The country’s entrepreneurial growth has been tremendous over the past few years. The number rose from 452 startups in 2016 to 84,012 in 2022 and 112,718 in 2023. By 2025, India is expected to have 250 unicorns. The numbers are impressive, and the passion is commendable, but businesses don’t have it easy from the start. Not all entrepreneurs have enough funds to fuel their passion projects. To secure funding, investors play a crucial role. Since significant amounts of money are at stake, investors check key metrics before proceeding.
If you are also seeking funding for your business, here is a list of 30 key metrics to impress the investors:
1. Revenue Growth Rate
It is a measure of revenue increase over a period, typically month-over-month or year-over-year. It demonstrates how fast the startup is scaling. It attracts investor interest by showing a consistent and strong upward trend, highlighting the business model’s effectiveness and potential for significant expansion.
Revenue Growth Rate = (Current Period Revenue−Previous Period Revenue) / Previous Period Revenue x 100
2. Gross Margin
Gross margin is the percentage difference between revenue and the cost of goods sold (COGS). It shows how efficiently a company produces and sells its goods. A high gross margin indicates the company can cover expenses, invest in growth, and generate profit. Investors value a healthy gross margin as it reflects the startup’s cost management and potential for profitability, making it an appealing investment.
Gross Margin=(Total Revenue−COGS) / Total Revenue ×100
3. Net Profit Margin
Net profit margin is the percentage of revenue left after deducting all expenses, taxes, and costs. It indicates a company’s profitability and operational efficiency. A higher net profit margin shows stronger financial health and the potential for sustainable growth.
Net Profit Margin=Total Revenue / Net Profit × 100
4. Burn Rate
Burn rate is the monthly rate at which a startup spends its capital before achieving positive cash flow. Investors closely monitor this metric to gauge how efficiently resources are managed and when additional funding may be required. Understanding your burn rate is critical for assessing operational sustainability and financial planning.
Burn Rate = (Starting Cash Balance−Ending Cash Balance) / Number of Months
5. Runway
Runway is the time a startup can operate before exhausting its cash, calculated by dividing the current cash balance by the monthly burn rate. A longer runway allows startups more time to achieve milestones, profitability, or secure additional funding, showcasing financial stability.
Runway = Cash Balance / Monthly Burn Rate
6. Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the total expense of acquiring a new customer, encompassing marketing and sales costs. It gauges the efficiency of the marketing efforts. A lower CAC indicates cost-effective customer acquisition, appealing to investors for its potential to enhance profitability.
CAC = Total Sales and Marketing Expenses / Number of New Customers Acquired
7. Customer Lifetime Value (CLTV)
Lifetime Value is the total revenue expected from a customer throughout their relationship with the business. It assesses long-term customer value and profitability. A high CLTV indicates customers contribute significant revenue over time, signaling sustainability.
CLTV = Average Revenue per Customer × Gross Margin × Customer Lifetime
8. CAC to LTV Ratio
The CAC to LTV ratio compares the cost of acquiring a customer to the revenue generated from that customer. It shows the return on investment for customer acquisition efforts. A higher ratio signifies efficient customer acquisition and greater profitability, enhancing the startup’s appeal.
CAC to LTV Ratio = CLTV / CAC
9. Churn Rate
Churn rate is the percentage of customers who discontinue using the product or service within a specific timeframe. Lower churn rates signify stronger customer retention, which is crucial for sustained revenue growth. Investors value low churn rates as they indicate high customer satisfaction and effective user retention strategies.
Churn Rate = Number of Customers Lost during Period / Total Number of Customers at the Start of Period ×100
10. Monthly Recurring Revenue (MRR)
Monthly recurring revenue (MRR) is the predictable revenue generated monthly from subscriptions. It’s crucial for subscription-based businesses, to offer a steady revenue stream. Investors prize MRR for its stability and growth potential in recurring revenue.
MRR= Average Revenue per Account × Total Number of Accounts
11. Annual Recurring Revenue (ARR)
Annual recurring revenue (ARR) is the yearly equivalent of MRR, offering a long-term view of recurring revenue potential. It’s crucial for assessing the health and growth trajectory of subscription-based businesses.
ARR = MRR × 12
12. Active Users
Active users are those actively engaging with your product or service within a specific period, reflecting user engagement and product relevance. Increasing active users indicates growing traction and meeting market demand.
13. Customer Retention Rate
Customer retention rate is the percentage of customers retained over a specific period, indicating satisfaction and loyalty. High retention rates are crucial for long-term success.
