#37: The Dangerous Fantasy of “Generated Pipeline”

Chip Royce, Flywheel Advisors

You’re sitting in that quarterly board meeting. The revenue numbers look bad. But don’t worry – you have a hero metric to save you: “We generated $4.2M in pipeline this quarter!”

The room goes quiet. Someone coughs. Your lead investor glances at the CFO.

Here’s the cold truth: Generated pipeline is the biggest lie startups tell themselves. It’s business calories that don’t count. Fantasy football for founders who can’t face reality.

The Mirage of Generated Pipeline

Generated pipeline sounds legitimate. It carries the weight of process and prediction. It even comes with its own formula:

Generated Pipeline = Number of Opportunities × Projected Deal Size

The problem? It’s mostly fiction.

Research from OpenView Partners found that early-stage B2B SaaS companies typically convert only 5-8% of their pipeline into actual revenue. Yet these same companies routinely forecast based on 20-30% conversion rates (OpenView, 2023).

This isn’t just harmless optimism. It’s organizational self-deception with real consequences:

1. Burns runway: Companies hire based on imaginary revenue
2. Destroys credibility: Leaders who repeatedly miss projections lose trust
3. Prevents adaptation: When you believe your pipeline fantasy, you don’t fix what’s broken

Why We Fall for the Pipeline Trap

The pipeline metric persists because it serves psychological needs:

1. Instant Gratification

Creating pipeline feels like progress. Each new prospect delivers a dopamine hit. McKinsey research indicates that early-stage startups generate 2-3x more economic value by focusing on scaling existing customers rather than endless pipeline generation (McKinsey, 2022). Yet we can’t resist the allure of the new.

2. Avoids Accountability

Pipeline metrics conveniently sit in that perfect middle ground – far enough from revenue that you can’t be held directly accountable, but close enough to revenue that they seem important.

3. The Activity Illusion

As Atlassian’s DORA metrics framework points out, high activity (like deployment frequency) means nothing if the quality isn’t there. Similarly, pipeline volume without conversion quality creates a dangerous illusion of progress (Atlassian, 2023).

Every market shift, new competitor, and change in customer behavior presents a choice. You can see it as a threat to your vision or as a chance to refine it. Most people choose the former, but success demands the latter.

The Dark Patterns of Pipeline Manipulation

Once pipeline becomes your north star metric, it gets manipulated:

• Marketing inflates MQL numbers by lowering qualification thresholds
• Sales logs opportunities at exaggerated values
• Deals stay “active” long after they’re dead
• Pricing proposals balloon to hit pipeline targets

Industry expert Ton Dobbe observes this phenomenon consistently: “Too many SaaS companies become obsessed with pipeline size rather than pipeline quality, creating a dangerous disconnect from business reality” (Dobbe, 2023).

Better Metrics for Actual Business Health

Instead of generated pipeline, here’s what smart early-stage companies measure:

1. Revenue-Centric Metrics

Monthly Recurring Revenue (MRR) Growth Rate

This is your truth serum. While pipeline is what might happen, MRR is what did happen. Dave Kellogg, former CEO of Host Analytics, emphasizes: “Revenue, bookings, and billings growth are blended metrics that tell the real story about business health” (Kellblog, 2022).

PROS: Direct measure of business health, predictable, easy to understand.
CONS: Lagging indicator, may not show future potential.

Customer Acquisition Cost (CAC)

CAC tells you what it costs to acquire a customer – a reality check against pipeline fantasies.

PROS: Shows efficiency of growth, helps optimize spending, critical for unit economics.
CONS: May vary significantly early on, requires accurate cost allocation.

2. Customer-Focused Metrics

Product-Market Fit Score

The “very disappointed” measure from Sean Ellis asks: “How would you feel if you could no longer use our product?” Companies with strong product-market fit see 40%+ of users answer “very disappointed.”

PROS: Indicates real market demand, validates business model, forward-looking.
CONS: Subjective measurement, requires consistent customer feedback

Net Revenue Retention (NRR)

This tracks how much revenue you keep and grow from existing customers. Top-performing SaaS companies maintain 120%+ NRR.

PROS: Shows actual customer value, strongest predictor of long-term success.
CONS: Takes time to accumulate enough data, affected by customer segment mix

3. Quality-Based Pipeline Metrics

If you must measure pipeline, at least measure the right aspects of it:

Qualified Pipeline Coverage

This focuses on highly-qualified opportunities that meet strict criteria, typically requiring 3-4× coverage ratio for your target.

PROS: Focus on quality over quantity, better predictor of future revenue.
CONS: More complex to track, requires clear qualification criteria.

Stage Conversion Rates

Track how efficiently deals move through each stage, not just the total volume.

PROS: Identifies specific funnel problems, shows process health, harder to manipulate
CONS: Requires disciplined sales process, consistent stage definitions

The Startup Measurement Framework That Actually Works

Here’s how to replace generated pipeline with metrics that matter:

Core Metrics (Weekly Focus)

1. Monthly revenue growth rate (target: 15%+ for early-stage)
2. Customer acquisition cost (target: recover within 12 months)
3. Net revenue retention (target: 110%+)
4. Cash runway (target: 18+ months)

Supporting Metrics (Monthly Review)

1. Product usage metrics (active users, core feature adoption)
2. Sales cycle length (and trends over time)
3. Win rates by lead source
4. Customer expansion opportunities

Pipeline Quality Indicators (Never in Isolation)

1. Opportunity source effectiveness
2. Deal velocity through stages
3. Stage conversion rates
4. Customer fit score against ideal customer profile

Case Study: Pipeline Fantasy vs. Reality

Consider Stackwave, an early-stage DevOps platform. Their journey illustrates this perfectly:

Year 1: Generated $12M in pipeline, celebrated at all-hands meetings.
Result: Closed $600K in actual deals (5% conversion)

Year 2: Changed approach to focus on product usage metrics and existing customer expansion.
Result: Generated half the pipeline but closed $1.8M (30% conversion)

“We wasted a year chasing vanity pipeline metrics,” admits Stackwave’s CEO. “When we started focusing on actual usage and customer success metrics, our genuine revenue tripled while our reported pipeline dropped.”

The Uncomfortable Truth

Generated pipeline is easy to create, easy to celebrate, and nearly impossible to convert at the rates startups imagine. It’s the startup equivalent of buying lottery tickets and counting the potential winnings as assets.

McKinsey’s landmark study on the Dutch startup ecosystem found that startups focusing on scaling existing success generate “two to three times the economic value” versus those constantly chasing new pipeline (McKinsey, 2022).

Start With These Steps

1. Implement a Quality Score System

Create a 1-10 qualification framework based on fit, need, timing, and budget. Only count pipeline above a certain threshold.

2. Track Conversion Rates By Source

Certain lead sources convert drastically better than others. Stop treating all pipeline as equal.

3. Run Regular Pipeline Audits

Force regular purges of stale opportunities with brutal honesty.

4. Recalibrate Forecasts Based on Historical Data

If you’ve historically closed 7% of pipeline, stop projecting 25% conversion.

5. Celebrate Revenue, Not Pipeline

What gets celebrated gets repeated. Make actual customer wins the hero moment.

The Last Word

Your investors, your team, and your future self don’t care about your generated pipeline. They care about your actual results. The sooner you recognize generated pipeline for what it is – a comforting fantasy that postpones the hard work of building a real business – the sooner you’ll focus on metrics that drive genuine growth.

Pipeline without conversion isn’t an asset. It’s a liability that consumes your most precious resource: focus.

What metric are you going to stop tracking tomorrow?