Pitch Anything's Oren Klaff: From Spreadsheet to Deal Table
In this episode of Financial Modeler’s Corner, Paul Barnhurst speaks with Oren Klaff about how financial modeling can become a powerful tool for deal-making, investment decisions, and career growth. Oren explains why modelers should focus on identifying key sensitivities, communicating insights effectively, and helping buyers and sellers find ways to make deals work rather than simply pointing out flaws.
Oren Klaff is a Private Equity Fund Manager and the bestselling author of Pitch Anything. Based in Beverly Hills, California, he focuses on recruiting smart people to join his portfolio companies. Oren began his career as a financial analyst in private equity before moving into deal-making and capital raising. His experience in financial modeling has played a key role in his approach to deal-making and raising capital.
Expect to Learn:
How financial modeling can help you transition into deal-making and capital raising.
Why identifying sensitive assumptions is more valuable than simply finding errors.
How analysts can avoid antagonizing other parties and instead help move deals forward.
What makes a financial model professional, usable, and trustworthy.
Why simplicity and structure matter when building models for business users.
Here are a few relevant quotes from the episode:
"Excel will never die. Rock and roll will never die, and Excel will never die." - Oren Klaff
"The shortest path to high status is finding something wrong." - Oren Klaff
Oren explains that the real value of a modeler goes beyond building technically complex spreadsheets. The best modelers help decision-makers understand what matters, communicate uncertainty, and find practical ways to move a deal forward. A strong model should also be simple enough for business users to operate and robust enough to withstand scrutiny.
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Disclosure: Portions of this episode (such as the introduction or promotional segments) use AI-generated voice narration produced under human editorial review.
In Today's Episode:
[00:00] - Trailer[05:20] - Finding Insight in the Numbers[07:28] - Moving From Analyst to Deal Maker[10:58] - Using Modeling Without Antagonizing the Other Side[15:26] - Price, Terms, and Making Deals Work[20:11] - Real-World Applications of Modeling in Deals[23:24] - Modeling Horror Stories & What Good Models Look Like[31:25] - Building Models That Help Raise Money[35:20] - Storytelling With Numbers[40:13] - Pitch Anything and the Role of Status[43:24] - Rapid Fire: Excel, AI, Sensitivity Analysis & More[44:53] - Final Advice for Advancing Your Modeling Career
Full Show Transcript:
Host: Paul Barnhurst (00:00):
Financial Modelers Corner is the world's premier modeling podcast. It is brought to you by Financial Modelling Institute, the world's leading financial modeling accreditation organisation. Welcome to Financial Modelers 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 Modelling 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 Oren to the show. Oren Klaff, welcome to Financial Modelers Corner.
Guest: Oren Klaff (00:48):
I appreciate that warm welcome and excited to get somewhere technical instead of purely opinion-rich about business. Yeah, I was
Host: Paul Barnhurst (00:57):
Going to say, did you ever think you'd be on a podcast just about financial modeling?
Guest: Oren Klaff (01:01):
It was my dream. I started as a financial modeler, and it's sort of like these kids who play video games their whole life and then their parents are like, "My kid will amount to nothing." Then they get hired by Rockstar Games or whatever to test for half a million dollars a year. So yeah, I never thought modeling would go anywhere, but in fact it does.
Host: Paul Barnhurst (01:24):
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." He 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.
Guest: Oren Klaff (01:55):
That's good. That's good. Rich, rich.
Host: Paul Barnhurst (01:58):
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.
Guest: Oren Klaff (02:04):
Sure. Again, my name is Warren Klaff. I started life in finance really as an analyst in a private equity group, not quite venture, really private equity. And they didn't have really even a modeling job, but I was technical. I understood some of the business issues in a small firm and they brought me on and really the spreadsheeting just fell to me. 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. The old Mikey will eat it commercials. You guys are probably too young for those, but there were these commercials for Life Cereal. 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 it was sort of like, "Well, Oren will do anything.
(02:52):
He's technical, smart, give him the Excel stuff." So I started modeling bottom up.
Host: Paul Barnhurst (02:57):
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'll have to go dig them up on YouTube. Love the background. I totally get it. Often the modeling falls to the most junior person. It's interesting 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.
