Fri, 28 January 2022
Metrics Investors Use
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
Investors also use metrics.
Here’s a list of key metrics investors focus on:
Annual Recurring Revenue (ARR) Growth - the overall growth rate of the revenue is a key factor.
Month-over-month growth demonstrates product-market fit.
Magic number - shows how sales and marketing spend drives revenue.
To calculate, take this quarter revenue minus last quarter revenue multiply by four and divide by the sales and marketing costs.
Investors want to see an equal return of revenue for every dollar spent on sales and marketing.
Gross margins - shows operational efficiency of the business.
Most SaaS companies have a gross margin between 60% and 70%.
Return on investment - shows how much the investment can return.
Investors seek a high potential return by looking for a large market with acquisitions in the high multiples based on revenue.
In essence, the investor looks for evidence of growth and efficiency in sales and operations and a return on investment.
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