Investor question 21 of 50 · Unit economics & retention
“What's your gross margin, and what's in COGS?”
Short answer: the investor is really asking is this really a software business? Answer in three steps: (1) list what's in COGS: hosting, payment fees, support, third-party tools; (2) give the margin today and the target; (3) flag any AI or usage costs that scale with customers.
What they're really asking
Is this really a software business? Investors rarely care about the question on its own. They're testing whether you know your numbers cold, whether your assumptions are honest, and whether you can explain them simply.
How to answer, step by step
- List what's in COGS: hosting, payment fees, support, third-party tools.
- Give the margin today and the target.
- Flag any AI or usage costs that scale with customers.
An example answer
Gross margin is about 84%. COGS covers hosting, card fees, support tools and per-seat licences.
Figures are from Loopdesk, the fictional SaaS company in our sample files. Swap in your own numbers and keep the structure.
The answer that loses trust
Avoid
Putting support salaries in OpEx to inflate margin.
Where the proof lives
Before the meeting, find the number behind your answer. In our workbooks it lives in: COGS. If you can open that tab and point to it, the follow-up question is easy.