In Episode 7 of Founder Files, Salma Hatim met with Daren Lauda, CEO of Outset, to talk forecasting, fundraising, and why so many startup teams get one crucial metric dead wrong.
“Sales leaders — 95% of the time you’re not creating revenue. You’re creating a booking.”
It’s a simple mistake with big consequences. Teams talk about “revenue” when they’ve only booked a deal, patting themselves on the back for numbers that won’t hit the P&L for another six months. And in boardrooms and investor meetings, this mix-up kills credibility fast.
If you’re a founder trying to scale, raise capital, or extend your runway, it’s time to stop calling it revenue and realize what you’re really measuring.
Booked Doesn’t Mean Earned
In SaaS, the moment a customer signs a contract isn’t when your business earns the revenue; it’s when the clock starts on a recognition process.
Here’s the breakdown:
- Booking: A signed agreement. It commits the customer to pay, but the value hasn’t been delivered yet.
- Invoice: A billing request. It may follow the booking immediately, but still doesn’t count as revenue.
- Revenue: Money your company has earned, often spread monthly across the term of the contract (per ASC 606 standards).
It’s common for early-stage startups to overstate revenue by treating bookings or future contract values as if they were earned. The confusion between these terms leads to inflated forecasts, misaligned planning, and difficult conversations with investors when reality doesn’t match the numbers.
Let’s make this real:
Imagine your team lands a $60,000 annual SaaS contract billed upfront. On paper, it looks like a massive win. Here’s how that plays out in accounting:
The full $60,000 sits on the books as a liability — unearned revenue — until it’s gradually delivered month by month. In accounting terms, it appears as a liability on the balance sheet because it represents a service the company still owes. Only as the months pass and the service is delivered does that liability convert into earned revenue, which appears on the income statement.
This is the distinction between ARR (Annual Recurring Revenue) and GAAP Revenue:
- ARR reflects the full annual contract value, useful for understanding business momentum.
- GAAP Revenue reflects only the amount you’ve actually earned, recognized month by month.
Treating the full booking as revenue upfront not only misleads your team, it creates inflated metrics that break models, damage trust, and invite tough questions during fundraising or board reviews.
The misunderstanding is common, and while it might feel harmless in a team meeting, in front of your CFO or a potential investor, it’s a red flag.
Get the Language Right
Revenue recognition is a precise discipline, and when sales, finance, and leadership use terms interchangeably, it creates real damage. Bookings, ARR, GAAP revenue, cash collected — they all mean different things.
When the team says “revenue” but the financials say otherwise, your forecasts break down. Miscommunication leads to misalignment which leads to potentially costly decisions.
Getting the language right is what makes your financials usable. When everyone from sales to finance uses terms consistently, your forecasts align and metrics make sense.
Assumptions Break Models
Once your team understands what real revenue looks like, the next challenge is projecting it forward. This is where many startups get stuck.
Too many growth forecasts are built on shaky assumptions: overly optimistic conversion rates, aggressive sales cycles, or unrealistic marketing performance. The result? Leaders are constantly rebuilding models that never match reality.
Most teams rely on spreadsheets that can’t flex with changing conditions. So when something shifts (a delayed product launch, underperforming campaign, or missed sales target) the whole model collapses.
“A lot of sales and marketing targets are hypothetical. Founders have to rebuild their whole model every month because the assumptions keep changing.”
Outset’s solution is what Daren calls deterministic AI, a bottom-up model that learns how your business behaves by cohort, segment, and seasonality. The system adjusts in real time and surfaces gaps before you burn through the runway.
But Outset is just part of the solution.
You Need More Than a Tool
Fixing these problems requires more than software; it takes people who understand the nuance of financial operations, people who can help your team clean up its forecasting, align across departments, and speak confidently in front of investors.
Cypher strengthens the most misunderstood parts of your financial model. We help early-stage companies turn bookings into investor-ready forecasts, ensure revenue is recognized accurately, and align your leadership team around numbers that actually mean something.
From board meetings to fundraising decks, we make sure your metrics hold up, and your finance function supports the growth you’re building toward.
If your team is still celebrating bookings as revenue, it’s time to align your numbers with how your business actually works.
🎧 Listen to Daren’s full episode on Founder Files — new episodes drop every Tuesday at 7 AM EST.
Need a strategic finance partner who can help you make the hard calls?
Build your empire — we’ll crunch the numbers. Get started with Cypher
