As a startup or early stage business, tracking metrics brings direction and strategy to your company. It also encourages a change in performance when evaluating those metrics and the goal is always to improve those metrics. Without measuring your metrics, you’re unable to improve.
Metrics are concrete and tangible evidence that you are able to show to a potential investor. They will ask you for this information when you approach them to help you raise funds for your startup. Your intention should be to get ahead of the game and get them the right information that they require to help accelerate your organizational growth.
Read on to discover the importance of startup metrics and what metrics you should be collecting in order to move your company through the venture fundraising lifecycle.
As a (small time) angel investor and having been involved in the Bay Area startup ecosystem for years, I often hear founders (especially in the Saas or mobile app sectors), touting their number of sign-ups for the solution. However, in many cases, startups launch their new product with a “freemium” model, where the initial version is offered at no-cost. As a startup KPI, this isn’t particularly impressive. Instead focus on factors such as:
· The number of paying customers
· The retention rate (in other words, do they use the service or app a few times and then drop it?).
· The frequency of usage
· Customer Acquisition Cost (CAC) - how much does it cost you to acquire each new customer?
· What is the lifetime value of each customer?
· Surveys are great, but go one step further and set up an actual landing page for the product and if feasible, collect pre-orders.
These are just a few of the much more meaningful KPIs (Key Performance Indicators) that will matter to prospective investors.
Startup metrics are one of the most critical, and often misunderstood, aspects of building a strong startup. Antoine de Saint-Exupéry once said, “a goal without a plan is just a wish.” To get their startups to where they want them to be, founders must develop a strong plan or roadmap for growth.
Startup fundraising is tough in any economic environment. Nonetheless, business funding is the lifeline of building a startup and enduring, profitable company. While passion and performance are important, a startup has to have sufficient financial resources to launch, scale and keep the lights on as it grows.
Important Industry Happenings
· 12 Vital Financial Metrics For Small Businesses (Via Forbes)
· Startup Metrics You Need to Monitor (via Visible)
· Ultimate Startup Metrics Guide (via Data Rockets)