Financial Projections for Series A: How to Build a Model Investors Trust
Learn how to build a financial model that demonstrates your understanding of the business and gives investors confidence in your planning ability.
Your financial model is one of the most important documents in your Series A fundraise. It's not just about the numbers—it's about demonstrating that you understand your business deeply enough to predict where it's going.
Investors know your projections won't be exactly right. What they're evaluating is your thinking: Are your assumptions reasonable? Do you understand your unit economics? Can you articulate the key drivers of your business?
This guide walks you through building a financial model that will hold up to investor scrutiny. For the broader context on Series A preparation, see our Complete Guide to Series A Readiness.
The Goal of Your Model
Your model should answer three questions: (1) How will you deploy the capital you're raising? (2) What results will that capital produce? (3) How does this set you up for the next raise?
Why Financial Projections Matter
A strong financial model serves multiple purposes in your fundraise:
Demonstrates Understanding
Shows you understand the levers that drive your business and can think strategically about resource allocation.
Supports Valuation
Gives investors a basis for valuing your company based on projected future performance.
Aligns Expectations
Creates shared understanding of what you'll accomplish with the capital and what milestones to expect.
Enables Scenario Planning
Allows you and investors to stress-test assumptions and understand risks.
What Investors Evaluate
- Assumption quality: Are your growth rates, conversion rates, and efficiency metrics realistic?
- Internal consistency: Do all the pieces fit together logically?
- Historical connection: Do projections build sensibly from your actual results?
- Capital efficiency: Does the use of funds make sense for the projected outcomes?
- Path to next round: Will you hit the milestones needed to raise Series B?
Model Structure & Components
A well-structured model is organized into clear tabs that flow logically. Here's the recommended structure:
Assumptions Tab
All key inputs in one place. Growth rates, pricing, conversion rates, hiring plans, and other assumptions should be clearly labeled and easy to modify for scenario analysis.
Revenue Build Tab
Bottom-up revenue model showing how you get from leads to customers to revenue. Should include cohort logic for retention and expansion.
Headcount Tab
Detailed hiring plan by role, department, and timing. This drives the majority of your expense base and shows how you'll deploy capital.
P&L Tab
Monthly P&L pulling from revenue and expense builds. Standard format with revenue, COGS, gross profit, operating expenses by function, and EBITDA.
Cash Flow Tab
Cash flow projection showing operating cash flow, working capital impacts, and runway calculations. Critical for understanding timing of future raises.
Metrics Dashboard
Key SaaS metrics calculated from the model: ARR growth, net retention, LTV:CAC, burn multiple, etc. Makes it easy to see the story.
Time Horizons
- Historical: 12-24 months of actual results for context
- Year 1: Monthly detail for the next 12-18 months
- Years 2-3: Quarterly or annual projections
- Total horizon: 3 years is standard; 5 years only if specifically requested
Revenue Modeling
Revenue should be modeled bottom-up from the activities that drive it. Top-down models ("we'll capture 1% of a $50B market") don't impress investors.
SaaS Revenue Build Example
Revenue Components to Model
New Business
Leads → Opportunities → Closed Won → New ARR. Build from marketing spend and sales capacity.
Expansion
Upsells, cross-sells, and seat expansion from existing customers. Model as percentage of existing ARR or per-customer rate.
Churn
Customer losses and downgrades. Model by cohort or as rolling percentage of ARR. Be realistic—investors check.
Net Revenue
New + Expansion - Churn = Net New ARR. Your net retention rate emerges from these components.
Avoid Hockey Sticks
Projections that show flat growth for 6 months then sudden acceleration raise red flags. Growth should build logically from the activities you're planning (hiring, marketing spend, product launches).
Expense & Headcount Planning
For most startups, 70-80% of expenses are people costs. Your headcount plan is the core of your expense model and the primary use of funds.