Guest: Oren Klaff (03:29):
Listen, sort of complete the introduction. I went from modeling into deal making and from deal making doing so many deals, I got asked to write the book, Pitch Anything, sold a million copies, and 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 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. Pitch Anything is from modeling. It's from understanding what is very likely to happen in the future in a business case. And so if you roll this forward, I'll complete the introduction, it's taken a long time. Over the last year, year and a half, I raised $50 million for a deal that I control. All of that ties back to one thing, the ability to model.
(04:27):
I think that's where we should spend a few minutes here talking about 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 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.
Host: Paul Barnhurst (04:52):
I love that. I love how you tie it all back to being able to model in what you do. 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 you shared. I'm curious, when you started your career, you started modeling, became the spreadsheeter as you put it, did you picture yourself ending up being a fund manager, doing deals, private equity, or did it just kind of happen as your career evolved? It
Guest: Oren Klaff (05:20):
Just happened. As situations came up, I think you and I talked, but my 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," this is before Instagram, "is that Osama bin Laden hit squared away in some cave and there's some video of him and there's some mould or leching in the background. And then I was like," Who knows where that stuff grows? "All of a sudden they're looking for college professors who are understanding what humidity and what regions and what mountain that particular lychen, and then that guy suddenly becomes the most important person in the United States. So it's the same thing with modeling. Okay, now we have a big deal. Now it's moving really fast. Who understands these numbers? Who can look at this and give us some insight?
(06:06):
That's the key word for me is who has insight? And if you believe insight comes from numbers, 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. I'll give you one visual. Every single disaster movie starts with some analyst, some 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, whether it's a deep sea monster, 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 as I understood how the numbers affected business cases, then it just rolled down the hill to me and they go, "What do you think?
(07:13):
Can you jump in here?"
Host: Paul Barnhurst (07:14):
Yeah, no, I hear you. So if someone's listening, we have some people early in their career and they want to get into the deal making side. They want to get into the capital raising. A lot of people are like, "Hey, that's the sexy area. I've built my share of models." Any advice you'd offer them?
Guest: Oren Klaff (07:28):
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 Samsom new market," their thought process is top down. They think in terms of features, benefits, value proposition, and what will people pay for? So that's how they think. If you then switch your thinking to saying that has to be built bottom up on assumptions, you speak the other half of the language that they crave because I know you should keep the answers short, but Paul, I want to bring this to the table. The business unit owners that I'm talking about, and I don't know if you have Lingua Franca, 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 envisioning, dreamscaping, vision boarding, they think a model is something that at the end of the day, after you put the kids to bed, you have a cup of tea and then you build a model.
(08:46):
Not one of them will say, "This is a 60 to 600 hour effort." They cannot do 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, 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. I
Host: Paul Barnhurst (09:33):
Love the one you put in there, "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 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.
Guest: Oren Klaff (09:58):
I'd love for people that I'm in contact with to think in terms of these movie trope, whether it's a law firm, whether it's the Avengers, they have this big decision and then they find Chang or Chad or Paul or Oren, whatever, sitting 19 floors down in the basement eating Snickers bars and drinking Pepsi soda and that is toiling obscurity. And then they bring that guy up and they go, "Tell us what you see in the numbers." That movie trope, if you can find a clip on that, I should have found one, that movie trope is there for a reason because it reflects reality.
Host: Paul Barnhurst (10:39):
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 there's different examples of NASA where someone comes up, look, I found this number and we need to stop everything and they do because oh wait, we got to spend the next six months researching what that number means because it's not good. And
Guest: Oren Klaff (10:58):
I think a lot of 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 and that is a superpower and I think a lot of analysts use it incorrectly. When I go to a meeting, and Paul, we'll get off the reservation here, jump in, but when I go to a meeting where there's a 10, 20, 50, 100 million dollar decisions being made, the other side brings their analyst 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 is I try and reframe or make look small or disintermediate or disconnect their analyst from the situation.
(11:56):
It's not any different from a court show 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 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 find a problem with our numbers in order to make himself or herself look good. And number two, to 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," which is very high conflict.
(12:50):
"Hey, we're looking at this as I'm reading through it, this doesn't make sense. "You would have to double. By the way, every single model breaks. If you pull it apart, we can talk about where, at least in the business units that I'm in, where it breaks. It always breaks on December, between December 31st and January 1st. You know why I say that? Why?
