Financial Projections: What Investors Actually Want to See (Template)

In 2019, Figma walked into their Series B pitch with a 3-year financial model. Their projections showed $10M ARR growing to $50M in three years with 85% gross margins. Investors saw the logic immediately—the bottoms-up customer acquisition math, the efficient hiring plan, the clear path to cash flow breakeven. They raised $50M at a $400M valuation in 6 weeks.

Compare this to a founder I met who spent 3 months building a 5-year model with 50 tabs. It had Monte Carlo simulations, sensitivity matrices, and macroeconomic assumptions. Investors passed in 48 hours. Why? They couldn't find the revenue assumptions in the complexity. The model answered questions no one asked while hiding the ones that mattered.

Investor-grade financial projections aren't about precision—they're about credibility. This guide shows you exactly what investors want to see and how to build it.

The 3-Year Projection Structure: What Matters

Investors want 3 years of projections. Not 5 (too speculative). Not 1 (not enough vision). Three years hits the sweet spot of credibility and ambition.

Required Statements:

Statement	Purpose	Investor Focus
Revenue Model	How you make money	Growth trajectory, unit economics
Operating Model	How you spend money	Efficiency, hiring plan
Cash Flow Model	When you run out of cash	Runway, funding needs
Headcount Plan	Who you hire when	Burn rate, milestones
Key Assumptions	What drives the model	Credibility, understanding

The Monthly vs. Annual Debate:

View	Use Case	Investor Preference
Monthly (Year 1)	Detailed planning, runway	Required for Year 1
Quarterly (Year 2)	Trend analysis, milestones	Acceptable for Year 2
Annual (Year 3)	Strategic vision, exit	Standard for Year 3

Example: Proper Projection Structure

Year 1 (Monthly):

Month	Revenue	OpEx	EBITDA	Cash	Headcount
Jan	$10K	$45K	($35K)	$465K	5
Feb	$12K	$47K	($35K)	$430K	6
Mar	$15K	$50K	($35K)	$395K	6
...	...	...	...	...	...
Dec	$85K	$95K	($10K)	$180K	12

Year 2 (Quarterly):

Quarter	Revenue	OpEx	EBITDA	Cash	Headcount
Q1	$300K	$300K	$0	$280K	15
Q2	$450K	$340K	$110K	$390K	18
Q3	$600K	$380K	$220K	$610K	20
Q4	$800K	$420K	$380K	$990K	22

Year 3 (Annual):

Metric	Amount	Growth
Revenue	$5M	525%
Gross Profit	$4M	80% margin
OpEx	$2.5M	50% of revenue
EBITDA	$1.5M	30% margin
Cash	$2.5M	Profitable
Headcount	35	59% growth

Revenue Forecasting: The Bottoms-Up Approach

Top-down projections ("We'll capture 1% of a $10B market") signal amateur hour. Investors want bottoms-up revenue built from unit economics.

The Bottoms-Up Revenue Formula:

Revenue = Customers × ARPU × Retention

Or for SaaS:

ARR = New Customers × ACV + Existing Customers × Retention × Expansion

Example: SaaS Revenue Model

Company: B2B Analytics Platform

Year 1 Monthly Model:

Month	New Customers	Churned	Total Customers	ARPU	MRR	ARR
Jan	2	0	2	$500	$1K	$12K
Feb	3	0	5	$500	$2.5K	$30K
Mar	4	0	9	$500	$4.5K	$54K
...	...	...	...	...	...	...
Dec	15	1	95	$750	$71K	$852K

Key Assumptions Documented:

Assumption	Value	Rationale
New customers/month	Starts at 2, grows to 15	Based on sales capacity
Churn rate	1% monthly	Industry benchmark for B2B
Starting ARPU	$500	Current pricing
ARPU growth	+$20/month	Upsell to higher tiers
Sales cycle	45 days	Based on current pipeline

Real Example: Figma's Series B Model (Reconstructed)

Metric	Year 1	Year 2	Year 3	Assumption
Seats (000s)	50	200	500	Viral growth, team expansion
ARPU	$120	$140	$160	Upsell to Pro/Org
Gross Retention	95%	95%	95%	Strong product-market fit
Net Retention	110%	120%	130%	Land-and-expand model
Revenue	$6M	$28M	$80M	Bottoms-up calculation

Figma's model showed viral seat growth and strong expansion revenue—exactly what investors wanted to see.

