Investor Q&A - The Finance Hawk

1. Break down the COGS per user.

Premium User ($8/mo):
- Storage (S3/R2): $0.15
- Vector DB (Cloud): $0.20
- LLM Inference (Cloud): $1.50 (Assumes 50 queries/day)
Total COGS: ~$1.85.
Gross Margin: ~76%.

2. LLM Inference costs will kill you. $1.50 is optimistic.

We aggressively cache answers. 60% of queries are repeated ("What's my WiFi password?"). These hit the cache ($0.001) vs the LLM ($0.03). We also route simpler queries to cheaper models (Haiku/GPT-4o-mini) to protect margins.

3. What is your monthly burn?

Currently $25k. With the Seed round, we scale to $80k to hire 3 senior engineers. This gives us 24 months of runway even with zero revenue, giving us ample time to find PMF.

4. Why raise Seed now? Why not bootstrap?

Because the "AI Memory" window is open now. Google and Apple will move slowly, but they will move. We need capital to capture the network effect and data gravity before the giants wake up. Speed is a structural cost.

5. What's your pricing?

$8/month or $80/year (17% discount). Freemium model: free local storage, paid cloud sync + premium features.

6. What's your ARPU?

Currently $72/year (blended). Target: $96/year within 18 months as premium features drive upgrades.

7. What percentage of users convert to paid?

Target: 5%. Currently 3% in beta. Industry standard freemium SaaS.

8. What's your LTV?

$100 (18-month average lifetime × $72 ARPU ÷ 12 = ~$100). High retention improves this.

9. What drives upgrades from free to paid?

Storage limits (device full), multi-device sync, family sharing. Natural upgrade triggers, no hard paywalls.

10. What's your COGS per user?

Free tier: $0 (local media storage only). Paid tier: $1.50/month (cloud storage + AI processing + vector database operations). 81% gross margin.

11. What's your CAC?

Target: $15. Currently $22 (early inefficiency). Improving through referrals + ASO.

12. What's your LTV:CAC ratio?

Target: 5:1 ($100 / $15). Currently 4.5:1. Industry benchmark = 3:1+.

13. What's your payback period?

6 months. Users who stay past month 1 pay back CAC by month 6.

14. How does unit economics improve at scale?

Lower CAC (virality), lower COGS (AWS volume discounts), higher ARPU (upsells). Path to 85%+ margin.

15. What's your monthly burn?

Currently $30k/month (pre-seed). Post-seed: $80k/month. Lean team, high efficiency.

16. What's the burn breakdown?

60% personnel, 20% infrastructure (AWS), 10% marketing, 10% ops/legal. Team-heavy, as it should be.

17. How long is your runway?

With $1.5M seed: 18 months at $80k burn. Enough to hit Series A milestones (100k MAU, $500k ARR).

18. What happens if you don't hit metrics?

We cut burn (reduce headcount, pause paid acquisition). We can extend runway to 24 months if needed.

19. What's your break-even point?

50k paid users at $8/month = $400k MRR. At 81% margin, that covers $80k burn. Break-even within 2 years.

20. What's your revenue forecast Year 1?

$150k ARR (2k paid users × $72 ARPU). Focus is growth, not revenue.

21. Year 2?

$1.2M ARR (100k MAU × 5% conversion × $240 per paying cohort). Series A milestone.

22. Year 3?

$5M ARR (1M MAU × 5% conversion × $100 LTV realized). Path to profitability.

23. Are these projections conservative or aggressive?

Conservative. Assumes 5% conversion (industry standard), no enterprise revenue, no family plan upsells.

24. What assumptions drive your model?

5% free-to-paid conversion, $15 CAC, 18-month customer lifetime, 81% gross margin. All achievable benchmarks.

25. How much are you raising?

$1.5M seed round. Post-money valuation: $10M. 15% dilution.

26. Why $1.5M? Why not more?

Right-sized for 18-month runway to Series A. Too much = excessive dilution. Too little = insufficient runway.

27. What milestones unlock Series A?

100k MAU, $500k ARR, 5% conversion, NPS >60. Clear targets, achievable with $1.5M.

28. What's your Series A size?

$5-7M at $40-50M valuation. Standard SaaS benchmarks.

29. What if you can't raise Series A?

Pivot to profitability (cut burn to $50k/month), extend runway, or explore acquisition. Multiple paths forward.

30. How do you stay capital-efficient?

Cloud-native architecture (pay only for usage), lean team (8 people), organic growth (virality), mobile-first design. Every dollar works.

31. What's your magic number?

Net new ARR / sales & marketing spend. Target: 1.0+. Currently 0.8 (early). Improving with product-led growth.

32. How do you optimize burn?

Contractors over FTEs where possible, AWS reserved instances (40% cheaper), focus on high-ROI channels (referrals).

33. What's your Rule of 40?

Growth rate + profit margin. Year 2: 200% growth + (-50% margin) = 150. Way above 40. Hypergrowth mode.

34. Are you profitable?

No, and we shouldn't be yet. Profitability = Year 3 goal. Right now, growth > profit.

35. Do you have other revenue streams beyond subscriptions?

Phase 2: B2B (\"Dzikra for Teams\"), API access (developers), professional services (data migration). Subscription-first for now.

36. What about ads?

Never. Ads destroy trust in a memory product. Subscription-only forever.

37. What about selling anonymized data?

Absolutely not. Privacy is our moat. Selling data = brand suicide.

38. What about physical products (photo books)?

Maybe. Partnerships with Shutterfly/Artifact. Low margin, high ops burden. Not core focus.

39. What's your revenue mix in 3 years?

80% consumer subscriptions, 15% B2B, 5% API/partnerships. Diversified but subscription-dominated.