Host: Paul Barnhurst (13:11):
Give us the answer. I
Guest: Oren Klaff (13:12):
Mean, because it shows you have to hire a hundred people overnight on December 31st in order to make 2027 work.
Host: Paul Barnhurst (13:19):
Yeah, there's always a huge hiring plan at the beginning of the year. I've seen it so many times. Well,
Guest: Oren Klaff (13:25):
In order to increase by 150 people next year, you have to start somewhere and that starts on January 31st. Wait, are you telling me you hired 17 people on Christmas and then they started working on. So models really break between the years because you're trying to make a year work and they break at that transition. You can pull these models apart, they always break. Now you have powers, but how you use those powers get into how you transition from. 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 in the model.
(14:13):
It's very tough to move up in firm. I think the way most analysts 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 antagonise the people who are probably the best path to a higher position. And so the transition is really finding where the model breaks, but 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 I'm an analyst who tries to make my side look good and the other side look bad, everybody knows what you're doing as a young person. So going back to your question, what's the thing to do? Find the assumptions that are sensitive, highlight that, but bring an analysis that says, "I think I know how to make these work." Buyers and sellers want to come together.
(15:26):
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 travel, they don't want to contemplate M&A, 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. The shortest path to what I would say, people being able to trust, rely on you, and be wanting to have you around to provide insight is to find things that are sensitive and share some ways that they can be made to work.
Host: Paul Barnhurst (16:11):
Every great modeler on this show says the same thing. Simplicity is a key skill. The AFM, the Advanced Financial Modeler is built around exactly that discipline, clean structure, sound logic, defensible work. Join me in becoming an AFM. Go to fminstitute.com/podcast. That is fminstitute.com/podcast and use code podcast for 15% off. It does find those things that are sensitive and kind of help them understand how to manage that sensitivity. And
Guest: Oren Klaff (16:55):
I'll give you a specific. We were doing a deal where we were acquiring a property in Hawaii and our analyst came up and he said, "Look, the air conditioners are failing at an increasing rate, which requires a repricing of the deal." We still wanted to buy the asset, but we don't want to buy it at the wrong price. So if we go in and say, "Hey, you guys, 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 $2 million over the next five years of HVAC rehab." If we just poke them in the eye with that, then it becomes antagonistic. So 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 to having a stake in deals, to making the transition into the private equity part of private equity or the managing director part of equity or the partner part of equity rather than the analyst or associate part of private equity.
(18:04):
And that is, let me see if I can put it 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're trying to, for your side, say, "We want better terms and we want better price," it's intractable. The sides cannot come together when one side wants to control price and terms. In Silicon Valley, in 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..." 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 know this HVAC. We've been running it for 15 years.
(19:03):
I understand your brand new HVAC 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. Paul and Oren here on the analyst team, they're going to build a model that reconciles HVAC pricing. We come back in a year, we look at the model, and if we're right and the HVAC units are fine, then the lookback has no adjustment. If through the model shows they are in fact failing an increasing rate, then we keep the price and there's no adjustment. 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.
(20:01):
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. I
Host: Paul Barnhurst (20:11):
Get it. 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 we can move this deal forward versus being antagonistic or like you said, you got two options. You got price or you got terms and what are different ways that you can end up protecting the business interest while allowing the deal to go forward? Can I
Guest: Oren Klaff (20:38):
Give another example of that? So I was in a deal with a genetics deal with the $83 million valuation, and the last round to drive that valuation was a $3 million round from an individual, an out-of-country one check individual. And so went to raise money and 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'd go, "Hey, it's a $3 million round by an individual." And then the venture guys would say, "Hey man, we get it, but a $3 million round on a $80 million pre for whatever, $84 million post, $82.5 million 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 has done this before, very experienced, knows the technology, and we think his round is validating." Now you have a situation that this solves.
(21:34):
You've got a price that the venture guys go, "At 60 million, we go. Or 65 million, we're in. At 83 million, we're not in. It's too high." So then the analyst comes in and goes, "Hey, let's do a three-year look back." 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, 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.
(22:18):
We bake the model, everybody signs it off, and the new money comes in." That's the real world application of where an analyst steps into deal making.