Revenue Build by Channel:

Break down revenue by acquisition channel for credibility:

Channel	Year 1	Year 2	Year 3	CAC	LTV
Inbound (SEO/content)	$200K	$800K	$2M	$500	$5K
Outbound sales	$400K	$1.5M	$4M	$3K	$8K
Partnerships	$100K	$500K	$1.5M	$1K	$6K
Product-led growth	$152K	$1.2M	$4.5M	$200	$4K
Total	$852K	$4M	$12M	$850	$5.5K

Expense Modeling: The Hiring-Driven Approach

For startups, expenses = people. Model headcount first, everything else follows.

The Hiring Plan Framework:

Role Category	Month 6	Month 12	Month 18	Month 24	Month 36
Engineering	3	6	10	15	25
Sales	1	3	6	10	15
Marketing	1	2	4	6	10
Customer Success	1	2	4	7	12
G&A (Admin, Finance)	1	2	3	4	6
Total Headcount	7	15	27	42	68

Cost Per Hire by Function:

Function	Base Salary	Benefits (20%)	Total Cost/Hire	Annual Cost
Engineering	$150K	$30K	$180K	$15K/mo
Sales	$80K + $40K variable	$24K	$144K	$12K/mo
Marketing	$100K	$20K	$120K	$10K/mo
Customer Success	$70K	$14K	$84K	$7K/mo
G&A	$90K	$18K	$108K	$9K/mo

Operating Expense Build:

Category	Month 6	Month 12	Month 18	Month 24	Month 36
People Costs
Salaries & Benefits	$85K	$180K	$324K	$504K	$816K
Non-People Costs
Software/Tools	$5K	$10K	$18K	$28K	$45K
Marketing spend	$15K	$40K	$80K	$120K	$200K
Office/Remote	$3K	$8K	$15K	$25K	$40K
Professional services	$5K	$10K	$15K	$20K	$30K
Other	$2K	$5K	$10K	$15K	$25K
Total OpEx	$115K	$253K	$462K	$712K	$1.156M

Example: Full Operating Model

Metric	Month 1	Month 6	Month 12	Month 18	Month 24
Revenue	$10K	$50K	$150K	$350K	$600K
Gross Profit	$8K	$40K	$120K	$280K	$480K
Gross Margin	80%	80%	80%	80%	80%
People costs	$45K	$85K	$180K	$324K	$504K
Non-people costs	$15K	$30K	$73K	$138K	$208K
Total OpEx	$60K	$115K	$253K	$462K	$712K
EBITDA	($52K)	($75K)	($133K)	($182K)	($232K)
EBITDA Margin	-520%	-150%	-89%	-52%	-39%

Cash Flow Projections: The Runway Calculator

Cash flow projections show when you need to raise money—and how much.

Cash Flow Build:

Item	Month 1	Month 6	Month 12	Month 18	Month 24
Starting Cash	$500K	$292K	$60K	($150K)	$1.35M
Cash from Operations
Net Income	($52K)	($75K)	($133K)	($182K)	($232K)
+ Depreciation	$2K	$3K	$5K	$8K	$12K
- Increase in AR	($3K)	($15K)	($30K)	($40K)	($50K)
+ Increase in AP	$5K	$10K	$20K	$30K	$40K
+ Deferred Revenue	$2K	$10K	$25K	$50K	$75K
Cash from Operations	($46K)	($67K)	($113K)	($134K)	($155K)
Cash from Investing
Equipment/Software	($10K)	($5K)	($20K)	($30K)	($40K)
Cash from Financing
Equity raise	$0	$0	$0	$2M	$0
Net Cash Change	($56K)	($72K)	($133K)	$1.836M	($195K)
Ending Cash	$444K	$220K	($73K)	$1.686M	$1.155M

The Funding Schedule:

Round	When	Amount	Runway Post-Raise	Milestone
Seed	Start	$500K	12 months	$50K MRR
Series A	Month 18	$2M	18 months	$350K MRR
Series B	Month 30	$8M	24 months	$1.5M MRR

Cash Cushion Rules:

Cash Position	Months of Burn	Status	Action
> 12 months	Comfortable	Green	Focus on growth
9-12 months	Normal	Yellow	Begin investor conversations
6-9 months	Warning	Orange	Active fundraising
3-6 months	Critical	Red	Bridge round or cuts
< 3 months	Emergency	Black	Survival mode

Key Assumptions: The Heart of Credibility

Your assumptions make or break your model. Document everything.

