Metrics & Performance
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.
VC Beast Take
Quick ratio has become the new north star for SaaS investors, often more important than growth rate alone. Companies with consistently high quick ratios command premium valuations because they prove sustainable growth engines. The best founders obsess over this metric monthly, while weaker companies focus solely on new customer acquisition and wonder why their valuations suffer despite growth.
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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.
Understanding Quick Ratio is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
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.
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