Retention Rate = Number of Customers at End of Period / Number of Customers at Start of Period × 100
14. Product-Market Fit (PMF)
Product-market fit (PMF) measures how well the product satisfies market demand. It’s critical for long-term success, demonstrating a viable market and strong growth potential. Investors prioritize startups with PMF as it indicates scalability and market acceptance.
15. Net Promoter Score (NPS)
Net Promoter Score (NPS) measures customer satisfaction and loyalty by gauging the likelihood of customers recommending the product. A high NPS indicates satisfied customers who are likely to promote the product, driving organic growth. Investors value high NPS for its indication of a strong customer base and potential for word-of-mouth marketing.
NPS = %Promoters − %Detractors
16. Monthly Active Users (MAU)
Monthly Active Users (MAU) are unique users engaging with the product monthly, indicating sustained interest and growth potential. Increasing MAU is a positive signal for investors, reflecting rising user adoption and engagement.
17. Daily Active Users (DAU)
Daily Active Users (DAU) are unique users engaging with the product daily, indicating strong engagement and habitual usage. High DAU signals active user activity and potential for daily monetization.
18. Cohort Analysis
Cohort analysis studies user groups (cohorts) with shared characteristics over time to understand behavior patterns and improve retention strategies. Investors value cohort analysis for insights into user behavior and product effectiveness in retaining customers.
19. Employee Turnover Rate
Employee turnover rate measures how quickly employees leave the company. High turnover may signal internal issues and impact stability. Investors favor startups with low turnover rates, indicating a positive work environment and operational stability.
Employee Turnover Rate = Number of Employees Leaving / Average Number of Employees × 100
20. Revenue per Employee
Revenue per employee measures the revenue generated per employee, indicating productivity and operational efficiency. A high revenue per employee demonstrates effective utilization of human resources.
Revenue per Employee = Total Revenue / Number of Employees
21. Customer Support Tickets
The number of customer support tickets reflects the volume of support requests received. High numbers may indicate product issues but also show active user engagement. Investors analyze this metric to gauge customer satisfaction and assess the effectiveness of the support team in resolving issues.
22. Customer Satisfaction Score (CSAT)
Customer Satisfaction Score (CSAT) measures satisfaction through surveys. High CSAT scores indicate positive customer experiences, signaling that the product meets expectations and drives satisfaction. High CSAT scores indicate strong customer satisfaction and product effectiveness.
CSAT = Number of Satisfied Customers / Number of Survey Responses ×100
23. Market Share
Market share represents the percentage of the market the startup captures, showing competitive positioning and growth potential. Investors favor startups with increasing market share, indicating effective market competition.
Market Share = Company’s Revenue / Total Market Revenue ×100
24. Total Addressable Market (TAM)
The Total Addressable Market (TAM) is the total revenue opportunity if the startup captures 100% market share. It helps gauge the market’s full potential. Investors use TAM to evaluate a business’s scalability and overall market opportunity.
25. Serviceable Addressable Market (SAM)
Serviceable Addressable Market (SAM) is the portion of TAM targeted by your product or service, offering a practical measure of market potential. Investors use SAM to assess the immediate market opportunity and the startup’s potential to capture a significant share of it.
26. Serviceable Obtainable Market (SOM)
Serviceable Obtainable Market (SOM) is the portion of SAM that the startup can realistically capture. It’s essential for setting achievable goals and expectations. Investors value SOM for its practical insight into the startup’s market potential and growth prospects.
27. Valuation
Valuation is the startup’s estimated worth, influencing investment decisions and ownership percentages. A higher valuation signals strong growth potential and attracts more investment. Investors use valuation to gauge fair market value and negotiate investment terms.
28. Equity Dilution
Equity dilution is the reduction in ownership percentage resulting from new equity issuance. Founders must understand equity dilution to grasp how fundraising affects their ownership stake. Investors assess equity dilution to ensure their stake remains significant when making investment decisions.
Equity Dilution = New Shares Issued / Total Shares After Issuance ×100
29. Funding Round Size
Funding round size is the amount of capital sought in a funding round, indicating planned growth and operational needs. Investors evaluate the funding round size to understand the startup’s capital requirements and how the funds will be utilized.
30. Capitalization Table
A cap table displays ownership stakes, equity dilution, and equity value in a startup. It ensures transparency in equity distribution. Investors review the cap table to understand ownership structure and the impact of their investment on existing shareholders.
Understanding these metrics will not only help in successfully planning a business but will also increase the chances of securing funding. Want to get funded without diluting equity? Understanding these metrics will not only help in successfully planning a business but will also increase the chances of securing funding.
Want to get funded without diluting equity? You can get funded via GetVantage by clicking here: https://getvantage.co/registration.
