Day 4
Dataset
March 12
⏳ 35 min to watch
Today’s videos offer essential insights into startup metrics and investor expectations. Oleg Bilozor, Founder & CEO of Reply.io, explains why tracking metrics is crucial for every founder, highlighting the universal metrics investors prioritize and the concept of a North Star Metric for sustainable growth. Understanding and optimizing the right metrics can boost fundraising efforts and help scale a startup efficiently.
In the second video, Michael Staton, investor and entrepreneur, shares strategies for startups that lack strong traction or clear metrics. He discusses how to demonstrate potential to investors through alternative proof points, such as market validation, team strength, and product vision. These insights are invaluable for early-stage founders looking to build investor confidence and secure funding even without extensive data. 🚀
Today’s videos offer essential insights into startup metrics and investor expectations. Oleg Bilozor, Founder & CEO of Reply.io, explains why tracking metrics is crucial for every founder, highlighting the universal metrics investors prioritize and the concept of a North Star Metric for sustainable growth. Understanding and optimizing the right metrics can boost fundraising efforts and help scale a startup efficiently.
In the second video, Michael Staton, investor and entrepreneur, shares strategies for startups that lack strong traction or clear metrics. He discusses how to demonstrate potential to investors through alternative proof points, such as market validation, team strength, and product vision. These insights are invaluable for early-stage founders looking to build investor confidence and secure funding even without extensive data. 🚀
⏳ 20 min to read
What Are Business Metrics?
Business metrics are quantifiable measurements that indicate how well a company is performing across different areas such as marketing, sales, finance, and operations. Tracking business metrics helps founders make data-driven decisions, improve efficiency, and optimize revenue models. These metrics are critical for startups to monitor growth, attract investors, and ensure long-term sustainability.
Metrics vs. Measures – What’s the Difference?
Example:
Why Are Metrics Important?
📊 Metrics provide clarity. They help founders understand what is working and where improvements are needed.
📈 Metrics ensure consistency. Standardized metrics allow companies to compare performance over time and against competitors.
🎯 Metrics guide strategy. They help businesses set realistic goals and prioritize efforts in marketing, product development, and sales.
4 Types of Business Metrics
1️⃣ Financial Metrics
These metrics assess the financial health and profitability of a business.
📌 Examples:
2️⃣ Marketing Metrics
Track the effectiveness of marketing campaigns and customer acquisition efforts.
📌 Examples:
3️⃣ Performance Metrics
These measure internal efficiency and productivity.
📌 Examples:
4️⃣ Sales Metrics
Track revenue growth, sales performance, and customer retention.
📌 Examples:
7 Key Business Metrics Every Startup Should Track
🔹 1️⃣ Customer Acquisition Cost (CAC)
🔹 2️⃣ Customer Lifetime Value (CLV/LTV)
🔹 3️⃣ Churn Rate
🔹 4️⃣ Gross Margin
🔹 5️⃣ Monthly Recurring Revenue (MRR)
🔹 6️⃣ Net Promoter Score (NPS)
🔹 7️⃣ Website Traffic-to-Lead Ratio
Measuring Metrics the Right Way
🔹 Avoid focusing on vanity metrics.
North Star Metric – The One Metric That Drives Growth
A North Star Metric (NSM) is the single most important metric that reflects business success and customer value.
Characteristics of a North Star Metric:
✅ Results in revenue growth
✅ Reflects customer satisfaction
✅ Aligns teams and decision-making
Examples of North Star Metrics for Different Businesses:
🔹 Why It Matters?
NSM aligns teams, simplifies goals, and ensures everyone is working toward the same objective.
Aligning Business Metrics with OKRs (Objectives & Key Results)
Adding OKRs (Objectives and Key Results) into the conversation is a valuable extension, especially for aligning business metrics with strategic goals.
Instead of just focusing on a wide array of business metrics, it’s critical to define high-level objectives and then identify the key results (metrics) that will indicate progress toward those goals.
OKRs and Metrics Connection:
1️⃣ OKRs define the strategic vision and align efforts across teams, ensuring everyone is focused on the same high-level goals.
2️⃣ Key Results are measurable outcomes that track whether you’ve achieved your objectives.
3️⃣ With OKRs, you focus on a set of critical metrics that contribute to your overall goals instead of getting lost in too many data points.
Example:
📌 Objective: Improve customer retention in the first year.
What Are Business Metrics?
Business metrics are quantifiable measurements that indicate how well a company is performing across different areas such as marketing, sales, finance, and operations. Tracking business metrics helps founders make data-driven decisions, improve efficiency, and optimize revenue models. These metrics are critical for startups to monitor growth, attract investors, and ensure long-term sustainability.
