Elizabeth Yin is the Founder and General Partner at Hustle Fund (and one of our favorite follows on Twitter). A few weeks back she Tweeted that fundraising is all about…
Tear Sheet 101 (and How to Build One with Visible)
Tear sheets are an important component of the venture capital world. If you’re new to VC, its crucial to understand what a tear sheet is and how to create a valuable, and effective one for…
Tear sheets are an important component of the venture capital world. If you’re new to VC, its crucial to understand what a tear sheet is and how to create a valuable, and effective one for your fund or individual company.
What is a Tear Sheet?
A tear sheet is a single-page summary of a mutual fund or individual company. A tear sheet is a critical term to understand in the venture capital world. Beyond a simple understanding of what a tear sheet is, it’s important to learn how a tear sheet is best used and even how to build one, too. The term “tear sheet” originated from pre-internet business when S&P would produce summary sheets for public companies on one-page. All of these single-page summaries could be torn out of a larger book containing all of the summary sheets. This act of tearing out the relevant page stuck around. Even though the physical act of tearing a sheet is gone, the single-page summary, the tear sheet, has withstood the test of time and is an extremely important piece of collateral for any VC-backed business to understand.
A tear sheet should contain overview information about your company. This should include market cap, your earnings, the market sector your tackling, and a chart of historical price movements for your shares and more. Essentially, anything that will allow the reader to get a quick snapshot of your business and give them an understanding of earning potential that is possible should be included on the tear sheet.
The LPs (limited partners), or investors at a VC firm that has a stake in your mutual fund or company are a key audience that will be viewing your tear sheet. You want to make a good impression when presenting to LPs. Therefore, when thinking about putting together your tear sheet, it’s important to pay attention and do this effectively as it may make or break your investor presentation. A well put-together tear sheet can make all the difference.
The Tear Sheet Template
When building out a tear sheet, make sure to include both metrics, or quantitative data, and qualitative data about your company or fund. If you’re looking for a tear sheet template (read on to learn more about tear sheet templates in Visible!) make sure to find a template that includes both of these categories.
Start with metrics, or quantitative data about your business. A few metrics you should include:
- Cash Position – Be transparent about how much money you have left in the bank and how much runway (or time left ahead) that you can operate the business at your current burn or spend rate.
- True North KPIs – Depending on the type of business you are operating, this might differ. However, you should always include your revenue goals. Beyond that, your true north KPIs in your tear sheet template should be the key performance indicators that are guiding your business every single day. Beyond revenue goals, examples of other KPIs could be active users, a customer net promoter score, active customers, or average contract value.
- Ownership Data – Share a breakdown of who currently owns what part of your business. If you give your employees stock options or have multiple investors already, make it clear how much of the company is on the table for the investors in the room.
Shifting from the metrics on your tear sheet template, consider the following qualitative points to include in your tear sheet:
- Overview – share a brief overview of your company. Highlight what you do, when you were founded, and a 1-line vision of the company.
- Board Information – List clearly who your current board members and what interests they represent.
- Previous Wins – Brag about any major accomplishments you’ve achieved as a company to-date. This could be highlighting a huge customer, an acquisition, or company growth. This is a great section to dive deeper into the why behind positive metrics on the tear sheet.
Tear Sheet Examples (and Advice From the VCs Reading Them)
If you’re stuck on where to start, we recommend seeking advice and tips from the experts. The VCs that are receiving hundreds of tear sheets every-year, or successful founders who have raised funds before are a great place to start.
- Matthew Cooper, CEO of EarnUp recommends highlighting the real-life problem you’re solving for in a way that showcases the earning potential. Keep it digestible for anyone to understand but relatable for a VC.
- 50 Folds shares a great Tear Sheet example and advises founders to keep it simple, and remember that every word counts.
- Lightspeed Venture Partners recommends making sure your tear sheets are scalable as your company grows.
- Gate39 Media has 8 tear sheet design mistakes you should avoid at all costs.
A great place to start when creating your tear sheet and looking for tear sheet examples is to ask your network. Talk to the most successful founders in your network. If they’ve raised money, they have successful tear sheet examples they are hopefully willing to share with you.
Using Visible for Tear Sheet Data
Visible has always been an incredibly useful tool for founders to report relevant metrics to your stakeholders on a consistent basis. You can take the quantitative data and metrics suggested above and turn it into a template right in Visible. Check out a tear sheet example in Visible below.
How Visible Automatically Builds Tear Sheets
Visible is the perfect tool for investors to ensure they are receiving automatically built tear sheets from all of their companies. Receiving tear sheets in Visible is simple for investors and allows for more consistent and up-to-date communication between investment rounds and quarterly reports.
Visible automatically builds tear sheets by:
- Using dynamic, update requests to receive data from portfolio companies. As an investor, you can decide what data is most relevant to request from each company.
- Creating tear sheet templates, making it easy for your companies to report out what is most relevant to you.
- Automatically generating tear sheets for everyone in your portfolio, automating your workflow reminders to request dynamic updates, and tracking engagement with each tear sheet.
- Scaling tear sheets. As your companies scale, Visible allows your tear sheet reporting to scale seamlessly.