Articles and Advice

Before You Meet the Investors: 9 Key Metrics You Need to Know

There comes a time in every entrepreneur’s life when determination and persistence are not enough. No matter how good your team, or how great your idea at some point turning your idea into a reality will take funding. That means cold, hard cash. And that means meeting the investors.

Just like the Boy Scouts, make sure you are prepared before you present your big idea to investors. While a potential investor will no doubt be impressed with unwavering self-belief, they will be even more impressed with an unwavering knowledge of the figures. Your ability to sprout key metrics without raising a sweat will go a long way in convincing a potential investor that your startup is a worthwhile one.

Don’t blow it

Ever been asked a question in front of a room full of people and not known the answer? It’s a sickening feeling and one most of us would do anything to avoid. It’s not a situation you want to find yourself in when presenting to a roomful of serious investors. At best, it will be embarrassing for everyone and at worst, it may mean you blow the best opportunity that’s come your way so far.
In some cases, a startup will have previous financials to show, but in many cases there won’t be. So, knowing a few key metrics will give a potential investor something to base their prediction of future success on.
Elizabeth Krause from MergeLane  has created a list of key metrics you really should know before you walk into that investor meeting. Here are 9 metrics worth knowing backwards, forwards and inside out.

• Monthly for past six months
• Yearly for past three years
• Year-to-date
• Month-to-date
• Average revenue by channel for previous quarter and year

Revenue Growth (as a percentage)
• Month-over-month for past six months
• Year-over-year for the past three years
• Year-over-year growth per quarter
• Revenue growth rate decline (SaaS)

Gross Margin
• Current gross margin
• Year-over-year percentage decrease or increase for last three years
• Projected year-over-year decrease or increase for next three year

Customer Acquisition Metrics (if applicable)
• Monthly recurring revenue (MRR)
• Churn rate
• Site traffic – year-to-date, last year, monthly for past three months
• Customer acquisition cost (CAC)
• Customer lifetime value (LTV)

• Cash in the bank
Burn rate
• Runway

Funding History
• Amount raised to date
• Timing and terms of previous financing (debt vs. equity, valuation, etc.)

Funding Plan – Current
• Details of current fundraise (amount raising, key terms, valuation)
• Use of proceeds
• Amount closed (in the bank) and soft-circled (amount verbally agreed to)
• Length of runway with current raise

Future Funding
• Projected amount to be raised over the life of the company
• Amount and timing of next raise

Other Metrics
• Time to break-even
• Current accounts receivable / accounts payable

Being able to rattle off key metrics will go a long way in giving a potential investor the impression that you have a strong business and you are a strong leader of that business. It shows a potential investor that you are presenting a serious proposition, not a part-time project.

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