Startup Metrics to Know

Generally I will ask the founders about the metrics below. Keep in mind this is for an early stage company raising at under a 10 million valuation.

BURN RATE

This is expenses - revenue. A high burn rate is red flag and I will usually ask more questions if they are burning through say 100k a month. Its easy to burn through cash and I look for financially responsible founders.

RUNWAY

This is essentially how many months of cash they have left. In the current environment they should have at least 12 months ideally 18-24 months of cash left once they are done raising.

CUSTOMER ACQUISITION COST (CAC)

How much does it cost (usually in marketing/sales/ads) to bring on one customer. There are only so many channels of acquiring customers and organic traffic (such as through partnerships or ranking high on google search) is much better than traffic through ads (google ads/facebook ads etc).

LTV/CLV

Customer lifetime value is how much money will 1 customer generate over their lifetime. This should ideally be at least 3 times CAC.

CHURN

What percent of customers are you losing every month/ year. Depends on if the startup is direct to consumer or business to business. The annual churn should be around 5-10%, the lower the better. A monthly churn of 10% may sound low but is fairly bad as it means in 5 months you will be down to 60% of your initial customer base (90%-81%-72.9%-65.61%-59%).

RUN RATE

This is how much revenue is the company generating (monthly/annual). This is also a way to value the startup, for an early stage fast growing startup you can use a 10-30x multiple. Although this multiple changes somewhat with the public markets/ exit potential.

Thanks for reading,

Rishad