Build a Capital Raise Model
This guide shows you how to model a capital raise in Model Reef, including how much capital is required, when it is needed, and how equity and debt injections affect runway and valuation.
Before you start
You should have:
A forecast for the business that includes revenue, costs, working capital and capex.
A Cash Waterfall view that shows net cash movements over time.
An idea of the rough funding options:
Pure equity.
Pure debt.
Mixed structure.
If your base forecast is not ready, start with Build a Full Financial Model from Scratch.
What you will build
A base case that shows cash shortfalls without additional capital.
One or more capital raise structures:
Equity only raise.
Debt plus equity mix.
A view of cash runway before and after the raise.
A view of the impact on valuation.
Assess funding need from the base model
In your current model:
Open the Cash Waterfall and Cashflow Statement.
Identify periods where:
Cash balance approaches zero or becomes negative.
Cash coverage for planned capex or debt service is tight.
Note:
The size and timing of the maximum cash deficit.
The minimum comfortable cash buffer you want to maintain.
This defines the gross funding requirement.
Decide on high level raise structure
Choose raise structures to test, for example:
Equity only:
Single equity cheque sized to cover deficits and provide buffer.
Debt plus equity:
Modest equity injection.
Debt facility sized to handle the remainder.
Plan to create separate copies of the model for each raise structure so you can compare outcomes cleanly.
Create a dedicated capital raise model
Duplicate your base model and rename the copy, for example:
Company - Capital Raise - Equity Only.
In this model you will modify:
Equity variables.
Debt variables.
Leave operational assumptions unchanged so you can see the pure financing effect.
Repeat for each alternate structure as needed.
Model equity injection
In the equity only model:
Create an Equity variable:
Name:
Equity - Capital Raise.Timing: decide whether capital is raised:
Upfront in a single period.
In multiple tranches over time.
Amount: set to cover maximum expected deficit plus buffer.
Confirm in the Cashflow Statement:
The capital raise appears in Financing Cashflow.
Confirm in the Balance Sheet:
Cash increases.
Share capital increases.
Observe how the cash trajectory looks once the raise is included.
Model mixed debt plus equity raises
For mixed structures, in a separate model copy:
Add a smaller Equity variable for the initial raise.
Add one or more Liability variables representing new loans or facilities:
Define principal, interest rate, tenor and amortisation.
Set drawdown timing to align with when cash is needed.
Confirm in the Cash Waterfall:
Equity injection and debt drawdowns provide sufficient liquidity.
Debt service is affordable relative to cash generation.
Adjust amounts and timing until you reach a structure that balances dilution and risk.
Evaluate runway and valuation
For each capital raise model:
Check cash runway:
Plot cash balance over time.
Confirm that minimum cash stays above your target buffer.
Check valuation:
Open valuation settings and confirm discount rates and terminal assumptions.
Observe whether the raise:
Supports a higher growth path.
Allows for higher terminal value.
If you track dilution externally or in supporting materials:
Combine raise amounts with assumed share prices to infer new shareholder ownership.
Remember that Model Reef does not natively model share counts, so dilution analysis is usually done alongside the model using exported values.
Compare raise structures
Create a simple comparison outside the models or in documentation that shows for each structure:
Total capital raised.
Mix of debt and equity.
Cash runway length.
Minimum cash balance.
Project and equity NPV.
Any implied post money and dilution metrics.
Use this comparison to decide which capital raise structure you prefer.
Check your work
Funding requirement is correctly identified from the base model.
Equity and debt variables reflect real world term sheets as closely as necessary.
Cash never falls below critical thresholds after the raise.
Debt service does not create unsustainable pressure on cashflows.
Valuation is updated to reflect the new structure.
Troubleshooting
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