Why This Matters
At pre-seed and seed stages, investors aren’t just betting on your product; they’re betting on your thinking. And nothing reveals a founder’s thinking more clearly than their financial model.
But here’s the truth:
Most early-stage founders treat financial modeling like a formality, a spreadsheet they make for investors, not for themselves.
“That’s the biggest mistake you can make.”
A solid financial model isn’t about “numbers.” It’s about narrative clarity, showing how your product, pricing, and market fit together into a sustainable, scalable business.
What Investors Really Look For
At early stages, investors know your forecasts will be wrong. What they’re really testing is your logic.
They want to see:
- How do you think about growth drivers (acquisition, retention, monetization)
- How do you handle assumptions and constraints
- Whether your unit economics make sense at scale
According to Dealroom’s 2024 investor survey, 62% of European seed investors said that “clarity of financial logic” mattered more than absolute revenue numbers when evaluating early-stage startups.
Financial modeling = storytelling through numbers.
Step 1: Build Your Model Backward from Reality
Start with what’s real, not what’s ideal.
- How many customers or users do you actually have?
- What’s your current burn rate?
- What are your top 3 cost drivers?
From there, forecast how reality evolves, not how it magically transforms.
Your model should include:
- Revenue assumptions: How many paying users will you acquire monthly? What’s the average ticket size?
- Cost structure: Include COGS, headcount, tech, and marketing separately.
- Runway & cash flow: How long can you survive on your current burn?
A great model doesn’t show how fast you grow. It shows how long you last while learning.
Step 2: Nail Your Unit Economics
Unit economics = your business model in one equation.
For SaaS, for example:
LTV (Customer Lifetime Value) / CAC (Customer Acquisition Cost)
But the same logic applies to any business:
- Marketplace: Take rate × transaction volume
- E-commerce: Gross margin per order – acquisition cost
- Subscription: ARPU × retention period – CAC
If your LTV:CAC ratio is below 2:1, you’re not yet scalable.
If it’s above 3:1, you’re attractive, but investors will want proof it’s sustainable.
Unit economics tell investors: “We understand our levers, not just our vision.”
Step 3: Build Scenarios, Not Predictions
Don’t show one linear forecast. Build three versions of your model:
- Conservative: Lean, slow growth, longer runway.
- Base case: What you expect with the current plan.
- Aggressive: Fast scaling, higher spend, tighter runway.
Investors don’t want guarantees; they want to see how you think in constraints.
The best founders use models as decision tools, not investor theater.
Step 4: Use Tools That Fit Your Stage
At pre-seed, don’t overcomplicate with 20-tab Excel beasts. Use simple frameworks:
- Excel Sheets templates for monthly runway & scenario planning
- Or build a light version that integrates with your CRM or investor updates
Keep it transparent, lightweight, and easy to update.
Step 5: Turn Numbers into Narrative
When you pitch, investors aren’t reading every cell; they’re listening for coherence.
Structure your narrative:
- “We make money by…” (unit economics)
- “Our growth levers are…” (key assumptions)
- “We can reach X scale before needing more capital.” (runway logic)
Your model is your story, told in spreadsheets instead of slides.
Final Thought
You don’t build a financial model to impress investors. You build it to become the kind of founder they want to back, one who thinks in systems, not slogans.
Tools like Equisy can help you merge investor signals with your financial readiness, so you always know when your numbers and narrative align.
Because investor-ready isn’t about perfection, it’s about precision.
