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 revenue growth, how much churn your company is experiencing, your customer acquisition cost (CAC) ratio and customer lifetime value (LTV), and if you are approaching product-market fit.
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The table below summarizes key tech startup growth metrics and how different types of investors and lenders view them.
| Traditional Debt Investors | Equity Investors | |
|---|---|---|---|
Customers | A strong and diversified customer base is important. Need to see consistent payment from customers | Require more than 4 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 | Love to see CAC of 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 |
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Using simple examples, we show you how to calculate each metric and why specific indicators are important to investors.