How to Prove Your Startup’s Growth Potential

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 Investors Lighter Capital’s Revenue-Based Financing Equity Investors
Customers A strong and diversified customer base is important. Need to see consistent payment from customers Require more than 5 customers with growth year-over-year Customer growth is critical, since product-market fit is a major stepping stone equity investors want to see
Churn Not applicable Less than 20% for sales to large enterprises, and 20-40% for sales to SMBs Less than 20% for sales to large enterprises, and 20-40% for sales to SMBs
CAC Ratio Not applicable Depends 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 better
Customer Lifetime Value Not applicable Higher than the cost to acquire Depends on the investment horizon of the investor
Product Market Fit Not applicable Need to see sustainability and adoption of product in the specific markets Large definable market and clear differentiated space is required

Want More SaaS Metrics?

The 8 SaaS Metrics That MatterWant a more comprehensive look at the most important metrics investors look for when funding tech companies? There are many numbers, statistics, and metrics to calculate, track and assess the health of your technology business; so many, in fact, that reliable measurement can seem overwhelming.

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.