when the spreadsheet breaks reality
projections are how founders lie to themselves. here's when you know the spreadsheet is wrong.
watched a founder present financials that showed 6x revenue growth over three years.
The model looked airtight. CAC was going down. LTV was going up. Unit economics improving each quarter.
One investor asked: "What has to be true for this to happen?"
The founder paused. Realized: his model assumed customer acquisition cost would drop 30% with scale. No evidence for it. Just assumed.
That one variable made the difference between raising at a $10M valuation and a $3M valuation.
The rule I follow: every line in the spreadsheet should either be historical data or a falsifiable bet.
historical: last quarter we spent X on ads and got Y customers. that's a number, not a guess.
bet: at double the budget, CAC will drop 30% because the brand will be stronger and LTV will rise.
The bet can be true or false. But it's testable. When you hit month three of the increased budget, you'll know if you were right.
The founder above had 47 spreadsheet cells that were "bets with no way to test them until it's too late." By then, the money was spent and the round was raised.
So: audit your spreadsheet. For every cell that's not last month's data, ask: "What has to be true? And how will I know in 60 days if I'm right?"
If you can't answer that, delete the cell. Your actual pitch is stronger without it.