Fundraising Modeling Guide

How to use the Fundraising Scenarios tab to model different round structures, understand dilution, and prepare for investor conversations.

Key Concepts

Pre-Money Valuation

What investors say your company is worth *before* their money goes in.

Post-Money Valuation

Post-Money = Pre-Money + Investment Amount

Dilution

New Investor Ownership = Investment ÷ Post-Money Valuation
Founder Dilution = Previous Ownership × (1 - New Investor %)

Example: You own 80%, investor puts in $2M at $8M pre ($10M post). They get 20%. Your ownership becomes 80% × (1 - 20%) = 64%.

Modeling a Round

Step 1: Determine your ARR multiple

Investors typically value SaaS companies as a multiple of ARR:

Multiples vary wildly based on growth rate, retention, and market conditions.

Step 2: Size the round

Rule of thumb: Raise 18-24 months of runway at your projected burn rate.

Round Size = Monthly Burn × 18 to 24

But also consider growth investment — you'll likely increase burn post-fundraise.

Step 3: Model the dilution

In the Fundraising tab, enter:

• Pre-Money Valuation (from Step 1)
• Investment Amount (from Step 2)
• Current ownership (founders + employees)

The formulas calculate post-money, dilution, and resulting ownership.

Use-of-Funds Allocation

Investors want to know how you'll spend their money. Typical allocations:

Scenario Comparison

Always model at least 3 scenarios:

1. Smaller raise, lower valuation — Less dilution in percentage terms, but less runway. Good if you're confident you can hit milestones quickly.

2. Larger raise, higher valuation — More dilution, more runway, more time to execute. Good if the market is uncertain.

3. Bridge / extension — Small amount from existing investors at a slight markup. Buys 6-12 months without a full fundraising process.

Decision Framework

Choose the smaller raise when:

• You're 3-6 months from a major milestone that would increase your valuation
• Current metrics support a higher valuation than investors are offering
• You want to minimize dilution and raise again soon at better terms

Choose the larger raise when:

• Market conditions are favorable (raise when you can, not when you must)
• You need significant investment in product/team before revenues justify valuation
• Competitors are well-funded and speed matters

Option Pool Considerations

Investors typically require a 10-20% option pool *pre-money* (meaning it comes out of founders' share, not investors').

Effective Pre-Money = Stated Pre-Money - New Option Pool Shares

A "$10M pre-money" with a 15% option pool expansion really values the existing shareholders at $8.5M.

How to model in the spreadsheet

In the Fundraising tab, the "Employee Pool Before" and "Employee Pool After" columns show how the option pool changes. If investors require pool expansion, it dilutes founders more than the headline numbers suggest.

Multiple Round Modeling

To see cumulative dilution across rounds:

Founder Ownership After Round N =
  Original × (1 - Dilution_Round1) × (1 - Dilution_Round2) × ... × (1 - Dilution_RoundN)

Typical founder ownership after each round:

• After Seed: 70-80%
• After Series A: 50-60%
• After Series B: 35-45%
• After Series C: 25-35%
• At IPO: 10-20%

These ranges assume no pool expansion pressure and modest dilution per round.

What Investors Look For at Each Stage

Negotiation Levers

Beyond valuation and amount, these terms matter:

The spreadsheet focuses on economics (valuation/dilution), but always review the full term sheet with legal counsel.

SaaS Metrics Explained

A comprehensive guide to the metrics that define SaaS business health. Understand what each metric means, how to calculate it, what "good" looks like, and how to improve it.

The MRR Family

MRR (Monthly Recurring Revenue)

The total predictable revenue you receive every month from active subscriptions.

Formula:

MRR = Sum of all active subscription fees (monthly equivalent)

For annual contracts: Annual Contract Value ÷ 12 = MRR contribution

What's NOT MRR:

• One-time setup fees
• Professional services revenue
• Usage overages (unless contractually guaranteed)

ARR (Annual Recurring Revenue)

ARR = MRR × 12

Simply the annualized version of MRR. Used for higher-level discussions (board meetings, fundraising) because the numbers are larger and easier to contextualize.

Important: ARR assumes zero growth and zero churn for 12 months. It's a snapshot metric, not a prediction.

Net New MRR

Net New MRR = New MRR + Expansion MRR - Contraction MRR - Churned MRR

The components:

• New MRR: Revenue from brand-new customers this month
• Expansion MRR: Additional revenue from existing customers (upgrades, add-ons, more seats)
• Contraction MRR: Revenue lost from existing customers who downgraded
• Churned MRR: Revenue from customers who cancelled entirely

If Net New MRR is positive, your business is growing.

Churn Metrics

Logo Churn (Customer Churn)

Logo Churn Rate = Customers Lost ÷ Customers at Start of Period

Example: 10 customers churned out of 300 = 3.3% monthly logo churn.

