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  • Writer's picturePhalgun Raju

Metrics Part 1: What VCs Want to See by Stage of a Startup

Are you measuring what matters to your stage of business and to VCs? I've sat down with many startup CEOs/founders during fundraising where some key metrics are often missing in their decks, or more importantly, missing in their heads & in their teams. Usually this means their teams are also not aligned/incentivized against the metrics that matter.

Metric-related No-Nos for a Startup CEO/team

Poor tracking - Have a few metrics, missing key ones or not tracking at correct level of granularity. You cannot improve what you cannot measure.

Poor relevancy - Have a lot of metrics they are spending time measuring/reporting, but many not relevant to the stage of the startup (see more on this below). This leads to unfocused teams trying to optimize against too many metrics.

Poor prioritization - Have a lot of metrics, but little clarity on on the 1-2 that really matter above others.

Poor organizational alignment - Have key metrics for overall business, but poorly translated and aligned within the teams. Metrics should be SMART (specific, measurable, attainable, relevant, time-bound).

Poor understanding/action of key levers - It's 80/20. Of all the variables that drive a key business metric, which one would have the greatest "bang for your buck" to focus your team's efforts on? Of all the variables that negatively affect that same key business metric, which is the one that if fixed, dramatically improves the metric?

So let's get started - note some of these metrics may vary by type of business/model, I tried to get the most common ones in here.

STAGE 1 METRICS: "0 to 1" - You are experimenting rapidly to find product market fit

Love (or Engagement) metrics are the priority at this stage - you need to show that the users that have signed up for your product/service absolutely love it, even if you don't have a ton of users yet.

% users "sad if product wasn't available any longer" -survey them. "would you be disappointed if the product would no longer be available?" Per some data crunching across 100 startups, Sean Ellis of Growth Hacking, found roughly at least 40% should not be disappointed.

Referrals or Net promoter score - "On a scale of 0-10, how likely are you to recommend to a friend or colleague?" Basically you want to either survey or better yet have real data on how proactively users are recommending to others organically yielding virality signups or purchases.

% Active users daily/weekly/monthly - the frequency depends on the nature of the product. Active can be defined as transactions completed, taking a key action and coming back for more. % is important vs. actual numbers at this stage, but need statistical significance.

LTV/CAC ratio (maybe) - Lifetime value/Customer acquisition cost - at this stage it is only relevant if you are spending money to get customers, and have a clear day-1 revenue model, e.g. e-commerce, SaaS. A good number is roughly 3 for product-market fit per industry views on this.

STAGE 2 METRICS: "Grow, grow, grow" - Users love your product - time to scale!

Focus on generating interest (signups), optimizing conversions (taking the 1-2 key actions), and keeping customers/users engaged (keep coming back for more)

# of New Users/month/day - Sub-metrics include: traffic, signup conversion by channel, optimization needed here

Conversion rate - what you want them to convert to will vary by the business model. e.g. e-commerce (buy something), SaaS (subscribe) etc...

Growth efficiency - Monthly churn/upsell/new/downsell - What % users are deleting accounts, e.g. moving back to free plan from a premium plan etc..or equivalent metrics for B2C

Sales & marketing spend as % of ARR

Top-line growth - Revenue/ARR/New logos - this may come later for business models with network effects, like marketplaces or social networking. ARR is for subscription models. Logos for enterprise.

Sales/integration/installation lead time (for SaaS/enterprise)

Supply capacity vs. demand - for HW businesses & marketplaces.

Plus all the engagement/satisfaction metrics in Stage 1

STAGE 3 METRICS: "Profit" - Lots of users converting - time to make money!

Margin - gross & operating margins

Costs to serve - understand the waterfall chart of cost to serve each customer segment & country e.g. support, technical integrations, shipping, warranties, free trials, promotions etc...fix the leakages or withdraw from customer segments/countries "not worth it" at this time.

G&A - fix leakages

Price vs. value - survey heavy users making up 80% of your revenue and understand the value you provide vs. alternatives to see what pricing levers you have.

Salesforce effectiveness - # of quota carrying reps, revenue/rep ranked by quartiles etc...

Cash flow

Plus all the Stage 1 & Stage 2 metrics

STAGE 4 METRICS: "Company building" - Congrats you are "winning", now what?

You are likely at a stage now where you are rapidly hiring and scaling your business - now is a great time to toptimize/fix metrics as it relates to building a great company that lasts.

If you were already focused on the below internal employee metrics - fantastic!:

Internal happiness metrics - Employee satisfaction/churn/employee NPS

Training - % of employees who have undergone the relevant internal trainings etc...

Diversity - In board, leadership & teams.

Brand Awareness - % of target users that have heard of you in target markets

Market share - in current and adjacent market segments

Plus all the other Stage metrics

What do you think? Was this helpful? Questions/feedback/comments welcome to refine this list. In Part 2 I will do deeper into the actual benchmark numbers by fundraising stage.

#startups #entrepreneurship #leadership #metrics #performance


At Morph Ventures, we are playing an active role in fostering the India and Southeast Asia entrepreneurial ecosystem. Share your views on what metrics matter or other founder topics/challenges you would like me to write about.

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If you are an early stage founder in India or Southeast Asia in consumer or SaaS, I would love to talk to you. Reach out to me on LinkedIn with a brief overview and deck - let's chat!

Other articles I've written in the past:

The Smartest People Work for Someone Else

Find the Big Problem, Ask the Right Question

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