Startups are using metrics, such as payback period for acquisition, net burn per net new recurring revenue, and revenue per employee, to instill confidence in VC backers amidst the volatile macroeconomic conditions.
The metrics are different from the ones that startups use during phases of growth, such as EBITDA, net revenue retention rate, and cash burn.
Due to the current conditions, "there's a huge push to sustainable growth," says Amplitude's chief product officer Justin Bauer.
- According to Bauer, entrepreneurs are increasingly tracking the payback period for acquisition metric, which is the time it takes to match the income received by new users with the marketing expenses to get them to the platform.
- Per Battery Ventures, startups are using the net burn per net new annual recurring revenue metric to evaluate the firm's efficiency to fund growth.
- The VC firm is advising portfolio SaaS companies to track the annual recurring revenue (ARR) per employee, which gives them deeper insight into the operating efficiency of the firm.
- Per Crunchbase, the most important metric in the current environment is the cash runway.
