Why VCs Commit: The Logic Behind the Numbers

For any UK scaleup that has crossed the £1m ARR threshold, the fundraising environment for Series A and B has fundamentally shifted. It is no longer enough to sell a vision of what might be; institutional investors now demand a rigorous demonstration of what is. At the recent UK ScaleUp Investment Summit, Rashesh Joshi, Managing Director of Alexander Rosse, delivered a keynote that challenged founders to look beyond their financial models. His core message was clear: investors do not invest in spreadsheets; they invest in the logic that underpins them.

The Foundation of Credibility: Pristine Actuals

In the world of institutional funding, your "actuals" - your historical financial data - are not just a record of the past; they are the primary metric of your management credibility. Joshi argues that without clean actuals, any forecast you present is essentially fiction.

Institutional investors will begin their scrutiny here, often starting with a high-level historical P&L before diving into granular monthly revenue by customer. For B2C scaleups, this inevitably means a rigorous cohort analysis to track retention and lifetime value. If your actuals are messy, or if you cannot explain a dip in revenue from eighteen months ago, you risk losing the investor’s confidence before you even get to the growth story.

The Benchmarks That Drive Series A and B Success

Beyond clean books, VCs are looking for specific performance benchmarks that prove your business is gaining sustainable steam. For a successful Series A or B round, founders should aim for the following targets:

• Revenue Growth: A year-on-year growth rate of 50% to 100% serves as the foundation metric for market traction.

• Retention: Monthly churn should ideally sit between 5% and 10%. High churn is a deal-killer, as it signals fundamental product-market fit issues that capital alone cannot solve.

• Unit Economics: A CAC to LTV ratio of 3:1 or higher proves that you can acquire customers profitably at scale.

• Efficiency: For SaaS companies, gross margins should be between 70% and 85%, while salaries should ideally account for 25% to 35% of revenue, demonstrating disciplined team scaling.

The Bridge to the Future: Defensible Assumptions

A forecast is only as strong as the assumptions that drive it. One of the most common pitfalls for founders at this stage is presenting a "hockey stick" revenue curve that lacks a logical bridge to their historical performance. Rashesh’s framework suggests that every assumption must trace back to a "proof point" found within your actuals.

For instance, if you project that your growth will triple next year, that assumption should be anchored in your monthly growth rate over the last year. If you claim that your Customer Acquisition Cost (CAC) will decrease as you scale, you must show a historical trend where CAC has already begun to soften as spend increased. Similarly, a claim that churn will stabilise must be supported by existing cohort retention data. By making these assumptions explicit and logical - rather than hiding them in complex formulae - you allow the investor to stress-test your strategy.

Identifying the Red Flags

Even strong growth metrics won’t save a deal if certain "red flags" appear in your financials. Professional investors are trained to spot these signals from across the room:

• Discount-Driven Growth: Revenue growth that is driven entirely by heavy discounting rather than organic demand.

• Stagnant Margins: Flat or declining gross margins quarter-over-quarter, suggesting a lack of scalability.

• Concentration Risk: Having more than 20% of your revenue tied to a single client.

• Operational Chaos: High professional fees relative to revenue can often signal underlying operational or legal disarray.

Beyond the Numbers: Creating Conviction

Ultimately, everyone in the room knows that forecasts will be wrong. The spreadsheet is a static document, but the business is a living entity. What VCs are actually assessing during a Series A or B round is whether you truly understand your own business.

Conviction comes from a founder's ability to demonstrate a deep grasp of unit economics and a use-of-funds plan that is strictly tied to measurable milestones. Most financial issues take three to six months to resolve before fundraising begins. By professionalising your narrative today and ensuring your forecasts are built on a foundation of pristine data and defensible logic, you provide institutional investors with the one thing they value most: the confidence to commit.

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Rashesh and the Alexander Rosse team helps ambitious founders across tech, property, e-commerce, and professional services scale successfully. Combining financial expertise with AI technology, they deliver strategic insights and real-time intelligence. With experience advising on over $5 billion in transactions, they provide cloud-first accounting tailored for founders.

If you would like personalised guidance or a 1:1 call with Alexander Rosse, get in touch via the VenturePath platform. 

About Rashesh

Rashesh (Rash) Joshi is the Managing Director and co-founder of Alexander Rosse, a leading accountancy and tax advisory firm. With more than 25 years of experience in both public practice and industry, Rashesh specialises in advising high-growth, tech-focused SMEs on scaling, acquisitions, disposals, and IPOs. He has led over 50 deals with a total value exceeding $5bn, working with companies in the technology sector to navigate the complexities of scaling and funding.