Skip to main content
@VCBeastmediaNewsletter
VC Beast

Metrics & Performance

Quick Ratio

Last updated

Quick Answer

A SaaS growth efficiency metric comparing new and expansion revenue against churned and contracted revenue — above 4 is considered excellent for early-stage companies.

SaaS Quick Ratio (not to be confused with the accounting liquidity ratio): (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)

A Quick Ratio above 4 means for every $1 lost to churn, the company adds $4 in new and expansion revenue. Mamoon Hamid at Kleiner Perkins popularized this metric as one of the best signals of early-stage SaaS health.

A Quick Ratio above 4 = excellent. 2-4 = good. Below 2 = concerning, especially if growth is slowing.

In Practice

A company adds $200K in new MRR and $80K in expansion MRR but loses $60K to churn and $20K to downgrades. Quick Ratio = ($200K + $80K) / ($60K + $20K) = $280K / $80K = 3.5 — solid but not exceptional.

Why It Matters

Quick Ratio captures both sides of the growth equation simultaneously. A company can grow fast while also having severe churn — Quick Ratio exposes this. It's particularly useful for early-stage companies where absolute numbers are small but trajectory matters enormously.

Related Concepts

Churn Rate →Net Revenue Retention →MRR →Expansion Revenue →

Further Reading

What VCs Actually Look for in a Seed-Stage Founder

Forget the pitch deck advice. Here's what seed investors are really evaluating — and it's not what most founders think.

Frequently Asked Questions

What is Quick Ratio in venture capital?

SaaS Quick Ratio (not to be confused with the accounting liquidity ratio): (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR) A Quick Ratio above 4 means for every $1 lost to churn, the company adds $4 in new and expansion revenue.

Why is Quick Ratio important for startups?

Understanding Quick Ratio is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

What category does Quick Ratio fall under in VC?

Quick Ratio falls under the metrics category in venture capital. This area covers concepts related to the quantitative measures used to evaluate fund and company performance.

Newsletter

The VC Beast Brief

Join thousands of founders and investors. Every Tuesday.

VentureKit

Ready to launch your fund?

Build Your Fund Package
Back to Glossary