10 Most Important metrics that are asked by investors.

For young entrepreneurs, tracking the right startup metrics is crucial to impress investors. These metrics for startups such as revenue growth, customer acquisition cost, and churn provide clear evidence of traction and viability Investors often emphasize growth and retention indicators as the most important signals of a startup’s health. Demonstrating strong numbers on these metrics builds trust and helps close funding, since sharing key metrics transparently has been shown to “earn you a lot of trust with investors” and speed up due diligence.

1. Revenue Growth Rate

Definition: The revenue growth rate measures the increase in a startup’s sales over time, usually calculated month-over-month (MoM) or year-over-year (YoY). This metric shows how quickly your business is expanding.

• Example 1: A SaaS company had $10,000 in revenue in January and $15,000 in February, a 50% MoM growth.
• Example 2: An online retailer earned $8,000 in Q1 and $12,000 in Q2, a 50% quarterly increase.

Why it matters: Investors treat consistent revenue growth as a clear sign of market demand and scalability. Strong growth suggests customers are willing to pay for your solution. As one advisor notes, “Revenue growth tells investors where a company is today and where it's headed". Conversely, flat or shrinking revenue raises red flags about product–market fit.

2. Monthly Recurring Revenue (MRR)

Definition: MRR is the predictable monthly income from subscriptions or contracts. Calculate MRR as (Number of Active Customers × Average Revenue per Customer). It represents the stable, recurring revenue stream each month.

• Example 1: A fitness app has 200 active subscribers paying $25/month, so MRR = $5,000.
• Example 2: A B2B tool has 50 customers at $200 each per month, so MRR = $10,000.

Why it matters: Investors closely watch MRR (and its growth rate) because it reflects traction and predictability. Rising MRR means the startup is acquiring and retaining paying customers. A steady increase in MRR signals that the product is gaining momentum; by contrast, falling MRR can indicate churn or a failing monetization strategy. Stable MRR makes forecasting easier and shows investors that revenue isn’t just coming from one-off sales.

3. Burn Rate

Definition: Burn rate is the speed at which a startup spends its cash reserves each month. In other words, it’s the amount of money going out (expenses) per month. Burn rate can be expressed as gross burn (total cash spent) or net burn (cash spent minus revenue).

• Example 1: A biotech startup spends $50,000 per month on research. If it has $600,000 in the bank, its runway is roughly 12 months.
• Example 2: An early-stage food startup burns $20,000 per month on operations. With $100,000 cash, its runway is about 5 months.

Why it matters: Investors use burn rate to assess financial health. A very high burn rate can be a red flag, signaling that the startup may run out of money before reaching key goals. Managing burn carefully (e.g. cutting unnecessary costs) shows discipline. Investors like to see that founders understand their burn and are planning to align spending with growth, since “cash flow problems” from high burn are among top causes of startup failure.

4. Cash Runway

Definition: Cash runway estimates how many months a startup can continue operating before its cash runs out, given the current burn rate. It’s calculated as Cash on Hand ÷ Monthly Burn Rate.

• Example 1: A gaming startup has $300,000 in cash and spends $75,000 per month. Its runway is 4 months.
• Example 2: A retail tech startup holds $900,000 and burns $100,000 monthly; its runway is 9 months.

Why it matters: Runway tells investors how much time you have to hit milestones or raise the next round. Investors typically look for a runway of 18–24 months at the time of funding. A longer runway means your startup has breathing room; a runway much shorter than 12–18 months is often viewed as too risky (it suggests you may need funding urgently). Demonstrating healthy runway reassures investors that their capital will not be immediately depleted.

5. Gross Margin

Definition: Gross margin is the percentage of revenue remaining after covering the cost of goods sold (COGS). Calculate it as (Revenue – COGS) ÷ Revenue × 100%. High gross margin means more revenue converts to profit.

• Example 1: A SaaS product charges $100 per license. The server and support costs per user are $10, so gross margin is 90%.
• Example 2: A boutique sells a dress for $200. The cost of materials and labor is $80, yielding a gross margin of 60%.

Why it matters: Gross margin indicates scalability and efficiency. Software companies often have high gross margins (e.g. 80–90%), whereas retail or manufacturing might see 20–30%. Investors compare your margin to industry norms: higher margin means you can spend more on growth (sales, marketing) while still being profitable. Low gross margins might worry investors that the business needs too many sales to break even.

6. Customer Acquisition Cost (CAC)

Definition: CAC measures the average cost to acquire one paying customer. It includes marketing, advertising, sales salaries, and any expenses directly tied to customer acquisition. Calculate CAC as Total Acquisition Spend ÷ Number of New Customers Acquired in a period.

• Example 1: If a startup spends $5,000 on a Facebook campaign and gains 100 new customers, CAC = $50.
• Example 2: A business development team spends $20,000 in a quarter and lands 10 clients, so CAC = $2,000 per client.

Why it matters: Investors look at CAC to judge growth efficiency. On its own CAC shows how expensive it is to get customers; by itself a high CAC can be worrying. More importantly, investors compare CAC to Customer Lifetime Value (LTV): ideally LTV should be at least 3× CAC. A low CAC (or a high LTV/CAC ratio) indicates that the startup can acquire users profitably. Trends in CAC also matter: a rising CAC may signal market saturation or inefficient marketing.

