What Investors Actually Want to See
Most first-time founders either skip financial projections entirely or create fantasy spreadsheets with hockey-stick growth curves and no logical foundation. Both are wrong. Investors want to see that you can think about your business as a system of inputs and outputs.
The goal is not to predict the future accurately -- nobody can. The goal is to show that you understand the key drivers of your business and can reason about how changing one variable affects everything else. A thoughtful model with conservative assumptions is worth more than an aggressive model with no logic behind it.
For SaaS startups specifically, investors look at a handful of metrics that tell the story of your business. Here is what those metrics are and how to project them.
The Key Rows Every SaaS Model Needs
Your financial model should include these metrics, at minimum:
New Customers per Month: How many new paying customers do you acquire each month? This should be grounded in your sales capacity and marketing budget, not in wishful thinking.
Monthly Churn Rate: What percentage of customers cancel each month? For early-stage SaaS, 5-8% monthly churn is common. Below 3% is excellent. Above 10% means your product has a retention problem.
ARPU (Average Revenue Per User): How much does each customer pay per month? Include any upsells or plan tiers.
MRR (Monthly Recurring Revenue): Customers multiplied by ARPU, minus churned revenue. This is the single most important metric.
CAC (Customer Acquisition Cost): How much does it cost to acquire one customer? Include all marketing and sales costs.
COGS (Cost of Goods Sold): Direct costs to serve each customer -- hosting, support, third-party APIs.
Gross Margin: Revenue minus COGS, expressed as a percentage. Healthy SaaS is 70-85%.
Operating Expenses: Everything else -- salaries, office, software, legal, marketing overhead.
EBITDA / Net Income: What is left after all expenses. Negative is normal for early-stage startups, but you should show a path to profitability.
Cash Balance: How much money you have in the bank at the end of each period. This tells investors when you will need more funding.
Example 3-Year SaaS Projection
Here is an example projection for a B2B SaaS startup with a $79-109/month price point. Month-by-month for Year 1 key milestones, quarterly for Years 2-3.
| METRIC | M3 | M6 | M12 | Y2 | Y3 |
|---|---|---|---|---|---|
| Customers | 15 | 45 | 120 | 400 | 1,000 |
| ARPU | $79 | $79 | $89 | $99 | $109 |
| MRR | $1,185 | $3,555 | $10,680 | $39,600 | $109,000 |
| Monthly Churn | 8% | 6% | 4% | 3% | 2.5% |
| CAC | $150 | $120 | $100 | $80 | $65 |
| Gross Margin | 65% | 70% | 75% | 78% | 80% |
| ARR | $14K | $43K | $128K | $475K | $1.3M |
Common Mistakes
Hockey stick without logic: Showing 10x growth in Year 2 without explaining what changes to drive that growth. Every growth inflection should correspond to a specific action -- hiring sales reps, launching a new channel, adding a product tier.
Ignoring churn: Many first-time founders model only new customer acquisition and forget that customers leave. At 5% monthly churn, you lose half your customers every year. Churn is the silent killer of SaaS businesses.
Unrealistic CAC: Assuming you can acquire customers for $20 when your product costs $79/month and you are targeting enterprise buyers. Research benchmarks for your market -- CAC varies dramatically by segment.
Missing cash runway: Not showing when the money runs out. Investors need to know your burn rate and how long your current funding lasts. If you are raising $500K, show exactly how many months of runway that gives you.
Over-precision: Projecting revenue to the dollar three years out. Round numbers are fine -- they show you understand that these are estimates, not guarantees.
Need help building the financial model for your startup? Email us at partners@awasero.com or learn about our venture studio model.