You don't need an MBA to evaluate a startup's financial model. You need to know which numbers actually matter and which questions to ask. Here's a practical framework.

Start with revenue assumptions

Open the model and find where revenue comes from. Then ask: "What has to be true for this revenue number to happen?"

If year-one revenue requires 1,000 paying customers but the startup currently has 12, the model needs to show exactly how they get from 12 to 1,000. What's the conversion rate? What's the sales cycle? How many leads per month?

If these assumptions aren't explicit, the revenue projection is a wish, not a model.

Check unit economics

Three numbers matter most:

CAC (Customer Acquisition Cost): How much does it cost to get one paying customer? Include marketing spend, sales salaries, and tools.

LTV (Lifetime Value): How much revenue does one customer generate before they churn? This is average revenue per month multiplied by average customer lifespan in months.

LTV:CAC ratio: Should be at least 3:1 for a sustainable business. Below 2:1 means the startup loses money on every customer even at scale.

If the founder can't tell you these three numbers from memory, the financial model is decorative.

Look at burn rate and runway

Monthly burn = total monthly expenses minus total monthly revenue. This tells you how fast the startup is spending money.

Runway = cash in bank divided by monthly burn. This tells you how long until the money runs out.

A healthy early-stage startup should have 12-18 months of runway after your investment. If the round gives them only 6 months, they'll be fundraising again immediately instead of building.

Question the hockey stick

Almost every startup model shows flat-ish revenue for months, then a sudden exponential curve. Sometimes this reflects a real inflection point (product launch, enterprise deal closing). Often it's just optimism with no mechanism behind it.

Ask: "What specifically changes in month 8 that causes revenue to triple?" If the answer is vague ("we'll have more brand awareness"), the hockey stick is fiction.

Compare to benchmarks

SaaS benchmarks for early-stage:

Monthly growth rate: 15-20% is strong, 5-10% is okay, flat is concerning
Gross margin: 70%+ for software, 40-60% for services
Net revenue retention: above 100% means existing customers spend more over time
CAC payback period: under 12 months is healthy

These aren't rigid rules, but if a startup's numbers are far outside these ranges, they should be able to explain why.

The simplest test

Ask the founder: "If you get half the customers you're projecting, what happens?"

A good founder has thought about this scenario and can tell you what they'd cut, how they'd extend runway, and when they'd need to raise again. A founder who hasn't considered downside scenarios is planning for one outcome in a world with many.