16 Startup Metrics 16 创业指标
Summary:We have the privilege of meeting with thousands of entrepreneurs every year, and in the course of those discussions are presented with all kinds of numbers, measures, and metrics that illustrate the promise and health of a particular company.Ultimately, though, good metrics aren’t about raising money from VCs — they’re about running the business in a way where founders know how and why certain things are working (or not) … and can address or adjust accordingly.One common problem with CAC metrics is failing to include all the costs incurred in user acquisition such as referral fees, credits, or discounts.Especially in early stage startups, it’s important to know and monitor burn rate as companies fail when they are running out of cash and don’t have enough time left to raise funds or reduce expenses.
We have the privilege of meeting with thousands of entrepreneurs every year, and in the course of those discussions are presented with all kinds of numbers, measures, and metrics that illustrate the promise and health of a particular company. Sometimes, however, the metrics may not be the best gauge of what’s actually happening in the business, or people may use different definitions of the same metric in a way that makes it hard to understand the health of the business.
So, while some of this may be obvious to many of you who live and breathe these metrics all day long, we compiled a list of the most common or confusing ones. Where appropriate, we tried to add some notes on why investors focus on those metrics. Ultimately, though, good metrics aren’t about raising money from VCs — they’re about running the business in a way where founders know how and why certain things are working (or not) … and can address or adjust accordingly.
A common mistake is to use bookings and revenue interchangeably, but they aren’t the same thing.
Bookings is the value of a contract between the company and the customer. It reflects a contractual obligation on the part of the customer to pay the company.
Revenue is recognized when the service is actually provided or ratably over the life of the subscription agreement. How and when revenue is recognized is governed by GAAP.
Letters of intent and verbal agreements are neither revenue nor bookings.
Investors more highly value companies where the majority of total revenue comes from product revenue (vs. from services). Why? Services revenue is non-recurring, has much lower margins, and is less scalable. Product revenue is the what you generate from the sale of the software or product itself.
ARR (annual recurring revenue) is a measure of revenue components that are recurring in nature. It should exclude one-time (non-recurring) fees and professional service fees.
ARR per customer: Is this flat or growing? If you are upselling or cross-selling your customers, then it should be growing, which is a positive indicator for a healthy business.
MRR (monthly recurring revenue): Often, people will multiply one month’s all-in bookings by 12 to get to ARR. Common mistakes with this method include: (1) counting non-recurring fees such as hardware, setup, installation, professional services/ consulting agreements; (2) counting bookings (see #1).
While top-line bookings growth is super important, investors want to understand how profitable that revenue stream is. Gross profit provides that measure.
What’s included in gross profit may vary by company, but in general all costs associated with the manufacturing, delivery, and support of a product/service should be included.
So be prepared to break down what’s included in — and excluded — from that gross profit figure.
#4 Total Contract Value (TCV) vs. Annual Contract Value (ACV)
TCV (total contract value) is the total value of the contract, and can be shorter or longer in duration. Make sure TCV also includes the value from one-time charges, professional service fees, and recurring charges.
ACV (annual contract value), on the other hand, measures the value of the contract over a 12-month period. Questions to ask about ACV:
What is the size? Are you getting a few hundred dollars per month from your customers, or are you able to close large deals? Of course, this depends on the market you are targeting (SMB vs. mid-market vs. enterprise).
Is it growing (and especially not shrinking)? If it’s growing, it means customers are paying you more on average for your product over time. That implies either your product is fundamentally doing more (adding features and capabilities) to warrant that increase, or is delivering so much value customers (improved functionality over alternatives) that they are willing to pay more for it.
See also this post on ACV.
Lifetime value is the present value of the future net profit from the customer over the duration of the relationship. It helps determine the long-term value of the customer and how much net value you generate per customer after accounting for customer acquisition costs (CAC).
A common mistake is to estimate the LTV as a present value of revenue or even gross margin of the customer instead of calculating it as net profit of the customer over the life of the relationship.
Note, if you have only few months of data, the conservative way to measure LTV is to look at historical value to date. Rather than predicting average life span and estimating how the retention curves might look, we prefer to measure 12 month and 24 month LTV.
Another important calculation here is LTV as it contributes to margin. This is important because a revenue or gross margin LTV suggests a higher upper limit on what you can spend on customer acquisition. Contribution Margin LTV to CAC ratio is also a good measure to determine CAC payback and manage your advertising and marketing spend accordingly.
See also Bill Gurley on the “dangerous seductions” of the lifetime value formula.
