VC Metrics & Performance
What startup metrics do VCs care about most?
VCs focus on growth rate, revenue, burn rate, CAC/LTV, churn, and net dollar retention — the specific metrics depend on the stage and business model.
The metrics VCs care about depend on the stage and business model, but here are the ones that matter most across the board:
Growth rate: The single most important number. Month-over-month or year-over-year growth. Triple-digit annual growth is exceptional. 15-20% monthly growth is excellent for early stage. The slope of the line matters as much as the absolute number.
Revenue (ARR/MRR): Annual or Monthly Recurring Revenue. For SaaS companies, ARR is the headline. Investors want to see the quality of revenue — is it recurring, contracted, or one-time?
Burn rate and runway: How much cash are you spending per month, and how long until you run out? Most investors want to see 18+ months of runway at any given time.
CAC and LTV: Customer Acquisition Cost (how much to acquire a customer) vs. Lifetime Value (how much revenue that customer generates over their lifetime). The LTV/CAC ratio should ideally be 3:1 or higher.
Churn: The percentage of customers or revenue that leaves each month/year. Net Revenue Retention (NRR) is the gold standard: if NRR > 100%, existing customers are spending more over time, offsetting any churn.
Gross margin: Especially for SaaS, gross margins of 70%+ indicate a scalable business. Low gross margins (below 40%) create concerns about long-term profitability.
Unit economics: Can the business make money on each customer? Positive unit economics is the foundation of a venture-backable business.
Related questions
What is IRR in venture capital?
IRR (Internal Rate of Return) is the annualized return on a VC investment, accounting for the timing of cash flows. Top-quartile VC funds target net IRRs above 20-25%.
How do VCs evaluate startups?
VCs evaluate startups on team quality, market size, product differentiation, traction, and whether the opportunity can return the fund — often summarized as 'team, market, product.'
What is the Rule of 40 for SaaS companies?
The Rule of 40 states that a healthy SaaS company's growth rate plus profit margin should equal at least 40%, balancing growth and profitability.