40. What's your biggest cost?

Personnel (60% of burn). Engineers are expensive but essential. We're a tech company.

41. What's your infrastructure cost?

$1.50/paid user/month (storage + API). At 10k paid users = $15k/month. Scales linearly (for now).

42. How do infrastructure costs scale?

Linearly to 100k users. After that, volume discounts (AWS commits) + optimization reduce per-user cost by 30-40%.

43. What about support costs?

Currently $0 (founders handle it). Post-seed: 1 support person at scale (AI chatbot handles 70% of queries).

44. What's your fully-loaded cost per paid user?

COGS ($1.50) + allocated overhead ($2) + CAC amortized ($0.50/month over 18 months) = $4/month. Still 50% margin.

45. What's your current valuation?

Post-money: $10M. Pre-revenue, but strong team + unique tech + large TAM justifies premium.

46. How did you calculate that valuation?

Comparable pre-seed/seed SaaS startups with AI differentiation. $8-12M range is standard.

47. What's your Series A valuation target?

$40-50M. Based on $500k ARR × 100× multiple (SaaS growth stage standard).

48. What's your exit strategy?

Acquisition by Big Tech (Apple, Google, Meta) or IPO if we reach $100M+ ARR. Both paths viable.

49. What's a realistic exit multiple?

10-15× ARR for acquisition. If $20M ARR, exit at $200-300M. Strong investor returns.

50. How do you manage cash flow?

Monthly burn tracking, quarterly reforecasting, 3-month cash buffer. Conservative financial management.

51. What if you run out of money before Series A?

Bridge round (6-month extension), revenue acceleration (focus on paid conversion), or cut burn. Multiple levers.

52. Do you have revenue yet?

$2k MRR in beta (25 paid users). Proves willingness to pay. Scaling post-launch.

53. What's your cash conversion cycle?

Instant. Subscriptions charge upfront. No AR/AP complexity. SaaS beauty.

54. How do you forecast revenue?

Cohort-based modeling. Track each signup cohort's conversion, retention, ARPU. Bottom-up, not top-down.

55. What's the potential return for seed investors?

If exit at $300M (conservative), seed investors at $10M post = 30× return. Strong upside.

56. What if Dzikra fails?

Downside = $0 (startup risk). But team + IP have value. Soft landing = acqui-hire at $5-10M.

57. What's your expected IRR for investors?

50-100% annually over 5-7 years. Typical venture returns for successful SaaS exit.

58. What's your ownership structure?

Founders: 70%, pre-seed angels: 15%, this seed round: 15%. Clean cap table.

59. Do you have liquidation preferences?

Standard 1× non-participating. Investor-friendly, founder-aligned.

60. What's your biggest financial risk?

Not reaching Series A metrics (100k MAU, $500k ARR). Mitigation: aggressive growth, lean burn, multiple pivot options.

61. What if AWS costs spike?

We have multi-cloud strategy (AWS + Cloudflare). Can shift workloads. Also negotiating volume commits.

62. What if CAC increases?

Shift to organic channels (virality, PR, community). We're not dependent on paid ads.

63. What if churn is higher than expected?

Focus on activation (\"Aha Moment\" in first 72 hours). Users who reach that milestone have 70% D30 retention.

64. What if conversion rate stays at 3% instead of 5%?

Increase ARPU through upsells (family plan $15/month) or reduce CAC through virality. Multiple levers.

65. How do you prevent overspending?

Monthly budget reviews, approval thresholds, zero-based budgeting. Every dollar must justify itself.

66. What's your hiring philosophy?

Hire late, fire fast. 10× engineers over warm bodies. Small elite team > large mediocre team.

67. Do you have a CFO?

Not yet. Founder-managed finances + fractional CFO advisor. Full-time CFO at Series A.

68. How do you track financial metrics?

Weekly dashboards (MRR, CAC, LTV, burn). Real-time visibility. No surprises.

69. What's your audit/compliance status?

Clean books, quarterly reviews by external accountant. SOC 2 compliance in progress (required for enterprise).

70. Why should I invest financially?

Massive TAM ($50B+), unique mobile-first cloud AI architecture, capital-efficient model (81% margin), clear exit path. Strong risk/reward.

71. What's the best-case scenario?

Become ubiquitous memory OS, $100M ARR, acquisition at $1B+. Seed investors = 100× return.

72. What's the worst-case scenario?

Can't achieve PMF, burn through runway, shut down. Seed investment = $0. Venture risk.

73. What's the most likely scenario?

Moderate success: $10-20M ARR, acquisition by mid-size tech company at $150-250M. Seed investors = 15-25× return. Still excellent.

74. How do you think about dilution?

Necessary evil. We'd rather own 50% of $500M than 100% of $0. Grow the pie.

75. What terms are you offering?

Standard SAFE with 1× liquidation preference, pro-rata rights, standard information rights. Founder-friendly but fair.

76. Do you have other committed investors?

$500k committed from angels + pre-seed fund. Raising remaining $1M. Momentum is building.

77. What's your use of funds?

60% team (3 engineers, 1 designer, 1 growth), 20% infrastructure, 15% marketing, 5% legal/ops. Clear allocation.

78. How long until next round?

18 months. Series A at $5-7M once we hit 100k MAU, $500k ARR.

79. What makes this a good investment timing?

AI boom (tailwinds), privacy concerns (our moat), Big Tech moving slow (window of opportunity). Perfect storm.

80. Last question: What's the financial moat?

81% gross margins + negative churn (upsells) + data gravity (switching costs). Once users are in, they stay and spend more. Compounding economics.