Metrics vs. Measures – What’s the Difference?
- Measures = Basic numerical values that can be counted or summed (e.g., revenue, number of sales, website visits).
- Metrics = Calculated using one or more measures, incorporating performance goals (e.g., conversion rate, customer lifetime value).
Example:
- Measure: Number of website visitors.
- Metric: Website traffic-to-lead ratio (% of visitors who become potential customers).
Why Are Metrics Important?
📊 Metrics provide clarity. They help founders understand what is working and where improvements are needed.
📈 Metrics ensure consistency. Standardized metrics allow companies to compare performance over time and against competitors.
🎯 Metrics guide strategy. They help businesses set realistic goals and prioritize efforts in marketing, product development, and sales.
4 Types of Business Metrics
1️⃣ Financial Metrics
These metrics assess the financial health and profitability of a business.
📌 Examples:
- Gross Margin – Profitability after deducting costs.
- Cash Flow – Movement of money in and out of the business.
- Burn Rate – Rate at which cash is being spent before becoming profitable.
2️⃣ Marketing Metrics
Track the effectiveness of marketing campaigns and customer acquisition efforts.
📌 Examples:
- Website Traffic – Number of visitors to the company’s website.
- Conversion Rate – Percentage of visitors who become customers.
- Customer Acquisition Cost (CAC) – Cost of acquiring one new customer.
3️⃣ Performance Metrics
These measure internal efficiency and productivity.
📌 Examples:
- Employee Satisfaction Score – Indicator of company culture and engagement.
- Operational Efficiency – How well the company uses resources to generate output.
4️⃣ Sales Metrics
Track revenue growth, sales performance, and customer retention.
📌 Examples:
- Customer Churn Rate – Percentage of customers lost over time.
- Monthly Recurring Revenue (MRR) – Predictable revenue generated from subscriptions.
7 Key Business Metrics Every Startup Should Track
🔹 1️⃣ Customer Acquisition Cost (CAC)
- Formula: CAC = Total Marketing & Sales Cost ÷ Number of New Customers Acquired
- Why it matters: If CAC is too high relative to revenue, the business is unsustainable.
🔹 2️⃣ Customer Lifetime Value (CLV/LTV)
- Formula: CLV = ARPU × Gross Margin (%) ÷ Churn Rate
- Why it matters: A high CLV means customers bring more value over time.
🔹 3️⃣ Churn Rate
- Formula: Churn Rate = (Lost Customers ÷ Total Customers) × 100
- Why it matters: High churn means customers are leaving quickly, impacting revenue stability.
🔹 4️⃣ Gross Margin
- Formula: Gross Margin = (Revenue - Cost of Goods Sold) ÷ Revenue × 100
- Why it matters: High gross margin means better profitability potential.
🔹 5️⃣ Monthly Recurring Revenue (MRR)
- Formula: MRR = Total Monthly Revenue from Subscriptions
- Why it matters: Essential for SaaS and subscription-based businesses.
🔹 6️⃣ Net Promoter Score (NPS)
- Formula: Survey customers: "How likely are you to recommend us on a scale of 1-10?"
- Why it matters: A high NPS indicates customer satisfaction and loyalty.
🔹 7️⃣ Website Traffic-to-Lead Ratio
- Formula: Traffic-to-Lead Ratio = (Number of Leads ÷ Total Website Visitors) × 100
- Why it matters: Shows how effectively the website converts visitors into potential customers.
Measuring Metrics the Right Way
🔹 Avoid focusing on vanity metrics.
- Example: Website traffic is meaningless if it doesn’t translate into paying customers.
- Track multiple metrics to get a full picture.
- Identify weak areas and adjust strategies accordingly.
North Star Metric – The One Metric That Drives Growth
A North Star Metric (NSM) is the single most important metric that reflects business success and customer value.
Characteristics of a North Star Metric:
✅ Results in revenue growth
✅ Reflects customer satisfaction
✅ Aligns teams and decision-making
Examples of North Star Metrics for Different Businesses:
- 📺 Netflix: Hours watched per user.
- 📦 Amazon: Number of purchases per customer.
- 🚗 Uber: Rides completed per week.
🔹 Why It Matters?
NSM aligns teams, simplifies goals, and ensures everyone is working toward the same objective.
Aligning Business Metrics with OKRs (Objectives & Key Results)
Adding OKRs (Objectives and Key Results) into the conversation is a valuable extension, especially for aligning business metrics with strategic goals.
Instead of just focusing on a wide array of business metrics, it’s critical to define high-level objectives and then identify the key results (metrics) that will indicate progress toward those goals.
