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VCs receive 100+ decks per week. They spend 3 minutes on your financial model, looking for red flags to skip to the next deal.
The 13 VC Challenger Criteria
Unit Economics (4 criteria)
1. LTV/CAC ratio (3-20x) — >50x = red flag, <3x = not viable
2. Gross Margin (>60%) — <50% for SaaS = business model problem
3. Payback Period (<12mo) — >18mo = cash flow nightmare
4. Churn Rate (<5%) — >7% = leaky bucket
Team & Costs (3 criteria)
5. Team Y1 (<$200K) — 5 FTEs for $150K ARR = red flag
6. ARR/FTE ratio ($150-250K) — Revenue per person benchmark
7. Founder-led growth coherence — 0 FTE Sales but 50% S&M budget?
Projections (3 criteria)
8. Realistic growth trajectory — 20% MoM × 60 months = 13,000x (impossible)
9. Coherent break-even — M36 announced but EBITDA negative M35?
10. Revenue vs Costs scaling — Revenue 3x but costs 5x = problem
Narrative (3 criteria)
11. CAC target realism — "<$10" for B2B SaaS = not credible
12. Market size source — "460K clients" without source = invented
13. Cross-section coherence — Same CAC everywhere? Same numbers?
Common Eye-Rolling Mistakes
"Our Gross Margin is 94%"
LLM-heavy SaaS = 60-75% max. Not 94%.
"Y1: 5 people, Y2: 12 people"
YC says: 2 founders until $300K ARR.
"Bootstrap runway: 0 months"
No savings? Red flag for VCs.
✓ Pass All 13 VC Criteria
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