Forward Fortnightly Archive: The metrics that VCs REALLY care about.
In this article, we’re going to be getting stuck into key startup metrics. How to choose the right ones to track. The metrics that VCs REALLY care about.
Keep reading to get practical, applicable insights, along with some examples from our portfolio companies of the thinking in action.
How do you make sense of your metrics?
Tracking the right metrics not only impacts your fundraising success but enables you to effectively grow your business. When establishing your KPIs you should think less about what VCs want to see and more about what you need to make informed, impactful decisions to move your business forward.
Measuring the right things and setting clear targets ensures your team is aligned, accountable, and working towards the same overall goal. Whilst the overall objectives for your whole team should be to drive revenue, it’s important to think about team-specific metrics for the different business functions.
That said, when pitching to VCs, you should expect to be asked about your metrics. Having a strong grasp of your metrics will reassure investors that you understand the levers you can pull to grow, while weak answers can raise concerns as to whether you understand the fundamentals of your business. VCs will perform in-depth due diligence at each step in the fundraising process, on your team, your revenue, your product, and your market. It’s important for you to understand what this process looks like and think about how to align your key metrics with the questions that VCs will ask. Get up to speed with how VCs think with this great guide from GoingVC.
Apply the learning.
⭐️ Establish your desired outcomes for success.
Think about the outcomes you need to achieve in order to build a successful business. This will enable you to identify the key metrics you need to measure. Ask yourself the question, "What outcome am I looking for"? The outcomes could be:
- I can identify potential customers
- I can convert prospects to customers
- Customers have a great experience
- I have a profitable marketing channel
- Our customers return and buy again
- Our people are happy
📊 You can't manage what you can't measure.
Once you establish your key metrics, it’s important that you regularly assess your performance against them, or you run the risk of missing problems that otherwise could be easily rectified. Read more about how not defining and tracking your metrics can be the difference between success and failure here.
🪞Beware of vanity metrics.
In the early stages of your startup, you may not have extensive data available, which can sometimes lead to too much focus on metrics that don’t help you take meaningful action. It’s easy to forget that an actionable metric is one that ties specific and repeatable actions to observed results. So rather than focus on a vanity metric (usually ones that goes up and to the right), focus on metrics that can inform meaningful action. A good example of this is a visitor v.s activated user or a customer who has made a purchase. Understanding how and why a user activated or purchased is much more valuable than driving more visitors to a site or product that isn’t converting.
If you’re building a startup, insights like this can help you stay ahead of the pack. Subscribe today to our Forward Fortnightly.
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