Before a Singapore VC writes a cheque, they audit your unit economics. Understanding what investors check — and what kills deals — gives founders and product leaders the ability to pressure-test their own models before due diligence begins. This is not theoretical finance; it is the practical checklist VCs use in the room.
Why Unit Economics Are the First Filter
Revenue growth is a leading indicator. Unit economics — the per-customer or per-transaction profitability profile — determine whether growth creates value or destroys it. In Singapore’s capital environment, where Series A and B investors have seen too many growth stories that never reached profitability, unit economics are a first-filter, not a late-stage concern.
The 10 Metrics VCs Audit at Due Diligence
1. Customer Acquisition Cost (CAC)
Blended CAC = total sales and marketing spend ÷ new customers acquired in the same period. Red flag: CAC is rising quarter-on-quarter without a corresponding improvement in LTV. Singapore B2B benchmark: SGD $500–$2,000 per customer for SME-focused SaaS. Enterprise: SGD $5,000–$20,000+.
2. Customer Lifetime Value (LTV)
LTV = average revenue per user × gross margin % ÷ monthly churn rate. Use gross margin LTV, not revenue LTV — investors will restate it if you do not. Red flag: LTV calculated on revenue, not contribution margin; or LTV models that assume zero churn after year 3.
3. LTV:CAC Ratio
Minimum viable: 3:1. Target: 5:1+. Below 3:1, the business is structurally unprofitable at scale. Above 10:1 can signal under-investment in growth. Singapore SaaS median at Series A: 3.5–5:1.
4. CAC Payback Period
Months to recover CAC from gross profit. Formula: CAC ÷ (ARPU × gross margin %). Target: under 12 months for B2B SaaS; under 6 months for high-volume B2C. Singapore benchmark: 4–8 months for healthy consumer businesses; 8–18 months for enterprise.
5. Gross Margin
Singapore industry benchmarks: SaaS 70–80%; e-commerce 40–60%; physical retail 30–50%; hardware 30–45%. Red flag: gross margin declining as revenue scales (unit cost not coming down with volume; pricing pressure not being managed).
6. Net Revenue Retention (NRR)
NRR measures whether existing customers spend more or less over time. Formula: (starting MRR + expansion − contraction − churn) ÷ starting MRR. Target: 100%+ (meaning your existing base grows without new customers). Best-in-class Singapore SaaS: 110–130% NRR.
7. Monthly and Annual Churn
B2C monthly churn benchmark (Singapore): 3–5% (acceptable), >8% (problematic). B2B annual churn: <10% target; >20% is a structural problem. Investors will model your LTV at your actual churn rate, not your aspirational rate.
8. Contribution Margin
Revenue minus all variable costs (COGS + variable CAC + fulfilment + payment processing). This is the number that tells you whether each incremental customer makes you money. Gross margin can be healthy while contribution margin is negative — a common trap in Singapore e-commerce businesses with high marketplace fees.
9. Burn Multiple
Net burn ÷ net new ARR. Measures how much capital it takes to generate $1 of new ARR. Target: below 1.5× (efficient); above 2× raises questions; above 3× is a red flag at Series A+.
10. Magic Number (SaaS)
(Net new ARR × 4) ÷ prior quarter sales and marketing spend. Benchmark: >0.75 is efficient growth; below 0.5 means the growth engine needs fixing before you scale it.
Common Red Flags That Kill Singapore Deals
- CAC calculated without including salesperson salaries or agency retainers
- LTV projections based on 5-year retention without cohort data to support it
- Gross margin including product development cost (which is OpEx, not COGS)
- Churn rates using “active users” instead of paying customers
- Unit economics that only work at 10× current scale
Preparing Your Model for Due Diligence
The Product-ivate Workshop covers a due diligence preparation module that walks through building a defensible unit economics model — one that holds up under investor scrutiny and reflects real operational data, not optimistic projections. The Product Marketing Consulting service includes a unit economics audit as part of the PMF Sprint engagement.
Previous: How to Validate a Product Idea for Under $5,000 →
Next: Pricing Strategy for Multi-Channel Singapore →
