Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / Why Series A Pitch Decks Now Lead With a Gross Margin Slide
Transcript
- Lucas: So Luna, I've been sitting in on a bunch of Series A pitches lately, and there's a slide that's showing up at the top of the deck now that wasn't there two years ago. It's the gross margin slide. Not buried in the appendix, not part of the financial model — it's right up front, after the problem slide, sometimes even before the team. Luna: Interesting. So investors are asking for gross margin that early? I thought that was more of a Series B conversation, once you've got some traction to actually calculate it. Lucas: Right, and that's the thing — the mindset has shifted. It used to be, growth first, margins later. But look at the public markets right now. Coinbase is up sixteen percent in five days, Palantir is hovering near its highs, and those are companies with strong gross margins, even if their net income fluctuates. Meanwhile, Meta's down seven and a half percent in the same stretch — there's a lot of noise there, but the market is clearly rewarding businesses that can prove they make money on every dollar of revenue. Luna: So it's a trickle-down effect from public market sentiment to early-stage investing. Makes sense. But what does a typical gross margin slide actually look like? Is it just a number, or is there more to it? Lucas: It's more than a single number. The best ones show the gross margin percentage, sure, but they also break it down — cost of goods sold, which for a software company means hosting, support, maybe some implementation costs. And then they show the gross margin trend over time, or projected, to prove it's going to improve as they scale. The slide is really a proxy for two things: pricing power and unit economics. Luna: And if the number's low? I mean, a lot of early-stage startups are still figuring out their pricing, or they're in hardware where margins are notoriously thinner. Lucas: That's the tricky part. A low gross margin isn't an automatic kill, but it needs a story. If you're selling a physical product, you can explain that your gross margin is thirty percent but you have a clear path to fifty percent as you negotiate better component pricing or move to a higher-margin software layer. What kills you is hiding it. I've seen founders try to bury bad unit economics in the financial model and hope nobody asks. That's a red flag. Luna: So it's about transparency and showing you understand your business economics. What about the flip side — a really high gross margin, like eighty percent plus for a SaaS company. Does that ever raise eyebrows? Lucas: It can, if it's not credible. If you're claiming ninety percent gross margin but your customer acquisition cost is through the roof, that's not a healthy business — you're just paying to get revenue that doesn't stick. The gross margin slide has to be read in conjunction with your CAC and your payback period. It's not a standalone metric, even though it's getting its own slide. Luna: So it's really about the whole unit economics picture. I remember when we had that episode on CAC slides, you made a similar point — that it's not just the number, it's the trend and the context. Lucas: Exactly. And the gross margin slide is sort of the natural next evolution. Once you've shown you can acquire customers efficiently, the next question is, okay, but do you make money on each one? And that's what gross margin tells you. I've seen decks that combine both — a slide with CAC on the left and gross margin on the right — with a clear line that says, 'We acquire customers for X, and each one generates Y in lifetime value with a gross margin of Z.' That's a powerful one-two punch. Luna: That makes a lot of sense. But I'm curious — is this coming from investors demanding it, or are founders proactively adding it? I feel like there's a difference. Lucas: From what I'm seeing, it's both. Some investors are explicitly asking for it during the screening process, but a lot of founders are proactively adding it because they've heard the conversation shift. And the smart ones are using it to their advantage. I talked to a founder last week who's raising her Series A, and she opened with the gross margin slide on purpose. She said, 'I want to show them we're not just a growth story — we have a path to profitability.' Luna: That's a bold move. And it sets a certain tone for the rest of the conversation. You're basically saying, 'I'm confident in my numbers, I'm not hiding anything.' Lucas: And that confidence is exactly what investors are looking for in this environment. I mean, look at the macro picture — we're in August 2026, and the rate environment has been higher for longer than people expected. Public market investors are demanding profits, and that's trickling down to private markets. A founder who can show a gross margin slide with a clear path to improvement is signaling they understand the new reality. Luna: So for a founder listening right now who's working on their Series A deck, what's the practical advice? How should they approach this slide if they haven't added it yet? Lucas: First, calculate your gross margin correctly. That sounds obvious, but I've seen founders mix up COGS — a lot of them forget to include support costs or third-party software that's directly tied to delivering the product. Second, if the number is lower than you'd like, don't hide it — but pair it with a credible plan to improve it. Third, benchmark yourself against your peers. If you're a SaaS company, you should be comparing yourself to that eighty to ninety percent range. If you're hardware, know that good hardware companies are in the forty to sixty percent range, and explain how you'll get there. Luna: That's really concrete. And I'd add — make sure the slide is visually clean. I've seen some that are just a number slapped on a slide, and it feels lazy. The best ones have a small chart showing the trend, or a simple breakdown of COGS. It's about showing you understand the levers. Lucas: Totally agree. And that's part of the broader trend we're seeing in pitch decks — they're getting more sophisticated. We've talked about data compliance slides, AI trust slides, exit route slides. The gross margin slide is just the latest in a lineup of slides that show the investor you're running a real business, not just a science project. Luna: And I think that's the key takeaway — it's not just about having a high gross margin, it's about demonstrating that you think about your business in terms of unit economics from day one. That's the kind of mindset that gets you from Series A to Series B. Lucas: Exactly. And before we wrap up, I want to mention something. You know, conversations like this — breaking down what's actually changing in pitch decks — are what we love to do on this show. And if these deep dives help you prepare for your own raise or just understand the market better, that's what keeps us going. If you'd like to support the show and keep it ad-free, you can buy us a coffee at buy me a coffee dot com slash fexingo. It's a small gesture that goes a long way in helping us keep having these conversations. Luna: Yeah, we really appreciate it. It helps us keep this going, and it means a lot to us. But back to the topic — so, where do you think this trend goes next? Is the gross margin slide going to become as standard as the team slide? Lucas: I think it's well on its way. Give it another year, and I wouldn't be surprised if investors start asking for a gross margin bridge — showing how you went from, say, forty percent to sixty percent over three years. It's the same logic as the CAC slide, it's just the next lens on the same question: can this business be profitable at scale? Luna: And the founders who can answer that question with confidence, backed by real numbers, are the ones who are going to stand out. Lucas: Absolutely. Alright, that's our take on the gross margin slide. Next episode, we're going to look at how Series A startups are handling the move from usage-based pricing to flat fees — another trend that's showing up in decks. See you then. Luna: Sounds good, see you then.