What metrics and thresholds do VCs look for when assessing a startup for investment, e.g., “What should our monthly churn rate be for Series X?“ 🤔
This is a very common concern for those seeking capital that leads to a host of different questions being asked in the venture capital space❗
Andrew Yeo from AirTree has written a great piece in which he explains why VCs generally consider signals of product-market fit (PMF) over hard thresholds for individual metrics 🔥
These are the red flags and positive signals that Andrew highlights for venture investment across stages:
Red Flags 🛑 🚩
– Low or inconsistent MRR growth
– High and/or increasing churn rate
– High and/or increasing CAC payback periods
– High CAC compared to LTV
– Low or declining Gross Margin %
Rocket Ship Signals 🚀🧑🚀
– High rate of ARR growth, 2x-3x+ YoY
– Low churn or positive net dollar retention
– Fast CAC paybacks
– Improving LTV/CAC
– High or increasing Gross Margin %
For details, read the article: https://lnkd.in/ga7cVETX
Click here to view the original Linkedin post.
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