In marketplace businesses, these are frequently used interchangeably. But GMV does not equal revenue!
GMV (gross merchandise volume) is the total sales dollar volume of merchandise transacting through the marketplace in a specific period. It’s the real top line, what the consumer side of the marketplace is spending. It is a useful measure of the size of the marketplace and can be useful as a “current run rate” measure based on annualizing the most recent month or quarter.
GMV(gross merchandise volume)是指在特定时期内通过市场交易的商品的总销售金额。它是真正的顶线，是市场上消费者方面的支出。它是衡量市场规模的有用尺度，可以作为基于最近一个月或一个季度的年度化的 “当前运行率 “的有用尺度。
Revenue is the portion of GMV that the marketplace “takes”. Revenue consists of the various fees that the marketplace gets for providing its services; most typically these are transaction fees based on GMV successfully transacted on the marketplace, but can also include ad revenue, sponsorships, etc. These fees are usually a fraction of GMV.
收入是指市场 “拿走 “GMV的部分。收入包括市场因提供服务而获得的各种费用；最典型的是基于市场上成功交易的GMV的交易费用，但也可以包括广告收入、赞助等。这些费用通常是GMV的一小部分。
In a SaaS business, this is the cash you collect at the time of the booking in advance of when the revenues will actually be realized.
As we’ve shared previously, SaaS companies only get to recognize revenue over the term of the deal as the service is delivered — even if a customer signs a huge up-front deal. So in most cases, that “booking” goes onto the balance sheet in a liability line item called deferred revenue. (Because the balance sheet has to “balance,” the corresponding entry on the assets side of the balance sheet is “cash” if the customer pre-paid for the service or “accounts receivable” if the company expects to bill for and receive it in the future). As the company starts to recognize revenue from the software as service, it reduces its deferred revenue balance and increases revenue: for a 24-month deal, as each month goes by deferred revenue drops by 1/24th and revenue increases by 1/24th.
正如我们之前分享过的，SaaS公司只有在服务交付时才能在交易期限内确认收入–即使客户签署了巨额的前期交易。因此，在大多数情况下，这种 “预订 “会在资产负债表中的负债项目中被称为递延收入。因为资产负债表必须 “平衡”，所以如果客户预付了服务费用，那么资产负债表资产端对应的分录就是 “现金”；如果公司预计未来会开单并收到服务，那么对应的分录就是 “应收账款”）。当公司开始确认软件作为服务的收入时，它减少了递延收入余额，增加了收入：对于24个月的交易，随着每个月的推移，递延收入下降1/24，收入增加1/24。
A good proxy to measure the growth — and ultimately the health — of a SaaS company is to look at billings, which is calculated by taking the revenue in one quarter and adding the change in deferred revenue from the prior quarter to the current quarter. If a SaaS company is growing its bookings (whether through new business or upsells/renewals to existing customers), billings will increase.
Billings is a much better forward-looking indicator of the health of a SaaS company than simply looking at revenue because revenue understates the true value of the customer, which gets recognized ratably. But it’s also tricky because of the very nature of recurring revenue itself: A SaaS company could show stable revenue for a long time — just by working off its billings backlog — which would make the business seem healthier than it truly is. This is something we therefore watch out for when evaluating the unit economics of such businesses.
Customer acquisition cost or CAC should be the full cost of acquiring users, stated on a per user basis. Unfortunately, CAC metrics come in all shapes and sizes.
One common problem with CAC metrics is failing to include all the costs incurred in user acquisition such as referral fees, credits, or discounts. Another common problem is to calculate CAC as a “blended” cost (including users acquired organically) rather than isolating users acquired through “paid” marketing. While blended CAC [total acquisition cost / total new customers acquired across all channels] isn’t wrong, it doesn’t inform how well your paid campaigns are working and whether they’re profitable.
CAC指标的一个常见问题是没有包括用户获取过程中产生的所有成本，如推荐费、积分或折扣。另一个常见的问题是将CAC作为一个 “混合 “成本来计算（包括通过有机方式获得的用户），而不是孤立地计算通过 “付费 “营销获得的用户。虽然混合CAC[总获取成本/跨所有渠道获取的新客户总数]并没有错，但它并不能告知你的付费营销活动效果如何，以及是否盈利。
This is why investors consider paid CAC [total acquisition cost/ new customers acquired through paid marketing] to be more important than blended CAC in evaluating the viability of a business — it informs whether a company can scale up its user acquisition budget profitably. While an argument can be made in some cases that paid acquisition contributes to organic acquisition, one would need to demonstrate proof of that effect to put weight on blended CAC.
