Investor Metrics: What Investors Look at When Assessing Startups
This post is part of the Entrepreneurial Education Series, which brings together successful, influential entrepreneurs and investors to teach entrepreneurs everything they need to know about early-stage investment through events, articles, videos, and more. If you are interested in learning more about raising a round, save the date for “Early Stage Investment 101” on June 17.
When you’re talking to any investor, angel or otherwise, you need to be able to tell a story about your business and support it with meaningful metrics. Without those metrics, the story lacks substance, direction, and credibility. So how do you know which metrics are meaningful, both in measuring your own business and presenting to investors?
Understand What Traction Means For You
Ultimately, the metrics that matter most to your story are the ones that show your traction in the market. Before you pick which ones seem most appealing or readily available, ask yourself a few key questions:
· What is your market and what does it look like?
· What pain point are you trying to solve?
· What behavior are you trying to change?
· Who is your ideal customer?
· How does he/she use your product?
When you have concrete answers to these questions, you can determine which metrics are nice to have, and which are critical to successfully telling you story to investors.
Still, There Are Several Metrics Angels Look For
It’s up to you how you use them in your pitch or in conversation, but you should know them in order to directly and effectively answer questions.
Product Usage (Month over Month)
· Time Users Spend Using Product
· Organic Growth
· How Much Usage and Growth Comes from Referrals
· How Much Product Usage is Repeat Usage
· Number of Non-Paying vs. Paying Customers
· Conversion Rate of Non-Paying Customers to Paying Customers
· Total Number Customers
· Number of Customers Month over Month
· Growth Rate (total, annual, and month over month)
· Lifetime Value
· Cost of Acquisition
Partner Growth (Month Over Month)
Depending on what your business does, you can use this in addition to customer growth, as a substitute for customer growth, or it exclude it altogether from your data.
*The goal here is to show clear trend lines
· Total Revenue Month Over Month
· Total Revenue Quarter Over Quarter
· Total Revenue Year Over Year
Chances are many of these metrics are crucial to your story. However, don’t forget about the metrics that relate to your core business. Just because investors don’t know to ask for them doesn’t mean they aren’t critical to your success.
About Hyde Park Angels
Hyde Park Angels is transforming early-stage investing by taking a people first approach. The organization is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the group provides critical strategic expertise to entrepreneurs and the entrepreneurial community. Nearly 40% of our members have founded a company, 88% are CEO’s, top executives or corporate board members, and 100% invest in startups. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 40 portfolio companies that have created over hundreds of jobs in the Midwest since 2006.
About the Authors
Alida Miranda-Wolff heads up communications and strategy at Hyde Park Angels, crafting and disseminating the organization’s brand in all forms across all channels. In addition to single-handedly building HPA’s integrated communications plan and executing its core elements, Alida manages membership, partnerships, portfolio company support, and all community engagement.
Prior to joining Hyde Park Angels, Alida served in a variety of journalism, marketing, communications, and management roles, specializing in creating spreadable multimedia content for tech-enabled businesses at all stages. Alida has run several Kickstarter campaigns, including one of the most successful in Chicago history, and still mentors companies running their own campaigns.
Alida graduated Phi Beta Kappa from the University of Chicago in 2014 with multiple honors and awards. She remains active in the university of alumni network, serving on five advisory boards and committees. Alida is also a published author and poet, with two poetry chapbooks currently in print, Domestic Scenes and Tree Fingers.
Over the past two decades, Peter has successfully founded, built, and turned around companies in the education, healthcare, and technology industries. He has also leveraged his entrepreneurial experience to help build one of the largest and most successful angel investor groups in the country.
Peter currently leads Hyde Park Angels (HPA) as the managing director. Prior to HPA, he co-founded New Futuro, a socially innovative education company helping Latino families get their students into college. Before New Futuro, Peter worked with KKR Capstone (KKR’s operations group) as President of PRIMEDIA Healthcare, where he turned around the company from record losses to record profits and built one of the premier online physician education communities. Prior to PRIMEDIA, Peter successfully served in senior sales and marketing roles for two technology startups that collectively sold for more than $2.8 billion. Peter holds a degree in business from Indiana University and graduated from the University of Chicago Booth Executive Institute.
Peter is passionate about inspiring and developing current and future startup leaders. He believes when entrepreneurs lead with purpose as their best-selves they improve their lives, their companies, and the world in incredible ways. Peter serves on a number of company, venture capital and non-profit boards and is an active advisor to many entrepreneurs. He also frequently speaks about entrepreneurship, as well as providing tailored solutions to executives and companies through the Omaxen Group.