Startup Finance: Waiting for White Smoke

In just a few days, 135 cardinal electors will gather to elect a new pope. In the Vatican, the election of a new pope is signaled by “white smoke” - a clear sign that consensus has been reached. Until then, it's “black smoke” - uncertainty, speculation, and waiting. I thought you can make a nice metaphor out of this process and apply it to the field of startup finance. 

In my view, startup finance unfortunately still operates too often in black-smoke mode. Especially in the early stages. In my experience, the following can be observed very frequently:

• Revenue projections are unclear.
• Cash runway is misunderstood.
• Cap table scenarios are misaligned.
• Fundraising strategies lack narrative.
• No timely and accurate financial reporting.
• And so on…

This means that both the founding team and investors do not have complete transparency, and clarity about the financial situation of the startup. Since this situation is obviously unacceptable, every startup needs to have strong financial leadership that will help to turn black smoke into white. Not by “just doing the numbers” but by translating financial key performance indicators (i.e. contribution margin, EBITDA margin, ROI) into strategic clarity.

So next time you’re staring at your financials wondering what they’re really telling you, ask yourself: Is it time to stop operating in black smoke mode and to send up some white smoke? In my opinion this question is of course rather methaphoric. Of course you should be sending white smoke instead of black. Here is what you should consider for some startup finance key areas when you intend to send white smoke in the future.

Revenue Forecasts

In many startups, revenue forecasts are more hopeful guessing or should I rather say wishful thinking than strategic planning. Models with different scenarios are being created and numbers are thrown around, but the assumptions behind them are often foggy at best. 

This is like sending black smoke from the Vatican! Uncertainty, speculation, and a dangerous lack of alignment.

White smoke in revenue projections means:

• Clear assumptions.
• Logical growth paths.  
• Stress-tested scenarios.  
• A financial model that tells a story investors and teams can understand and trust.

Revenue forecasts shouldn’t be wishful thinking. They are rather a combination of data analysis, market knowledge and experience while taking into account the business objectives and strategies that may influence them. 

Is your revenue forecast sending black smoke into the sky? Or are you ready to declare white smoke and bring clarity to the path ahead?   

Cash Runway

I have seen it as a consultant with and as an employee,  in startups the founder, the board and key employees have different understandings of the cash runway. The founder believes the business has „12 months of runway” - until a few questions reveal that there is disagreement. Other key people believe it is 18 month! Or maybe only 6 month if key assumptions shift. This is like sending black smoke from the Vatican! Disagreement misleads the organization. For some it signals a false sense of urgency and for others, and even worse, of security. As leader you have to find agreement and communicate it into the world just like white smoke ends the conclave.

White smoke around cash runway means:  

• Alignment on monthly burn.
• Clear cash flow forecasting.
• Contingency plans for different funding and operational scenarios.

It’s crucial to understand that the cash runway is your startup’s oxygen. You can't afford everyone privately guessing your runway.  

Is your runway signaling real white smoke or are you stuck in black smoke territory, hoping for the best?  

Cap Table Scenarios

Cap tables tell the story of ownership of the business. All owners must be clear on how the ownership is structured and allocated. When cap tables are messy, outdated, or misunderstood, they send the signal of black smoke from the heart of the business. Confusion, surprises, mistrust will ensue and hurt the business and the value of the business.

The white smoke scenario in cap table management means:  

• Clean tables of shares and ownership.
• Up-to-date cap tables.
• Clear projections of dilution effects.
• Scenario planning for fundraising rounds and exits.

Cap table clarity is crucial to keep owners aligned. It isn’t just for closing the next round - it's about building long-term trust with your investors, employees (think ESOP) and your founding team. 

Are your ownership structures setting off black smoke? Or is your startup ready for a white smoke moment of alignment and clarity?  

Fundraising Strategy

Too often, startups go into the process of raising venture capital without a clear direction. It is important to consider various criteria and, among other things, to know the investment criteria of the venture capitalists you want to approach. Unfortunately, getting started with fundraising without excellent preparation will not lead to success. Before approaching investors you have to have a conclave of sorts that forges an agreement among all stakeholders. The black smoke scenario in fundraising is to have no clear fundraising strategy, the team makes random pitches to VC s, inconsistent messaging from the stakeholders in the business.

You'll communicate alignment (white smoke) when:  

• You build a strong financial and strategic narrative.
• Your support your narrative with aligned revenue projections
• You are aligned on the cash runway projections
• You target the right investors at the right time.
• You understand what you’re asking for - and why.

How much equity do you want to raise? To which valuation? Pre-money or post-money valuation? What are you using the money for? - are some questions to consider. And keep in mind that fundraising isn’t just about getting money. It’s about creating strategic momentum for your startup.  

Is your fundraising strategy emitting black smoke confusion? Or have you aligned all stakeholders, ready to send white smoke, signaling you are in control of the business?  

Financial Reporting

If financial reports are late, inaccurate, or irrelevant, you’re not leading — you’re reacting. It creates a scenario of disagreement among stakeholders, because some base their suggestions on the (faulty) reporting, while other make mental or explicit corrections to the report. This is like sending black smoke from the Vatican, signaling disagreement and uncertainty.

That’s pure black smoke:

• Outdated numbers.
• Poor decisions.
• Missed opportunities
• Disagreement on the path forward.

Financial reporting worthy of emitting white smoke means:

• Timely monthly closes.
• Reliable, relevant KPIs.
• Reporting that informs decision making - not just compliance.

Good reporting doesn’t just tell you what happened. It helps you decide what should happen next.  

Is  your financial  reporting team sending black smoke signals? Or is your financial reporting a source of "white smoke" clarity for your entire startup?  

Turning Black Smoke into White Smoke – The Mission of Startup Finance

I’ve shared thoughts on how startups can move from black smoke to white smoke in key areas like revenue projections, cash runway, cap table management, fundraising strategy, and financial reporting.

In early-stage startups, financial leadership is not just about “doing the numbers.” It’s about turning messy signals into sharp strategic insights. It’s about sending a clear message - to founders, teams, and investors - that you know where you stand, and you know where you are going.

A finance leader should insist with the founder or CEO that a conclave is help under the rule the cardinals in the Vatican do elect a new pope. You need to achieve alignment on 

• Revenue projections
• Cash runway
• Cap table management
• Fundraising strategy
• Financial reporting

The team and all stakeholders must commit to align and communicate the alignment. The stakeholders must commit to avoid the black smoke of disagreement and signal the business their agreement with white smoke. Turning black smoke into white smoke will: 

Replace guesswork with grounded planning. Replace confusion with clarity. Replace hope with thoughtful strategy.

Strong startup finance doesn’t wait passively for clarity to emerge. It creates clarity actively, deliberately, and consistently. If you want to build a startup that earns trust and moves fast, make it your mission to send up white smoke early and often. Because in the end, startups don’t just run on money. They run on confident and aligned management.