Headcount Planning Framework
| Department | Key Driver | Planning Approach |
|---|---|---|
| Sales | ARR targets | Quota capacity model (reps × quota = capacity) |
| Marketing | Pipeline needs | Based on leads needed to hit sales targets |
| Customer Success | Customer count | CSM ratio (e.g., 1 CSM per 30 customers) |
| Engineering | Roadmap | Based on product priorities and technical debt |
| G&A | Total headcount | Scales with company size (HR, finance, ops) |
Non-Headcount Expenses
- Software & tools: Model per-employee costs or specific line items
- Marketing spend: Based on lead generation needs from revenue model
- Infrastructure: Hosting, cloud services—often scales with usage
- Professional services: Legal, accounting, recruiting fees
- Facilities: Office costs if applicable
Use of Funds
Be specific about how you'll deploy the capital you're raising:
Example: $10M Series A Use of Funds
Key Assumptions to Document
Your assumptions tab should clearly document every key input. Investors will scrutinize these and ask about your justification.
Revenue Assumptions
- Average contract value (ACV) and expected trends
- Sales cycle length
- Lead-to-opportunity and opportunity-to-close conversion rates
- Quota per sales rep and ramp time
- Churn rate by segment (monthly or annual)
- Net revenue retention target
- Expansion revenue as percentage of base
Cost Assumptions
- Average salary by role and department
- Benefits load (typically 20-30% of salary)
- Time to hire for each role
- Marketing cost per lead
- Commission rates for sales
- Infrastructure costs per customer or usage
Justification Matters
For each assumption, be prepared to explain: What's this based on? Historical performance, industry benchmarks, or your best estimate? Investors respect founders who say "we don't know yet, so we assumed X based on Y."
Building Multiple Scenarios
Include at least three scenarios to show you've thought through different outcomes:
Upside Case
Things go better than expected. Higher conversion, faster sales cycles, lower churn.
Typically 20-30% above base case
Base Case
Your best estimate based on current trajectory and planned initiatives. Should be ambitious but achievable.
The case you present as your target
Conservative Case
Things don't go as planned. Lower conversion, longer sales cycles, higher churn.
Typically 20-30% below base case
Downside/Survival Case
What if things go wrong? How do you preserve cash and extend runway?
Shows you can manage through adversity
Sensitivity Analysis
Beyond full scenarios, be able to quickly show what happens if key assumptions change:
- What if ACV is 20% lower than projected?
- What if sales cycle doubles?
- What if churn is 50% higher?
- What if hiring takes 2 months longer than planned?
Common Mistakes to Avoid
Hockey Stick Growth
Projections that show modest growth then sudden acceleration aren't credible. Growth should build logically from your planned activities.
Top-Down Market Sizing
"We'll capture 1% of a $50B market" isn't a model. Revenue should build from bottoms-up drivers you can actually influence.
Unrealistic Efficiency
Projecting dramatic improvements in CAC, churn, or conversion without explaining what will drive those improvements.
Ignoring Ramp Time
New salespeople don't produce at full quota from day one. Model realistic ramp periods (typically 3-6 months to full productivity).
Circular References
Technical issue: ensure your model calculates correctly without circular dependencies that can break or create errors.
Missing Historical Bridge
Projections should connect to your actuals. If you grew 8% last month, explain why you'll grow 15% next month.
Questions Investors Will Ask
Be prepared to answer these questions about your model:
Revenue Questions
- "Walk me through your revenue build."
- "What drives the 15% MoM growth assumption?"
- "How did you arrive at these conversion rates?"
- "What's the path to $XM ARR by end of Year 2?"
Cost Questions
- "Why do you need X salespeople?"
- "What's driving the marketing spend?"
- "How did you prioritize engineering hiring?"
- "When do you expect to be cash flow positive?"
Scenario Questions
- "What if sales cycles are 50% longer?"
- "What's your path to profitability if needed?"
- "How much runway do you have in the downside?"
- "What are the key risks to this plan?"
Path Forward
- "Where will you be at Series B?"
- "What milestones will you hit with this capital?"
- "When do you expect to raise your next round?"
- "What ARR do you need for Series B?"
Related Articles
Complete Series A Readiness Guide
Everything founders need to know
Key Metrics for Series A
What numbers investors care about
Data Room Checklist
What investors expect to see
Startup Runway Guide
Managing cash and burn rate
Need Help With Your Financial Model?
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