Host: Paul Barnhurst (22:27):
That makes sense. And I've seen those look backs and all the things you're talking about, having 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 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. I invite you to become an AFM. Go to fminstitute.com/podcast. That is fminstitute.com/podcast and use code podcast for 15% off.
Guest: Oren Klaff (23:24):
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 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 on the day of the presentation. He's going to send it to you. 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.
Host: Paul Barnhurst (23:55):
Can't validate a thing.
Guest: Oren Klaff (23:57):
I can't do anything. Yeah,
Host: Paul Barnhurst (23:59):
Exactly.
Guest: Oren Klaff (23:59):
Model. I can't touch anything. I'm like, "Oh, hey, thanks. I now live in the year 800 BC where I have a pen and some dirt and I'm trying to figure all this stuff out and then we can't see any of the formulas and that's my model. That my nightmare is getting - And how often
Host: Paul Barnhurst (24:25):
Does that happen to you that you get a PDF? So
Guest: Oren Klaff (24:27):
In banking, it happens a lot from clients. So what'll happen is clients over and over are going to say. Listen, if you get into banking, here's what you hear. The client will go," Our numbers are perfect.That's all we do is I run the numbers all the time. I run the model and you don't have to worry about anything. We follow everything closely down to the last dollar and then you go, great. You sign the engagement, you have a presentation to do on the company, 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 lemonade stands or yoghourt shops you work with? I have $145 million company that I just guided through a sale to private equity.
(25:21):
And this is why maybe we're in a $250 million price. They run the whole company on Excel spreadsheet. So 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 a three-statement model out of QuickBooks and basically a spreadsheet for APAR. I no
Host: Paul Barnhurst (25:44):
Longer will. Some of our guests might, but at this point I won't. I've seen enough of that. You're just like talking to somebody nearly a billion dollar company in Microsoft access databases and an ERP that was no longer supported. And I'm just like, oh, that's a nightmare. No. That's
Guest: Oren Klaff (26:01):
The horror story is numbers in a PDF. That's
Host: Paul Barnhurst (26:03):
Pretty funny. So obviously when you get those, you can open it up like you said and play with it and get your hands on it. But I'm curious, 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 look at it? Because obviously you're not looking at it necessarily like an analyst would, you're looking at it from a deal perspective. So how do you go about looking at a model?
Guest: Oren Klaff (26:29):
The first thing I did, and just indulge me in digression for 60 seconds, I just bought for my son a Baja bug. We live in Southern California. We have a bunch of cool cars, but I realised we don't have anything true Southern California. So we started looking at these Baja buggies. You're probably familiar with it. They got an engine sticking out the back, they're down in the front, and so there's tonnes 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 or does it do anything? I need some. What Southern California shop built it? 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 you look at it, you look at the roll cage and you look at the welds.
(27:15):
So in a Baja buggy, you go to the welds, you go to the, is it four-wheeled disc brakes? What do the shock mounts look like? How is the wiring? Is it a new wiring harness? Was this built by a professional or was this hacked together by a do-it-yourselfer in the garage? And so we found one clearly built by a professional and bought it on the spot. So I immediately dig into the bones of it and trying in terms of a model, we're off of Baja buggies now. Sure.
(27:47):
But I go in the model and I go, "Is this a do-it-yourselfer or was this built by a professional?" And professionals build things in a way that somebody who is not familiar with the 600 hours of winning the model can read it and they don't have to go into these very complex algorithmic cells that refer either to another sheet or another tab and have to spend 15 minutes chasing around how this assumption was built. They allow you to see the numbers. The other thing I do is I look for any hard coded numbers. Hard coded numbers drive me absolutely batshit, which leads me to the third thing because where does this number come from? Now, where we do want 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?
(28:48):
So really those are the three things. It says, "Built by a professional, this is someone I can work with." Or built by Jim, who's the guy at the bottom of the totem pole that's told, "Build a model."
Host: Paul Barnhurst (29:01):
It's funny you mention 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's presented to you, if 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, "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 differently.
Guest: Oren Klaff (29:33):
Because a lot of young people think built by a professional means algorithms 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 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.
