Speaker A: Yes, very good. Do let me know.

Speaker B: Will do. Well, thank you so much for joining us, Oren. It was a pleasure chatting with you. I loved having, you know, the perspectives from the other side of the table. Most people I talk to are still, you know, in the weeds, in the modeling. So. Thanks. You so much. Really appreciate you carving out some time.

Speaker A: Thank you Paul. Very good.

Speaker B: Financial Modeler's Corner was brought to you by the Financial Modeling Institute. This year I completed the Advanced Financial Modeler certification and it made me a better financial modeler. What are you waiting for? Visit FMI www.fminstitute.com podcast and use code podcast to save 15% when you enroll in one of the accreditations today.