Simple hacks: 1. Establish what’s ‘normal’ based on the context of the start up, toughest three current or potential competitors and examine its delta from the ‘abnormal’ projections. 2. Ask if that delta is explained by the MOAT and differentiation claimed by the start up. 3. Check for the traction that proves the delta. 4. Examine the unit economics and whether it aligns with the claimed capabilities and asset productivity, by the start up. 5. Establish the range of XIRRs assuming downside with the worst case coming true see if the fund economics allows one to invest. 6. Do not invest, even if the above is addressed, if pressured due to time trap.

Vision of Growth: They show the scale of what’s possible if all goes according to plan. Investors need to see the potential for substantial returns to back your idea. Business Mechanics: Projections shed light on the unit economics—pricing, costs, and customer acquisition. They’re the blueprint for how the business can sustain itself. Founder’s Preparedness: These numbers reflect the founder’s financial awareness and strategic thinking. Even for first-timers, a solid effort speaks volumes about their readiness to navigate challenges.

When assessing a startup's financial projections, it’s vital to evaluate their feasibility with a critical eye. Start by examining whether the growth rates and revenue targets are grounded in realistic expectations for the sector. Pay close attention to the foundational assumptions, including the estimated market potential and expense forecasts like customer acquisition costs. Analyze any available historical financial data to identify patterns or gaps that might challenge the validity of future predictions. By adopting a methodical approach and questioning the rationale behind each figure, you can differentiate between well-substantiated projections and overly ambitious estimations.

Key methods investors use to evaluate a startup's financial forecasts for investment: - Financial Projections - Burn Rate - Break-even Analysis - Market Potential - Customer Acquisition Costs (CAC) - Competitive Analysis - Scenario Analysis - Revenue Streams For early stage follow cut by 2, but allow the entrepreneurs to prove their creativity over years.

I start with the CRM ( marketing and sales pipeline ) and make a direct link to budgeted revenue. I do believe in 50 - 100 % growth, but the faster you grow the more working capital you need. Mostly that is financed by equity, and too often a follow-on financing round is not included in the financial plan. One of my SaaS companies grew in 10 years from 0 to 4 M in revenues and during the next 10 years from 4 to 100 M in revenues - with 4 financing rounds of 100 M. When doing a financial plan for Series A you could also show the impact of a much larger Series B 18 - 24 months down the road.