Track Key Investors Metrics for your Startup
Startups who are looking forward to raising funding should align their reporting in line with the requirement of investors. This article discusses the key metrics that startups should publish regularly and update investors. Track Key Investors Metrics
Table of Contents
Importance of right metrics
Choosing the right metrics specific to your business is important so that investors can take key decisions to fuel your growth and gives confidence to the investors about the viability of the business.
Even you raise money without choosing the right metrics and regular updates on these key metrics to investors, then future funding or valuation of the business would get adversely impacted.
Key Metrics for Startups
When an investor evaluates a startup, they would like to review the historical financial statement, financial forecasts, and key metrics to track the growth and financial viability of the startup. Metrics would be dependent on the company size, industry types, business model, stage of the company, etc. Hence, the metric should be chosen carefully to suit the requirements of the investors depending on various dynamic factors.
A startup should always aim to engage with its investors, build trust and strengthen the relationship. This would also help them in the next round of funding. A startup should choose the top 4-7 metrics to track in alignment with the investor.
Monthly Revenue
Average Monthly revenue can be calculated by Total sales divided by the number of months. This indicates the revenue of the startup each month.
Revenue against Target
Revenue is tracked against the plan revenue for the period and variance is explained if the same is highly skewed.
Percentage Revenue Growth
Percentage Revenue Growth can be calculated as [(Revenue in the current month – Revenue in last month) divided by Revenue in last month] x 100.
This indicates the % increase in revenue month over month.
Revenue Year on Year Growth
Revenue growth year on year = [(Revenue in current year – Revenue in last year) divided by Revenue in last year] x 100.
This indicates the % increase in revenue year on year.
Examples:
Revenue = 120 in current year
Revenue = 100 in last year
Revenue yoy% is 20% calculated as [(120-100)/100] x 100.
Revenue contributed by new customers
Revenue contribution by new customer = (Revenue from new customers divided by total revenue) x 100.
Revenue per user
Revenue per user = (Total revenue divided by the number of users)
This indicates the revenue contributed by each user or subscriber.
Burn
Burn is the amount of amount is spending to run the operations of that Startup. It means that cash outflow on account of expenditure is more than the cash inflow from revenue sources.
Gross Burn per month = Cash outflow on expenditures & growth
Net Burn = Gross Burn less revenue
Months of Runway
Months of runway indicates for how many months current cash holding can fund the startup operation. Post this, investors have to fund the operation.
Months of runway = Cash/Bank balance divided by burn rate per month
Customer Base
Customer base is the total number of customers existing at a particular point in time. If we add all of the customers for a given period, the total number would the customer base and this should exclude the customer canceling or exiting or not renewing the subscriptions.
Active Users
The active users count to indicate the number of users who are using the product or services of the startup during the defined time interval.
Paying Users
Paying users to indicate the number of customers who are paying money to startup in some form. So, this excludes customer on trail pack or customer opted for free subscription offers.
The investor would appreciate a relevant set of metrics being tracked and updated regularly. Visual presentation and presentation in charts & graphs enable ease of understanding to the investors. Track Key Investors Metrics
Best of luck!!
