The Fastest Way to Lose an Investor’s Interest? Unrealistic Financials

Imagine this: You’re in the middle of pitching your startup to a room full of investors.

You click to the financial slide, proudly showcasing your projected revenue—$100 million by Year 3.

Silence.

One investor leans back, arms crossed.

Another glances at their phone.

The meeting ends in record time.

What just happened?

Your financial projections weren’t just ambitious—they were delusional.

And nothing makes investors check out faster than numbers that don’t add up.

Why Unrealistic Financials Are a Deal Breaker

Investors don’t expect you to be a financial wizard, but they do expect you to be rational. When founders present projections that seem detached from reality, it signals one of two things:

• You don’t understand your business. If you can’t explain how you’ll get to those numbers, why should they trust you?

• You’re trying to bluff your way through. Investors have seen thousands of pitches. They can spot a fantasy model instantly.

Take this real-life example: A SaaS founder claimed their startup would hit $50M ARR by Year 2. When asked about churn rate or CAC (Customer Acquisition Cost), they had no answers. The meeting ended in 12 minutes.

Common Financial Red Flags

1. The Perfect Growth Curve
   Your numbers look like a hockey stick—zero dips, no challenges. This isn’t how real businesses grow.

2. The Magic $100M Projection
   Saying you’ll hit nine figures in revenue within three years, with no clear roadmap, raises eyebrows.

3. Ignoring Costs & Unit Economics
   Revenue isn’t profit. If you haven’t factored in costs, margins, and customer acquisition, your numbers mean nothing.

How to Build Financial Projections That Investors Trust

Investors aren’t expecting a perfect financial model, but they do expect a credible one. Here’s how to do it:

1. Start with a Bottom-Up Approach

Instead of dreaming up a giant market share, break it down:

• How many customers will you acquire per month?

• What’s your pricing model?

• What’s your churn rate?

Example: Instead of saying, “We’ll hit $100M,” say:
“We currently acquire 500 customers/month at a CAC of $50. With an LTV of $1,200, we expect to grow MoM by 15%.”

2. Show Realistic Growth Assumptions

• Don’t assume revenue will double every year without explaining how.

• Factor in challenges like market fluctuations, seasonality, and scaling difficulties.

Example: Instead of a hockey-stick curve, show a ramp-up phase, steady growth, and eventual plateaus.

3. Know Your Unit Economics

You should be able to answer these questions instantly:

• What’s your CAC (Customer Acquisition Cost)?

• What’s your LTV (Lifetime Value)?

• What’s your burn rate and runway?

Example: “For every $100 spent on marketing, we generate $500 in revenue. Our churn is 5%, keeping retention strong.”

4. Factor in Costs

Your revenue means nothing if you ignore:

• Operational costs

• Hiring expenses

• Infrastructure costs

Example: “At scale, our gross margin will be 70%, with fixed costs stabilizing at $200K/month.”

YOUTUBE TREASURE

👉My Pick: Hardwork Doesn’t Build Wealth