When pitching to venture capital investors, few metrics matter as much as your Customer Acquisition Cost. On the surface, calculating CAC seems simple, but in reality, it is more nuanced than most founders realise.
Presenting inaccurate CAC figures can seriously hurt your fundraising chances. Misrepresenting this metric may make investors think your unit economics are weak, or worse, that you are not transparent about your spending.
Understanding the Two Types of Customer Acquisition Cost (CAC)
If you ask your finance team or accountant, they usually calculate a fully loaded CAC. This includes everything:
- Paid advertising spend
- Marketing team salaries
- Contractor fees
- PR costs
- Marketing technology subscriptions
- Analytics tools
This number is technically accurate and provides a comprehensive view of customer acquisition costs. But here’s the catch: Indian VCs usually prefer a more focused view.
Most investors want to see direct acquisition spend CAC, which considers only the direct costs of acquiring customers. To calculate it:
- Add up direct advertising spend (Google Ads, Facebook, Instagram, etc.)
- Include direct performance marketing costs (affiliate commissions, influencer fees, etc.)
- Divide by the total number of customers acquired in that period
This number shows the actual efficiency of your marketing spend without overwhelming investors with all operational costs.
Why This Difference Can Make or Break Your Fundraising
Imagine you and a competitor pitch to the same VC. You calculate LTV:CAC (Lifetime Value to CAC ratio) using fully loaded CAC and get 2.5x. Your competitor uses direct spend CAC and presents 4.8x. At first glance, they look much more efficient.
But in reality, using fully loaded CAC, your competitor’s true ratio might be only 2x. During a short pitch, you won’t get time to explain these nuances. The investor may move forward with your competitor, even if your actual unit economics are better.
The Right Way: Transparent and Strategic Presentation
In your pitch deck, present direct acquisition spend CAC and include a note explaining your methodology and that full CAC is available if needed.
This approach:
- Ensures transparency
- Avoids showing inflated numbers
- Encourages investors to dig deeper during due diligence, where you can explain cost inclusions, exclusions, and scaling assumptions
How to Answer Investor Questions
If an investor asks why you presented only direct spend CAC, you can say:
“We have calculated CAC using both methods. Many investors we spoke to preferred starting with direct spend CAC for initial discussions. During detailed diligence, we are happy to share the fully loaded CAC and explain how we plan to improve our LTV:CAC ratio as we scale our marketing and operations.”
This shows that you:
- Understand metrics and their relevance
- Know the fundraising process
- Are already in discussions with other potential investors
- Have clear visibility of your unit economics
It signals that you are a founder who understands both the numbers and the strategy.
Context for Indian Founders
In India, this distinction is critical. Many VCs are experienced and have backed multiple startups, but there is still no standard way to calculate Customer Acquisition Cost. By being transparent and clear about your method, you show that you understand global best practices while staying grounded in local expectations.
With growing scrutiny on profitability, demonstrating command over your unit economics, and the different ways to calculate them, builds credibility.
Bottom line: Master your Customer Acquisition Cost metrics, understand what investors expect, and you’ll navigate fundraising conversations with confidence and clarity.
In today’s competitive startup ecosystem, numbers tell your story, and precision builds trust. The founders who deeply understand their unit economics don’t just raise funds; they attract the right investors, form stronger partnerships, and scale sustainably. Your command over metrics like CAC reflects not just financial discipline, but your readiness to build a business that lasts.
Image Credits : Pinterest
🔗 For more articles on startup growth, fundraising strategies, and business insights for Indian founders, visit: Udyamee India Magazine