The key to a successful magic trick is the illusion.
When it comes to forecasting revenue, investors are looking for more than just smoke and mirrors. Increasingly, founders use Weighted Average Contract Value (WACV) to make their pipelines look promising. But investors want data, not guesswork.
While WACV might seem like a convenient way to show growth potential, it often leads to skepticism, as it relies heavily on subjective probabilities rather than hard facts. Fortunately, there are several alternatives to weighted average contract value that can provide investors with more transparency and confidence in a founder’s sales pipeline. Here are three approaches that offer a clearer, more data-backed picture of pipeline health.
1. Deal Stage Visibility as an Alternative to Weighted Average Contract Value
Rather than condensing pipeline information into a single number, founders can offer transparency by breaking down deals by stage. Investors are more likely to trust a clear breakdown of where each deal stands, whether it’s a first meeting, follow-up discussions, proposal sent, or final negotiations. This gives a far more realistic picture of the sales cycle than a speculative probability-weighted figure.
Moreover, providing additional context about the strength of each connection adds even more insight. For example, a deal that came through a warm referral from a board member is far more likely to close than one initiated by cold outreach. This qualitative data, when combined with deal stages, not only clarifies the pipeline but also provides investors with a better understanding of the probability of success without the need for subjective weighting. By using deal stages and relationship strength, founders can paint a clearer, more truthful picture of where they are in the sales process.
2. Segmenting by Customer Type: A Strategic Alternative to Weighted Average Contract Value
Another effective approach is segmenting the pipeline by customer type, deal size, or industry. Instead of relying on the average contract value across the entire pipeline, founders can present their deals by customer cohort. This segmentation could look something like:
- Enterprise clients (>$500K ARR): 3 deals in advanced discussions
- Mid-market clients ($100K–$500K ARR): 5 deals at proposal stage
- SMB clients (<$100K ARR): 10 deals in early conversations
Segmenting the pipeline this way allows investors to see the distribution of deals across different categories and assess how well the company’s go-to-market strategy is performing in each area. By dividing deals into cohorts, founders give investors the ability to evaluate the scalability of their business and the alignment of their pipeline with long-term strategy. Investors can also assess whether the mix of deals aligns with the company’s target market, helping them to gauge whether the pipeline is healthy or top-heavy in one category.
3. Using Historical Sales Data as a Trusted Alternative to Weighted Average Contract Value
One of the most compelling alternatives to WACV is using historical sales data to demonstrate how deals typically progress through the pipeline. Founders can show their historical close rates by stage (e.g., how many deals in the “proposal sent” stage have closed in the past year), the average sales cycle length, and time-to-close variance by customer segment. These data points provide investors with a much more accurate projection of future revenue than a weighted average contract value could ever offer.
For example, a founder could demonstrate that 30% of deals in the “proposal sent” stage converted to closed deals over the past 12 months and that deals in “final negotiations” typically close within 45 days. By showcasing these historical metrics, founders provide investors with data-backed projections of pipeline health and sales velocity, which offer a more grounded and realistic view of what to expect.
Key Takeaways
While WACV might be a quick and easy way for founders to summarize their sales pipeline, it often does more harm than good by introducing assumptions that investors are hesitant to trust. By shifting away from WACV and embracing alternatives to weighted average contract value, founders can provide investors with the clarity they crave. Whether it’s through offering detailed deal stage breakdowns, segmenting deals by customer type, or leveraging historical conversion data, these alternatives offer a more accurate and transparent view of revenue potential. Founders who prioritize transparency and data over speculative metrics not only gain investors’ trust, but also improve their ability to forecast and scale their businesses with greater confidence.
After all, in the world of investing, the illusion of success won’t cut it. Investors want to see the real magic—hard data that leads to tangible, scalable growth.
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