Identifying and tracking metrics are important to measure and analyze a startup’s health. However, not all metrics and indicators should be equally monitored. Each startup with different business models working in different industries should focus on certain metrics depending on their business goals and stages of development.
Therefore, understanding and choosing the right metrics to analyze would help you stay concentrated on what matters most to achieve your business objectives. Below you will find some of the metrics that VIISA and other VCs often look for when analyzing a startup.
As a startup founder, you are the one to decide what metrics to improve for certain goals that the startups are focusing on. For example, if your startup is aiming to increase brand awareness, the website traffic and click through rate (CTR) are some of the indicators to trace.
If you want a more engaged audience to trial your product, you can focus on daily/monthly active users (DAU/MAU) and furthermore to figure out how to improve customers’ loyalty, the retention rate is the one to pay attention to. These metrics will be helpful in measuring the stickiness and forecasting the traction revenue potential of your startup.
For startups at market-entry and scale up stage, measuring the effectiveness of its marketing plan is important. Revenue per dollar of sale expense is one of the indicators that are applicable in this stage. Conversion rate is also important and at the same time, tracking the drop offs and finding out the reasons behind them are crucial as well, as it gives you an idea of what needs to be fixed.
In our previous topic on what investors want to see in your startup, we mentioned about the unit economy model. Lifetime value of a customer to your company (LTV) and customer acquisition cost (CAC) are the two metrics that all startups should pay attention to. According to TechCrunch, “the ratio of CAC to LTV to be the golden metric. If a company can predictably and repeatedly turn x into 10x (note: 10x is just an illustration and not meant to imply any sort of minimum or standard), then it’s sustainable.”, and an LTV:CAC ratio of 3:1 or higher is considered an ideal (Klipfolio).
CAC recovery time also needs to be taken into account as it directly relates to the cash flow and runway of the company. A period of 18 months or less is more preferable as not all investors are patient enough to keep pumping money into your startups if it takes too long to become profitable.
A continuously increasing gross merchandise volume (GMV) is also important to investors, especially in the e-commerce industry as we want to invest in a growing business. We also look at startups’ burn rate, as it reveals the ability to maintain the business and survive in some unexpected situations, when the startups cannot find the investors or this covid-19 pandemic for instance. And it shows whether the founders can operate the business effectively as well.
With our experience of working with 36 startups over the last 3 years, we commit to nurture you and your startups’ potentials!