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Tech Topics In This Article: Founder advice, investor advice
Startups live and die by the numbers. Whether displayed on pitch decks or shared in investor updates, the metrics founders choose to highlight can make or break their startup’s success.
But in the early-stages of building a startup, deciding which metrics to prioritize can be difficult. Picking the right ones to focus on can help unlock funding, refine customer outreach, or reveal hidden product opportunities. The wrong focus, however, might send founders chasing vanity metrics that fail to drive long-term success.
To separate signal from noise, we spoke to investors to uncover which metrics truly matter to them at various stages of the startup journey. Their advice can help founders avoid common pitfalls and focus on what metrics matter:
TRACTION OVER VANITY
“We have always been heavily focused on traction, but it has become much more relevant following the downturn in venture that began in 2022,” said Connor Davidson, General Partner at Atlanta Seed Company. “Traction typically means revenue, but customer count can be a useful metric for pre-seed companies who are still in Beta. The key here is having a large enough data set for us to conduct a handful of customer interviews.”
Davidson said he has seen some common pitfalls founders fall into when it comes to metric tracking. Specifically, he told Hypepotamus that he often sees early-stage companies quoting monthly growth without providing actual revenue data or customer metrics.
“For example, a company might quote 50% month-over-month growth in their deck when they only grew from 4 to 6 customers, or 10 to 15. I’d much rather see metrics on product usage, churn, and growth in ACV or the price customers are willing to pay for the product,” he added.
Joe Mancini, co-founder and General Partner at Raleigh-Durham-based Front Porch Venture Partners, said that his firm focuses heavily on customer KPIs like renewals, upsells, churn, contract value.
“We want to see founders demonstrating in their customer KPIs that they sit in what we call the “goldilocks zone” of founder-market fit – meaning that they have built early momentum with early adopters that are most often in their immediate network, but then moved from there to prove the company can sell, onboard, grow and retain customers who are outside that network,” Mancini added.
FOCUS ON YOUR STAGE
For Steve Greenfield, General Partner at Atlanta-based Automotive Ventures, the metrics to focus on are based on what stage a startup founder is building in currently.
For pre-seed and seed startups, Greenfield says he focuses on Team, TAM and Defensibility. But at this early stage of investment, it really is all about the Founder (and/or Founding Team).
“Given that [Automotive Ventures] focuses on investing in the very early stage (Seed or Pre-Seed), we’re really focused on early product/market fit. Some indication of initial traction: that the startup has some proof that they’re solving the problem they’re attacking. At this stage, founders shouldn’t worry about the scalability of the business, but finding customers that are willing to pay for the solution to the problem they’re offering,” Greenfield told Hypepotamus. “Having said that, for Series A funding (the next round), they will need to be able to communicate how adding fuel (in terms of additional capital) will allow them to start scaling the production of the solution they’ve proven out.”
“Any other distractions at this stage are just that: distractions. Seed stage startups should singularly focus on using their scarce resource (cash) to prove out that they can get customers to pay for their solution to an existing pain point.”
AVOIDING COMMON PITFALLS
Mancini pointed out that certain metrics, while flashy, often fail to hold weight with investors.
“At the pitch stage, the silliest slide in a pitch is the market sizing one, and the next silliest is the hockey stick slide,” he said.
“Once we invest and are more engaged operationally, we see a lot of startups obsess over and trumpet raw unweighted sales pipelines. Unless you share these numbers on a weighted basis, with weights that represent your historical and projected tactics and conversion by stage, they don’t mean much. We see founders spending a lot time here when revenue and bookings are behind plan,” Mancini added.
“Going up-funnel isn’t a bad move when revenue and bookings are behind plan,” he noted. “But sharing and obsessing over raw pipelines compared to weighted, actionable ones is a misleading way to assess where you are.”