Benchmarks:

• <2% monthly — Excellent (enterprise SaaS)
• 2-5% monthly — Acceptable (SMB SaaS)
• 5-7% monthly — Concerning (consumer/prosumer)
• >7% monthly — Product-market fit problem

Gross Revenue Churn

Gross Revenue Churn = Churned MRR ÷ Beginning MRR

Measures the raw dollar loss, ignoring expansion. A large customer leaving hurts more than many small ones.

Net Revenue Churn (Net Revenue Retention)

Net Revenue Retention = (Beginning MRR + Expansion - Contraction - Churn) ÷ Beginning MRR

This is the percentage of last month's revenue that you retained AND grew this month.

Benchmarks:

• >120% — Elite (your existing customers grow 20%+ annually)
• 100-120% — Excellent (expansion offsets churn)
• 90-100% — Acceptable (slight erosion from existing base)
• <90% — Leaky bucket (you're losing revenue faster than you gain it)

Net negative churn (NRR > 100%) is the holy grail of SaaS. It means your existing customer base grows even if you add zero new customers.

Unit Economics

CAC (Customer Acquisition Cost)

CAC = Total Sales & Marketing Spend ÷ New Customers Acquired

What to include in the numerator:

• Marketing team salaries
• Ad spend (all channels)
• Sales team salaries + commissions
• Sales tools and software
• Content creation costs

Fully-loaded CAC includes everything above. Paid CAC includes only direct ad spend divided by customers from paid channels.

LTV (Customer Lifetime Value)

LTV = ARPU × Gross Margin % × Average Customer Lifetime

Alternative formula (using churn):

LTV = (ARPU × Gross Margin %) ÷ Monthly Churn Rate

Example: $600 ARPU × 80% margin ÷ 3% churn = $16,000 LTV

LTV:CAC Ratio

LTV:CAC = LTV ÷ CAC

Benchmarks:

• >5 — Very capital-efficient (could you grow faster with more spend?)
• 3-5 — Healthy and sustainable
• 1-3 — Works, but tight margins; may need to raise prices or lower CAC
• <1 — You're losing money on each customer (unsustainable)

CAC Payback Period

Payback Months = CAC ÷ (Monthly ARPU × Gross Margin %)

How many months until you recoup the acquisition cost from a customer's gross profit.

Benchmarks:

• <6 months — Excellent
• 6-12 months — Healthy
• 12-18 months — Acceptable if retention is strong
• >18 months — Dangerously slow (especially with monthly contracts)

Growth Metrics

MoM Growth Rate

MoM Growth = (Ending MRR - Beginning MRR) ÷ Beginning MRR

T2D3 Framework (Triple-Triple-Double-Double-Double):

• Year 1-2: Triple ARR ($1M → $3M → $9M)
• Year 3-5: Double ARR ($9M → $18M → $36M → $72M)

This translates to roughly:

• 15-20% MoM at early stage
• 8-12% MoM at growth stage
• 5-8% MoM approaching scale

CMGR (Compound Monthly Growth Rate)

CMGR = (Ending MRR ÷ Starting MRR)^(1/months) - 1

More honest than averaging individual months (which can be misleading if there are outliers).

Efficiency Metrics

Burn Multiple

Burn Multiple = Net Burn ÷ Net New ARR

How much cash you burn to generate each dollar of new ARR.

Benchmarks:

• <1x — Amazing efficiency (or you're under-investing in growth)
• 1-2x — Great
• 2-4x — Acceptable at early stage
• >4x — Burning too fast relative to growth

Rule of 40

Rule of 40 = Revenue Growth Rate % + Profit Margin %

If the sum exceeds 40%, the business is considered healthy. A company growing 60% YoY can tolerate -20% margins. A company growing 10% YoY needs +30% margins.

Magic Number

Magic Number = Net New ARR (quarterly) ÷ Sales & Marketing Spend (previous quarter)

Measures the efficiency of your go-to-market spend.

Benchmarks:

• >1.0 — Efficient; invest more in S&M
• 0.5-1.0 — Acceptable
• <0.5 — Inefficient; fix funnel before spending more

SaaS Quick Ratio

Quick Ratio = (New MRR + Expansion MRR) ÷ (Contraction MRR + Churned MRR)

How fast you add revenue relative to how fast you lose it.

Benchmarks:

• >4 — Very healthy growth engine
• 2-4 — Good
• 1-2 — Fragile (small churn increase could stop growth)
• <1 — Shrinking (losing revenue faster than gaining it)

Putting It All Together: The Investor Slide

When presenting to investors, lead with these 6 numbers:

1. ARR and growth rate (size and trajectory)

2. Net Revenue Retention (proves customers love the product)

3. Gross Margin (proves the business model works)

4. LTV:CAC Ratio (proves acquisition is efficient)

5. Burn Multiple or Rule of 40 (proves operational efficiency)

6. Months of Runway (proves you won't die before the next milestone)

Everything else is supporting detail.