Many investors do like seeing both, however: the blended number as well as the CAC, broken out by paid/unpaid. We also like seeing the breakdown by dollars of paid customer acquisition channels: for example, how much does a paying customer cost if they were acquired via Facebook?
Counterintuitively, it turns out that costs typically go up as you try and reach a larger audience. So it might cost you $1 to acquire your first 1,000 users, $2 to acquire your next 10,000, and $5 to $10 to acquire your next 100,000. That’s why you can’t afford to ignore the metrics about volume of users acquired via each channel.
Different companies have almost unlimited definitions for what “active” means. Some charts don’t even define what that activity is, while others include inadvertent activity — such as having a high proportion of first-time users or accidental one-time users.
不同的公司对 “活跃 “的含义几乎有无限的定义。有些图表甚至没有定义这种活跃度是什么，而另一些图表则包括了无意中的活动–比如拥有高比例的首次用户或意外的一次性用户。
Be clear on how you define “active.”
Often this measured as the simple average of monthly growth rates. But investors often prefer to measure it as CMGR (Compounded Monthly Growth Rate) since CMGR measures the periodic growth, especially for a marketplace.
Using CMGR [CMGR = (Latest Month/ First Month)^(1/# of Months) -1] also helps you benchmark growth rates with other companies. This would otherwise be difficult to compare due to volatility and other factors. The CMGR will be smaller than the simple average in a growing business.
There’s all kinds of churn — dollar churn, customer churn, net dollar churn — and there are varying definitions for how churn is measured. For example, some companies measure it on a revenue basis annually, which blends upsells with churn.
Investors look at it the following way:
It is also important to differentiate between gross churn and net revenue churn —
Gross churn: MRR lost in a given month/MRR at the beginning of the month.
Net churn: (MRR lost minus MRR from upsells) in a given month/MRR at the beginning of the month.
The difference between the two is significant. Gross churn estimates the actual loss to the business, while net revenue churn understates the losses (as it blends upsells with absolute churn).
Burn rate is the rate at which cash is decreasing. Especially in early stage startups, it’s important to know and monitor burn rate as companies fail when they are running out of cash and don’t have enough time left to raise funds or reduce expenses. As a reminder, here’s a simple calculation:
Monthly cash burn = cash balance at the beginning of the year minus cash balance end of the year / 12
每月现金烧损率=年初的现金余额减去年底的现金余额 / 12
It’s also important to measure net burn vs. gross burn:
Net burn [revenues (including all incoming cash you have a high probability of receiving) – gross burn] is the true measure of amount of cash your company is burning every month.
Gross burn on the other hand only looks at your monthly expenses + any other cash outlays.
Investors tend to focus on net burn to understand how long the money you have left in the bank will last for you to run the company. They will also take into account the rate at which your revenues and expenses grow as monthly burn may not be a constant number.
See also Fred Wilson on burn rate.
Downloads (or number of apps delivered by distribution deals) are really just a vanity metric.
Investors want to see engagement, ideally expressed as cohort retention on metrics that matter for that business — for example, DAU (daily active users), MAU (monthly active users), photos shared, photos viewed, and so on.
Cumulative charts by definition always go up and to the right for any business that is showing any kind of activity. But they are not a valid measure of growth — they can go up-and-to-the-right even when a business is shrinking. Thus, the metric is not a useful indicator of a company’s health.
Investors like to look at monthly GMV, monthly revenue, or new users/customers per month to assess the growth in early stage businesses. Quarterly charts can be used for later-stage businesses or businesses with a lot of month-to-month volatility in metrics.
There a number of such tricks, but a few common ones include not labeling the Y-axis; shrinking scale to exaggerate growth; and only presenting percentage gains without presenting the absolute numbers. (This last one is misleading since percentages can sound impressive off a small base, but are not an indicator of the future trajectory.)
It’s fine to present metrics in any order as you tell your story.
When initially evaluating businesses, investors often look at GMV, revenue, and bookings first because they’re an indicator of the size of the business. Once investors have a sense of the the size of the business, they’ll want to understand growth to see how well the company is performing. These basic metrics, if interesting, then compel us to look even further.
As one of our partners who recently had a baby observes here: It’s almost like doing a health check for your baby at the pediatrician’s office. Check weight and height, and then compare to previous estimates to make sure things look healthy before you go any deeper!
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