Required Assumption Categories:

Category	Key Assumptions	Source
Market	TAM, SAM, SOM	Industry research, bottoms-up
Product	Pricing, packaging, roadmap	Customer interviews
Sales	Conversion rates, cycle length	Historical data, benchmarks
Marketing	CAC by channel, spend efficiency	Test campaigns
Retention	Churn, expansion, LTV	Cohort analysis
Operations	Headcount timing, productivity	Capacity planning
Financial	Tax rate, DSO, DPO	Industry norms

Example: Assumptions Documentation

Revenue Assumptions:

Assumption	Value	How We Got Here	Confidence
Starting ACV	$12K	Current average deal size	High
ACV growth	15% YoY	Upsell to enterprise tier	Medium
New logos/month	5 → 25	Sales hiring plan	Medium
Win rate	25%	Current funnel metrics	High
Sales cycle	60 days	Average time to close	High
Gross retention	95%	Current performance	High
Net retention	115%	Expansion revenue target	Medium

Cost Assumptions:

Assumption	Value	How We Got Here	Confidence
Engineering salary	$150K	Market rate, SF	High
Sales OTE	$120K	$80K base + $40K variable	High
Benefits load	20%	Standard burden rate	High
COGS	20%	Hosting + support costs	High
Marketing %	25%	Growth-stage benchmark	Medium

Investor Red Flags: What Makes Them Pass

Certain patterns in projections trigger immediate rejection.

Automatic Red Flags:

Red Flag	Why Investors Hate It	The Fix
Hockey stick without explanation	Unrealistic	Show the math behind acceleration
100%+ margins	Doesn't understand COGS	Research industry benchmarks
No headcount growth	Naive about scaling	Model hiring by function
Flat CAC as you scale	Violates law of diminishing returns	Show CAC increases
Negative churn in Year 1	Unprecedented	Use conservative retention
No competitive response	Ignores market dynamics	Model pricing pressure
Founder salaries >$200K	Misaligned incentives	Cap at $150K until profitable
No working capital	Cash flow ≠ net income	Model AR, AP, inventory

The "Too Good to Be True" Test:

If your projections show:

• Growth faster than the fastest company in your space achieved
• Margins higher than public company leaders
• Retention better than best-in-class benchmarks
• CAC lower than any comparable

You're modeling fantasy, not business. Investors will spot it immediately.

Common Mistakes Founders Make

Mistake 1: The Precision Trap

Building a model with 50 tabs and Monte Carlo simulations. Investors don't trust complex models—they trust simple ones they can audit.

Fix: 5-8 tabs max. Revenue, OpEx, Cash Flow, Headcount, Assumptions, Summary, Sensitivities.

Mistake 2: The Top-Down Delusion

"We'll capture 2% of a $50B market." Every investor has heard this. It signals you haven't thought about how to get customers.

Fix: Build bottoms-up from sales capacity, marketing spend, and conversion rates.

Mistake 3: The Static CAC

Assuming customer acquisition cost stays flat as you scale. It always increases.

Fix: Model CAC increasing 20-30% each year as you exhaust low-hanging fruit.

Mistake 4: The Vanity Metrics

Focusing on revenue, ignoring unit economics. Revenue without contribution margin is meaningless.

Fix: Lead with LTV/CAC, payback period, and gross margin by cohort.

Mistake 5: The Working Capital Amnesia

Assuming cash = profit. For growing businesses, cash lag can be 30-60 days.

Fix: Model accounts receivable, payable, and inventory changes explicitly.

Mistake 6: The Eternal Growth

Showing 100% growth forever. All businesses mature.

Fix: Show growth declining: 300% → 200% → 150% → 100% → 50% → 30%.

The Template Structure: Build It Yourself

Here's the exact structure investors want to see.

