For a pre-revenue or early revenue company, even 1-year revenue projections are pure fantasy. Demanding to see 5-year revenue projections seems perverse.  No company in the entire history of the universe has ever come within telescope view their 5-year projections. They’re completely useless, and yet, absolutely necessary.

When someone sends me a pitch deck, I turn straight to the 5-year revenue projections. When we’re in the Q&A session at the end of a pitch to an angel group, it’s not the product slide or the team slide or even the critical traction slide that ends up on the screen but the revenue projections. This slide is where your plans and assumptions get distilled down to their essence with a few numbers that tell me everything I need to know.

First of all, your revenues after 5 years tell me if you’re in the right room or not. If you expect to get to $5 million in revenues after 5 years, you may have a profitable business, but it won’t work for venture funding. Public companies generally don’t acquire startups until they’re over $25 million in revenue, and non-public companies don’t have the cash to acquire a startup for an attractive multiple. So unless you expect to be over $25 million and ideally over $50 million, there’s no point in talking to angels. For VCs, given typical minimum check sizes, you usually need to be targeting at least $100 million to $250 million. Perversely, if your expected revenue is too high, the amount of capital you’ll need makes the deal infeasible for angels (a complicated topic for a separate article) and you should go straight to the VCs.

Next, I glance at how much money you plan to lose at the beginning. This tells me your burn rate, your runway, and how much capital you’ll need to raise. If your runway is too short, you’re likely to crash and burn, or at least get stuck in a tight spot desperate for more investment. If you need $25M before you get to cashflow positive, even if you’re only raising a small $500k round now, my small early investment will get wiped out at some point, so I’m not likely to get involved.  

Last, I check how realistic your assumptions seem.

  • Do you plan to take a large fraction of the total market, and if so, how?
  • Are you showing $2 million in revenues this year, even though we’re more than halfway through the year and you only have $200k to date?
  • Are you generating tens of millions in revenues without increasing headcount and marketing costs?
  • Is your revenue the mythical hockey stick where you jump from $10M to $50M overnight?
  • Are you showing exactly $100M or $250M because that’s what investors require? In other words, have you built these revenue projections to meet a desired endpoint instead of from the ground up?
  • If you’re selling consumer products, how much are your marketing costs and gross margins?
  • If you’re making a physical product, have you factored in not only the costs of production, but all of the logistics?
  • If you’re not in revenue yet, how soon do you start generating revenue and what happens if that’s delayed (as it always is).

That seems like a lot of details, but after reviewing hundreds of pitches, the absurdities are easily apparent. We don’t want to see pages of spreadsheets here—save those for the due diligence discussions—but we want to know that you’ve made them and thought through the complications and consequences. Even if it’s all going to change tomorrow.

The slide should have the following information in a simple table.

  • Gross revenue for the next 5 years
    • COGS (if significant)
  • Gross profits
    • Marketing expenses
    • Employee expenses
    • Other expenses
  • Net income

That it—that’s all you need on this slide. And it’ll tell me everything I need to know.

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