7. Customer Lifetime Value (LTV)

Definition: LTV is the total revenue a startup expects to earn from a single customer over the entire period of their relationship. It accounts for repeat purchases, subscriptions, or any ongoing revenue from that customer. In formula terms, you can approximate LTV as Average Revenue per User × Customer Lifespan (in months or years).

• Example 1: A subscription coffee delivery company charges $20/month. If the average customer stays for 12 months, LTV = $240.
• Example 2: An e-commerce business finds that the average shopper spends $100 per visit and makes 3 purchases per year over 2 years, so LTV ≈ $600.

Why it matters: LTV shows the long-term value of each customer. Investors use LTV in combination with CAC: if LTV is much higher than CAC, the business can grow profitably. As an expert puts it, LTV should ideally be at least three times CAC A high LTV (driven by customer loyalty and upsells) tells investors you have a sustainable revenue model. In contrast, a low LTV means customers don’t stick around or spend much, which can limit growth even if acquisition is cheap.

8. Churn Rate

Definition: Churn rate is the percentage of customers who stop using your product (or cancel subscriptions) over a given period. It’s calculated as Customers Lost ÷ Customers at Start of Period × 100%

• Example 1: A mobile app starts the month with 1,000 subscribers and 50 cancel. Churn = 5%.
• Example 2: A gym had 200 members, lost 20 over a quarter. Quarterly churn = 10%.

Why it matters: Churn directly impacts growth. A low churn rate means customers are satisfied and stick around, which is a positive sign of product-market fit. High churn (e.g. 15–20% monthly) is a red flag: it means you’re losing customers almost as fast as you gain them. Investors know “churn is a silent killer” of recurring revenue. Reducing churn (through better service or product improvements) is often cheaper than acquiring new customers, so investors will ask about churn early to understand retention.

9. Unit Economics

Definition: Unit economics assesses the profitability of acquiring and serving one customer. In simple terms, it’s the contribution margin per customer: LTV – CAC. This shows whether each new customer is profitable in the long run.

• Example 1: A startup spends $100 to acquire a customer (CAC). That customer brings $200 in profit over time (LTV after costs), yielding a net $100 profit per customer.
• Example 2: A subscription service has $50 CAC and $150 average revenue per customer (with 80% margin). After 2 months the customer has paid back the acquisition cost.

Why it matters: Investors want to see positive unit economics, meaning the business makes money on each customer eventually. A key benchmark is the CAC payback period: many investors look for payback in under 12 months. Strong unit economics imply that scaling up (acquiring more customers) will lead to profits rather than losses. If unit economics are weak, investors worry the startup may need endless funding to grow.

10. Customer Retention Rate

Definition: Customer retention rate is the percentage of customers a business keeps over a period (often a month or year). It’s calculated as ((Customers at End – New Customers) ÷ Customers at Start) × 100%. High retention (complementary to low churn) means customers continue buying or subscribing.

• Example 1: A SaaS business starts the quarter with 100 customers, adds 20 new ones, and ends with 95 total. Retention = 75%.
• Example 2: An online service had 500 users, 50 are new, and 480 remain active. Retention = 86%.

Why it matters: Retention rate highlights customer loyalty and product-market fit. High retention suggests the product is valuable and sticky; low retention signals issues. Investors often compare your retention to industry norms. Steady or improving retention can be even more persuasive than raw customer counts, because it shows the startup is learning and fixing problems. In short, high retention means less pressure to constantly acquire new customers, which makes the business model more sustainable.

Table contains different metrics & their use cases

Metric	Real‑Life Example
Revenue Growth Rate	A tutoring startup earns $1,000 in January and $1,500 in February (50% growth).
Monthly Recurring Revenue (MRR)	A fitness app has 100 subscribers paying $10/month, so MRR = $1,000.
Burn Rate	A campus cafe startup spends $2,000 each month on supplies and rent.
Cash Runway	With $12,000 in the bank and burning $2,000/month, runway = 6 months.
Gross Margin	A handcrafted candle business sells for $20 each, costs $8 to make (60% margin).
Customer Acquisition Cost (CAC)	A snack box service spends $500 on ads and gains 50 customers (CAC = $10).
Customer Lifetime Value (LTV)	A subscription box customer pays $25/month for 8 months, so LTV = $200.
Churn Rate	A language‑learning app starts with 200 users and 10 cancel in a month (5% churn).
Unit Economics	If it costs $20 to acquire a customer who then generates $100 profit, unit profit = $80.
Customer Retention Rate	An online course platform has 100 students, adds 20 new, and ends with 95 (75% retention).

Conclusion

Tracking these metrics for startups gives young founders a data-driven story to tell investors. By measuring revenue growth, MRR, burn rate, CAC, and the other key numbers above, you prove that you understand and control your business. Remember investors often emphasize growth and retention as the "most important signals". Sharing clear, accurate metrics early can build confidence - one VC advises that transparent metrics "earn you a lot of trust" and smooth the fundraising process.

Stay focused on these 10 metrics, present them confidently in your pitch, and you’ll show investors the solid foundations and potential of your startup. With good data backing your story, you’ll be well on your way to raising capital and achieving startup success.

Sources: Definitions and insights adapted from venture expert guides and startup finance resources.