OKRs and Metrics Connection:
1️⃣ OKRs define the strategic vision and align efforts across teams, ensuring everyone is focused on the same high-level goals.
2️⃣ Key Results are measurable outcomes that track whether you’ve achieved your objectives.
3️⃣ With OKRs, you focus on a set of critical metrics that contribute to your overall goals instead of getting lost in too many data points.
Example:
📌 Objective: Improve customer retention in the first year.
- Key Result 1: Achieve an NPS score of 70+.
- Key Result 2: Reduce churn rate to 5%.
- Key Result 3: Increase average session duration by 20%.
What Metrics Tell Investors
Investors look for strong business metrics before funding a startup.
📊 Key Metrics Investors Analyze:
✔ Gross Margin: Shows profitability potential.
✔ MRR & ARR (Annual Recurring Revenue): Predictability of revenue.
✔ Revenue Growth Rate: Demonstrates company expansion potential.
✔ Burn Rate & Runway: Determines how long a startup can survive before needing more funding.
✔ LTV:CAC Ratio: Ideally 3:1 or higher for sustainable growth.
📌 Example:
A SaaS startup with LTV = $900 and CAC = $300 (LTV:CAC = 3:1) is highly investable.
Metrics Mistakes Startups Should Avoid
❌ Focusing only on revenue while ignoring churn.
❌ Measuring too many metrics without clear goals.
❌ Ignoring customer retention and engagement.
❌ Overestimating projected revenue without historical data.
📌 Solution:
✔ Prioritize actionable metrics over vanity metrics.
✔ Reevaluate metrics monthly and adjust strategy.
What’s Next?
🚀 Day 5: Fundraising Process
📺 Now, watch our short video interview and read some cases.
📢 Afterwords, complete today’s exercise and get ready for Day 5!
🚀 Let’s make your startup investor-ready!
Investors look for strong business metrics before funding a startup.
📊 Key Metrics Investors Analyze:
✔ Gross Margin: Shows profitability potential.
✔ MRR & ARR (Annual Recurring Revenue): Predictability of revenue.
✔ Revenue Growth Rate: Demonstrates company expansion potential.
✔ Burn Rate & Runway: Determines how long a startup can survive before needing more funding.
✔ LTV:CAC Ratio: Ideally 3:1 or higher for sustainable growth.
📌 Example:
A SaaS startup with LTV = $900 and CAC = $300 (LTV:CAC = 3:1) is highly investable.
Metrics Mistakes Startups Should Avoid
❌ Focusing only on revenue while ignoring churn.
❌ Measuring too many metrics without clear goals.
❌ Ignoring customer retention and engagement.
❌ Overestimating projected revenue without historical data.
📌 Solution:
✔ Prioritize actionable metrics over vanity metrics.
✔ Reevaluate metrics monthly and adjust strategy.
What’s Next?
🚀 Day 5: Fundraising Process
📺 Now, watch our short video interview and read some cases.
📢 Afterwords, complete today’s exercise and get ready for Day 5!
🚀 Let’s make your startup investor-ready!
⏳ 20 min to learn
SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters
This article is a comprehensive and detailed look at the key metrics that are needed to understand and optimize a SaaS business. For this version, I have co-opted two real experts in the field: Ron Gill, (CFO, NetSuite), and Brad Coffey (VP of Strategy, HubSpot), to add expertise, color and commentary from the viewpoint of a public and private SaaS company. My sincere thanks to both of them for their time and input.
Read the article
Tools to measure your metrics
🌶 SplitMetrics (for mobile applications) is an intelligent data-driven solutions designed for advanced Apple Search Ads automation and optimization, mobile app concept validation and A/B testing, market insights, as well as full-cycle professional services for app and brand growth.
🌶 Klipfolio helps you centralize data and gives you the power to make decisions with confidence.
SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters
This article is a comprehensive and detailed look at the key metrics that are needed to understand and optimize a SaaS business. For this version, I have co-opted two real experts in the field: Ron Gill, (CFO, NetSuite), and Brad Coffey (VP of Strategy, HubSpot), to add expertise, color and commentary from the viewpoint of a public and private SaaS company. My sincere thanks to both of them for their time and input.
Read the article
Tools to measure your metrics
🌶 SplitMetrics (for mobile applications) is an intelligent data-driven solutions designed for advanced Apple Search Ads automation and optimization, mobile app concept validation and A/B testing, market insights, as well as full-cycle professional services for app and brand growth.
🌶 Klipfolio helps you centralize data and gives you the power to make decisions with confidence.
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