Tab 1: Executive Summary

Metric	Year 1	Year 2	Year 3	CAGR
Revenue	$500K	$2M	$6M	246%
Gross Margin	75%	78%	80%	-
EBITDA	($400K)	($200K)	$600K	-
EBITDA Margin	-80%	-10%	10%	-
Headcount	10	20	35	-
Cash Balance	$100K	$500K	$2M	-
Funding Required	$1M	-	-	-

Tab 2: Revenue Model (Monthly Year 1, Quarterly Years 2-3)

Month	New Customers	Churn	Ending	ARPU	MRR	ARR
Jan	2	0	10	$500	$5K	$60K
Feb	3	0	13	$500	$6.5K	$78K
...	...	...	...	...	...	...
Dec	15	1	95	$750	$71K	$852K

Tab 3: Operating Model

Category	Year 1	Year 2	Year 3
Revenue	$500K	$2M	$6M
COGS	($125K)	($440K)	($1.2M)
Gross Profit	$375K	$1.56M	$4.8M
Gross Margin	75%	78%	80%
Sales & Marketing	($300K)	($800K)	($1.8M)
R&D	($200K)	($400K)	($1M)
G&A	($100K)	($200K)	($400K)
Total OpEx	($600K)	($1.4M)	($3.2M)
EBITDA	($225K)	$160K	$1.6M
EBITDA Margin	-45%	8%	27%

Tab 4: Cash Flow Model

Item	Year 1	Year 2	Year 3
Net Income	($225K)	$160K	$1.6M
+ Depreciation	$20K	$50K	$100K
- Δ Working Capital	($75K)	($100K)	($200K)
Cash from Operations	($280K)	$110K	$1.5M
CapEx	($50K)	($100K)	($200K)
Equity Financing	$1M	$0	$0
Net Cash Change	$670K	$10K	$1.3M
Ending Cash	$670K	$680K	$1.98M

Tab 5: Headcount Plan

Role	Month 6	Month 12	Month 18	Month 24	Month 36
Engineering	3	5	8	12	18
Sales	1	3	5	8	12
Marketing	1	2	3	5	8
CS/Support	1	2	4	6	10
G&A	1	1	2	3	5
Total	7	13	22	34	53
Monthly Cost	$85K	$160K	$275K	$425K	$660K

Tab 6: Key Assumptions

Category	Assumption	Value	Source
Market	TAM	$5B	Industry report
Pricing	Starting ACV	$12K	Current deals
Sales	Win rate	25%	Funnel data
Retention	Monthly churn	2%	Current rate
Costs	CAC	$3K	Marketing spend
Growth	Revenue growth	300%	Capacity plan

Tab 7: Sensitivities

Scenario	Revenue Y3	EBITDA Y3	Cash Y3	Likelihood
Bull case	$9M	$2.5M	$3.5M	20%
Base case	$6M	$1.6M	$2M	60%
Bear case	$3M	$400K	$800K	20%

How to Present Projections to Investors

The 5-Minute Pitch Format:

1. Show the destination (30 seconds): "In 3 years, we'll be a $6M ARR business with 30% EBITDA margins"

2. Show the path (2 minutes): "We'll get there by growing from 10 to 95 customers, expanding from $500 to $750 ARPU"

3. Show the economics (1 minute): "Our LTV/CAC is 5× with 12-month payback. We'll invest $800K in sales and marketing to drive growth"

4. Show the capital needs (1 minute): "We need $1M to fund 18 months of runway. That gets us to $350K MRR and cash flow breakeven"

5. Show the risks (30 seconds): "Key risks are CAC increasing and enterprise sales taking longer. We've modeled bear cases for both"

What Investors Will Ask:

Question	What They Want to Know	How to Answer
"Walk me through your revenue build"	Do you understand your business?	Show the bottoms-up math
"What happens if CAC doubles?"	Have you stress-tested?	Show sensitivity analysis
"Why is Year 2 growth only 300%?"	Are you being realistic?	Explain market size, capacity constraints
"Where does the $1M go?"	Are you capital efficient?	Show detailed use of funds
"What if you don't hit projections?"	Do you have a plan B?	Show contingency scenarios

Conclusion: Projections as Your Roadmap

Financial projections aren't just for fundraising—they're your operating plan. The discipline of building a bottoms-up model forces you to think through every aspect of your business.

Build It Right:

• Bottoms-up revenue from unit economics
• Hiring-driven expense model
• Cash flow that accounts for working capital
• Assumptions you can defend with data
• Sensitivities that show you've stress-tested

Present It Clearly:

• Lead with the 3-year summary
• Show the monthly build for Year 1
• Focus on milestones and capital needs
• Be ready to defend every assumption

Remember: Investors don't expect you to hit your projections exactly. They expect you to understand your business deeply. A thoughtful, well-built model demonstrates that understanding—and that's what gets you funded.

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Related Guides

• Financial Modeling for Startups
• Burn Rate Management
• Unit Economics Deep Dive
• Cash Flow Management
• How to Pitch Your Startup