Fundraising is one of the toughest tasks you’ll take on as a startup founder and entrepreneur. One way to make it easier is to line up the key components you need to tell a good story about your company’s growth. Growth metrics are key to a successful pitch and story.
Once you’ve connected with potential investors and piqued their interest, the next step is sharing specific data about your company. In addition to financials, investors want to see metrics that demonstrate your company is growing and on a path to profitability.
Investors will ask questions about the strength of your customer base and growth, how much churn your company is experiencing, your customer acquisition cost (CAC) ratio and customer lifetime value (CLTV), and if you are approaching product/market fit. (RELATED: How to Calculate CLTV to CAC Ratio for Your SaaS Business)
The table below summarizes key tech startup growth metrics and how different investors view them.Traditional Debt InvestorsLighter Capital’s Revenue-Based FinancingEquity InvestorsCustomersA strong and diversified customer base is important. Need to see consistent payment from customersRequire more than 5 customers with growth year-over-yearCustomer growth is critical, since product-market fit is a major stepping stone equity investors want to seeChurnNot applicableLess than 20% for sales to large enterprises, and 20-40% for sales to SMBsLess than 20% for sales to large enterprises, and 20-40% for sales to SMBsCAC RatioNot applicableDepends on the LTV of your customers (If they stay with you for 3 years, 0.5 is fine. If they are only 1 year customers, you need to be at the minimum of 1.)Love to see 1 or betterCustomer Lifetime ValueNot applicableHigher than the cost to acquireDepends on the investment horizon of the investorProduct Market FitNot applicableNeed to see sustainability and adoption of product in the specific marketsLarge definable market and clear differentiated space is required
Want More SaaS Metrics?
This guide explains the core metrics used to measure SaaS company success. Using simple examples, we’ll show you how to calculate each metric, and describe why specific indicators are important to investors.