East Coast investors have a reputation for being sticklers around numbers, and not “buying the dream”, the same way our West Coast brethren tend to. In this piece I’m going to double down on the first part, and continue to strongly deny the second…
One of the most common oversights of a seed stage SaaS company is not thinking about unit economics at the early stages of their business. Far too frequently we see strong founding teams raise a seed and unfortunately fail to close an A because unit economics never came close to working even though they thought they actually were working. These situations are avoidable IMO, and simply requires some conversation around the unit economics framework and theory.
We all know the basic unit economic math. However, it is the theoretical framework that can lead to significant adjustments in the actual numbers, and ultimately a differing POV between investors and entrepreneurs during a fundraise. These adjustments lead to understandably frustrated entrepreneurs who feel like investors are giving them a moving target. On the other hand, investors are discouraged when LTV / CAC goes from the 10x represented in a deck to a 2x after making what are, in their eyes, basic adjustments to the calculations.