How a Startup Burned Through $1M — And What the Financials Were Really Saying

Thinking Ledger
Jun 14
3 min read

Updated: 1 day ago

It’s a classic story in the startup world: promising pitch, big funding round, and then… silence. The money's gone, the momentum fades, and founders are left wondering what went wrong.

We’ve worked with dozens of post-mortem financials, and today, we’re diving into a real-world case (anonymized) where a SaaS startup raised $1 million and still ran out of runway in just 14 months.

The Setup: $1M Seed Round & a Big Vision

This was a SaaS product targeting remote team collaboration — think lightweight Trello meets Slack.

● $1M seed raised from a few angels and a small VC.

● Team of 12 by month 6 (including 2 founders, 6 devs, 2 sales, 2 marketing).

● Goal: Hit $40K MRR within 12 months and raise a Series A.

Burn rate in the first 3 months: ~$70K/month, mostly payroll.

Where It Started to Go Wrong

The financials looked fine at first glance — runway forecast showed 15+ months.

But here’s what deeper analysis revealed:

1. Over-Hiring Without Revenue Justification

● 6 engineers onboarded before even a working MVP.

● Marketing & sales hires before validated ICP (ideal customer profile).

● No cash allocation for customer onboarding or support — leading to churn.

Example Payroll Breakdown:

Role	Monthly Cost	Value at Stage?
Senior Dev (x3)	$36,000	🚫 (Too early)
Sales Rep (x2)	$12,000	🚫 (No ICP yet)
Marketing Lead	$8,000	⚠️ (Misaligned)

2. Zero Spend on Financial Infrastructure

● No accounting software.

● No forecasting model beyond Google Sheets.

● Founder reviewed cash monthly, not weekly.

● No understanding of gross margin vs. net burn.

At month 9, CAC was 4x LTV and no one noticed.

3. Misreading Growth Signals

● Added $10K MRR in Month 6 → celebrated.

● Lost $5K MRR in Month 7 → brushed off.

● No customer cohort tracking to identify product fit issues.

● Churn reports didn’t exist — just Stripe data dumps.

Churn Rate: 18% monthly — masked by new trial signups.

What the Financials Were Really Saying

If a Fractional CFO or finance lead had reviewed this in Month 3, here’s what they would’ve flagged:

Red Flag	What It Meant
Payroll = 85% of spend	Unsustainable burn
CAC > LTV	Growth isn't profitable
No forecast tied to unit economics	Blind scaling
No monthly reporting cadence	Trouble brewing unseen
Cash burn projections not updated	Risk of sudden shortfall

Simple Financial Visual That Would’ve Saved Them

Here’s a sample graph that could’ve changed everything:

Monthly Cash vs. Burn Forecast

| $1000s

| 1000 ──────────────────────────────

| 800 ───────────────────────┐

| 600 ────────────────┐ │

| 400 ────────────────┴──────┴─> Burn rate projection

| 200 ───────┐

| 0 ───────┴─────────────────────> Month

→ Burn rate outpaced their expectations by 40% within 4 months. No course correction.

How a Fractional CFO Could’ve Changed the Story

● Set up unit economics early (CAC, LTV, runway).

● Built a rolling 13-week cash forecast.

● Created financial dashboards + burn alerts.

● Aligned hiring with growth KPIs.

● Flagged risk on MRR quality & churn by Month 5.

Instead of $1M vanishing in 14 months…

→ They could’ve stretched it to 24 months, reached $60K MRR, and raised a successful Series A.

Startup Financial Health Checklist (Quick Self-Test)

Question	Yes / No
Are your CAC and LTV tracked monthly?
Do you know your burn rate and runway?
Are hires tied to specific revenue goals?
Do you review financials every 2 weeks?
Is churn tracked with product feedback?