Host: Paul Barnhurst (30:07):
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 for? Go to fminstitute.com/podcast. That is fminstitute.com/podcast and use code podcast for 15% off. I love that idea that a business user can operate because I've been guilty of that where I built some models and you're like, all right, that was way too complex. I should have simplified that. Anyone who's built a lot of models has done it at some point. But as you advance in your career, you really realise, keep it as simple as possible. Are 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.
(31:07):
So I think that's a great point there. So what would be the lesson you would, taking that back, what would you tell those people that are building the models? Obviously simplicity, structure matters, but any other advice you'd give them now as you look back?
Guest: Oren Klaff (31:25):
You have to understand what I'm doing to actually get the money. 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 because my side, most people need a software company. They go, "Hey, I have this great software company. It's got 40% market share. It's growing 20% year over year. It's got a great management team. They have an account with Microsoft." That is not a finance presentation. That is typically how people hear about a deal are a bunch of soft numbers and 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 not necessarily good investment.
(32:32):
I'm 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 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 product, software, market, partners, Instagram account, good followers, 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&A activity. They're $50 million of revenue, $17 million of EBITDA growing 22% 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 forward revenue because there are three AI companies who have just gone public who have holes in this particular gap.
(33:47):
If you look at the public company gap in this, 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, there's going to be competition for the couple of these companies that have this capability and the acquisition price is going to have to be 20 to 30 times four 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.
Host: Paul Barnhurst (34:20):
Yeah. As I'm hearing 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, 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 is all about working in Excel as writing complex formulas and being the math person, the nerd, so to speak.
(35:03):
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 you've talked a little bit about that, but anything you want to add there around storytelling?
Guest: Oren Klaff (35:20):
A million percent. When I go to pitch a deal to sell financial instrument, when I go to sell a security, 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 because if nothing's changing, they're just going to buy it from Target, use Microsoft, use Oracle, get it from Amazon. I'll give you an example of change that's very easy to understand. Now today, basically all college students are using AI to complete their work so they can drink more beer, talk to more girls, play more football and just avoid the rigours of having to do academic work. And so the entire system of academia is changing today underneath our feet. And so the value of a Harvard diploma is getting revalued on the market as we speak.
(36:26):
I don't have a business that's in it, but I have to lead with change and that is a story. So what else is changing? Sure. SaaS companies are losing 30, 40% of the value in the public markets because of the fear that AI can just duplicate the SaaS company. If you saw this press release, some venture firm duplicated every one of the last 15 or 20 Y Combinator companies using AI. 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 with our technology typically into this new market. So I'll give you another, I don't want to talk too abstractly. So the concrete example of that is if you look at AI, first it was the models and then it was the chips and then it was the data centres.
(37:27):
So what's happening is as the use of AI exploding in the business, and then it became tokens and token management, you keep drilling down to going, what is the constraint? 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 fibre cable. Can't get enough throughput out of the data centres through the fibre cable reliably. And so now people with the highest quality, highest throughput, highest redundancy, fibre cable are going to be the next explosive companies. They're going to go from industrial manufacturing firm, basically irrelevant like Nvidia was 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 fibre optic cable industry is changing. The tectonic plates are shifting and the new technologies are going to be the glass, whatever, whatever, and that is going to be able to open up the constraint and anybody with that technology is going to step in and going to have explosive growth." That's the business story.
(38:35):
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. Me as the guy out there in front of investors having to tell the story, if you can make it so I can make 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.
Host: Paul Barnhurst (39:10):
I love that you mentioned a number with it because one of my favourite books is Effective Data Storytelling. And one of the things that you see a lot with storytelling is you see this idea that, well, numbers speak for themselves. And I would 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 have to share that in a way that's forthcoming, but 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 like how you shared that. I think sometimes people don't realise that. All right, so I want to ask one 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.
(39:57):
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 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.
Guest: Oren Klaff (40:13):
So look, I think Pitch Anything I wrote because of my journey from analyst into raising money and running the end. 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 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, and that's why private equity, and that's why banks love PitchAnything 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. I have to take calls with guys who run billion dollar funds.
