How investors think about KPIs in B2B SaaS businesses

In a growing business, it can be hard keeping track of the metrics that matter. In this video, investors Constanza Diaz and Saranyah Douse explain which key performance indicators (KPIs) are important to potential Series A investors – and why.

  • Annual recurring revenue (ARR) is the most important metric. It describes contractually committed recurring revenue, and we reach a figure by taking the latest monthly recurring revenue and multiplying it by 12.
  • We’re interested in high growth businesses, but this is assessed more through a company’s history than any hard figures.
  • Net revenue retention demonstrates that a software as a service (SaaS) business is growing sustainably. High net retention tells us a business has good product-market fit.
  • By looking closely at the customer acquisition cost (CAC) payback period, we can get a sense of how efficient a business’s go-to-market strategy is. The shorter the period, the better – we’re impressed by anything under 12 months.
  • CAC covers sales and marketing, and any cost associated with acquiring new customers. It shouldn’t include any costs incurred running the platform or servicing existing customers.
  • The cash burn multiple offers insight into the rate of cash burn relative to ARR. This figure, unlike the CAC, includes operating costs. A lower cash burn multiple will reassure investors that the business is operating efficiently.

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