(41:10):
I work for two billion years. I work for Marvin Davis, and those guys are high status. Why? Everybody wants their money. Everybody supplicates to them. They can do anything they want. They have armies of people that work for them and just they're celebrities in finance and money. They're rich, the outward. Marvin Davis worked in the. He owned the Fox building in Los Angeles where many, many movies were filmed and just everybody treats him as the highest status person. And so when I 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 $15 billion from Masa Yoshison or they're getting $20 billion from the Sovereign Wealth Fund of the UAE, they don't come to that meeting late.
(41:58):
They come to meeting with you late to hear about your numbers and stuff. That is a status game happening for sure. And the way to correct that is you go, "Hey Marvin, welcome to the 10:05 meeting. Let me catch you up on what happened at the 10 o'clock meeting." 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 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 apologise and that is the way to start a call. 30 seconds into it, a billionaire apologising 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.
(42:53):
That's what Pitch Anything is about.
Host: Paul Barnhurst (42:55):
I have not read it. It's been added to my list, so I'll have to pick that up. Obviously I do a lot of selling, running my own business. I'm curious to dig into it more. So here we go. First one I want to ask you is, do you think Excel will ever die?
Guest: Oren Klaff (43:24):
Excel will never die. Rock and roll will never die and Excel will never die.
Host: Paul Barnhurst (43:27):
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?
Guest: Oren Klaff (43:36):
Income statement.
Host: Paul Barnhurst (43:37):
What about from the investor's perspective?
Guest: Oren Klaff (43:41):
Income statement.
Host: Paul Barnhurst (43:42):
Okay. What's your favourite LLM, like Claude, Copilot, ChatGPT, or is there something else
Guest: Oren Klaff (43:47):
Out there? Claude. Claude.
Host: Paul Barnhurst (43:49):
Claude. Not surprised. 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?
Guest: Oren Klaff (44:00):
Sensitivity.
Host: Paul Barnhurst (44:02):
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?
Guest: Oren Klaff (44:08):
Cost to acquire.
Host: Paul Barnhurst (44:09):
Do you believe financial models are the number one corporate decision-making tool?
Guest: Oren Klaff (44:15):
No.
Host: Paul Barnhurst (44:15):
What is?
Guest: Oren Klaff (44:16):
Bad judgement .
Host: Paul Barnhurst (44:17):
That's a fair way to say that. I had someone answer with politics, which would be close to bad judgement . All right. That wraps up the section there for the questions for you. I won't ask your opinion on circular references since you have a model.
Guest: Oren Klaff (44:29):
Ask me my opinion on circular - Okay.
Host: Paul Barnhurst (44:30):
Circular references, yes or no?
Guest: Oren Klaff (44:32):
No. Deal's over. If I have to open something and it starts with circular reference or external spreadsheet not found, same thing.
Host: Paul Barnhurst (44:40):
External links are the worst.
Guest: Oren Klaff (44:42):
Internal links not found. I'm like, "I can't work with this."
Host: Paul Barnhurst (44:47):
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?
Guest: Oren Klaff (44:53):
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. 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 and it's something that doesn't feed all the way through, I find integers instead of formulas. I find formulas that were just dragged out times 1.05% 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 4.5731271 as a cell five years out? I get that, but as I start pulling on threads and I see either the obvious mistakes, and you guys have probably covered them here, pulling cells all the way out, using integers, any complex formulas that I can't adjust, no summary page, but that's one thing.
(46:04):
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.
Host: Paul Barnhurst (46:27):
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?
Guest: Oren Klaff (46:35):
The best starting point is to read Pitch Anything because then you go, "I'm a true believer or Oren's head is full of dead insects. I don't want to read anything else that he's saying." Then once you go, "I agree," try one thing that the book tells you to do, and this is where most of my 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 enter my head and now I'm raising money on my own." Start with the book and then we follow up from there. Pitch anything. All
Host: Paul Barnhurst (47:10):
Right, perfect. Well, I'm going to read the book and I'll let you know if I think there's insects or value.
Guest: Oren Klaff (47:14):
Yes. Very good. Do let me know.
Host: Paul Barnhurst (47:17):
Will do. Well, thank you so much for joining us, Oren. It was a pleasure chatting with you. I loved having the perspectives from the other side of the table. Most people I talk to are still in the weeds in the modeling, so thank you so much. Really appreciate you carving out some time.
Guest: Oren Klaff (47:30):
Thank you, Paul. Very good.
Host: Paul Barnhurst (47:31):
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