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NextView Ventures is a hands-on seed venture capital firm based in Boston. The team at NextView makes 10-12 investments a year so its fair to say they’ve seen their fair share of investor update email templates. David Beisel, Partner at NextView, recently put together a great seed investor update template for startup founders. As David Beisel, partner at NextView Ventures, wrote in his investor update post, “First and foremost, investors (whether they say it or not) prefer over communication of what’s happening at the company, both the good and the bad. And a regular update with candor about what is going well and what is not signals an orientation towards transparency, which in turn engenders trust. This trust can yield benefits later on if the company faces a challenging situation in which it requires to raise more capital outside a position of strength.” By building trust, this will only unlock further benefits down the road. When you stay top of an investor’s mind they will be more inclined to help with networking, hiring, fundraising, decision making, and more. You can check out the NextView seed stage update template below or continue reading for a deeper breakdown of the template. The Seed Stage Investor Update Template As David writes in his post, “In terms of form, we recommend an update email that is short and sweet. After all, the goal is to have investors actually read it!” The seed stage investor update template from NextView is similar to the other seed stage templates we have seen in the past. The template is largely broken down into the easily digestible sections below: TL:DR; The TL:DR; section is used to give a short and sweet overview of the entire update. This can include a sentence or two overview of the last period with a bullets highlighting key initiatives and specific areas where you need help. Highlights The highlights section is exactly what it sounds like; a section to showcase your team’s wins over the last period. Make sure to share goals that you achieved or other company and team initiatives that are moving your company forward. Core Metrics Include 3 to 5 key metrics that are related to the success of your business. Your investors should be familiar with your metrics and should know what to expect here. With each metric be sure to include a chart or visualization and a brief recap of the last period’s performance. Challenges Arguably the most difficult section to craft, this can also be one of the most important sections for your investors. Mentioned where you missed the mark and what your plans are for improving this moving forward. Investors know that building a startup is hard and are fully expecting challenges and road bumps along the way. Goals This section should lay out your major company goals over the next few weeks or months. You will want to be sure to revisit these goals in a future update. Asks and Thanks Use this section to call out specific people, investors and teammates, that went above and beyond over the past few weeks or months. This will not only make the person feel good but will also motivate others to help in the future. Finances Share the vital metrics to your companies financial health. David encourages founders to share cash in bank, runway, and burn rate. If anything unexpected happened over the past period, be sure to call it out. Bonus points if you include a financial document or link to a spreadsheet. We hope this template is helpful. To learn more about best practices for sending regular investor updates, check out our template library here.

Over the last few months we’ve directly helped a few of our customers with their venture fundraise. One of the questions that continues to come up is, “how should I display my sales and marketing plan in my pitch deck?” In order to best help our customers, we’ve set out to research and find out how to best display go-to-market strategies. Your Business Model Your business model often goes hand-in-hand with your go-to-market and customer acquisition strategy. At the end of the day, an investor needs to make a return on their investment. In order to do so, investors need to clearly understand how your company will make revenue. In the Guy Kawasaki pitch deck template, Guy suggests sharing your business model in slide 5 and following that with your marketing and customer acquisition plan in slide 6. Assuming you have a solid understanding of your business model, you’ll need to clearly articulate how you will acquire new customers and retain existing customers. Your Go-to-Market Strategy Being able to show a repeatable and efficient process for acquiring new customers is a must. Investors want to make sure that they will not be throwing their money down the drain. Going into a pitch with potential investors you need to understand your go-to-market strategy like the back of your hand. Make sure your GTM strategy slide is easily digestible and can be easily understood without added context. Still developing your GTM strategy? Check out how Nick Loui, CEO and Founder of PeakMetrics, found their first customers below: Customer Acquisition Costs & Strategy One of the key metrics that investors will want to understand is your costs to acquire a new customer. (Learn more about CAC here). It is important to demonstrate to your investors that your customer acquisition costs are less than your customer lifetime value. This will help showcase your path to profitability. Ablorde Ashigbi is the Founder and CEO of 4Degrees. Earlier this year, Ablorde wrapped up a round of financing for 4Degrees. We went ahead and asked Ablorde what tips he has for founders looking to showcase their CAC in a pitch deck. His response: Don’t present CAC without a corresponding view of LTV Don’t present a blended CAC (including both organic and paid – only include conversions that came from paid channels) For earlier stage companies, payback period equally (maybe more) important than pure LTV / CAC When it comes to presenting your GTM strategy and customer acquisition costs it all comes down to simplicity. An investor should be able to take a look at your slide and know exactly how your business functions. Under the current circumstances and in the wake of larger companies failing to find profitability, a financially responsible customer acquisition strategy is more important than ever. If you have your own tips for presenting your GTM and customer acquisition strategy, we’d love to hear it. Shoot a message to marketing at visible dot vc. Related Resource: Customer Acquisition Cost: A Critical Metrics for Founders

Term sheets can be intimidating as a first-time founder. As it is likely the first time you’ve seen a term sheet, the intricacies of the deal can be difficult to understand. You can spend hours trying to understand a term sheet and what exactly makes up a “good” term sheet. As the team at YC writes, “we’ve noticed a common problem: founders don’t know what “good” looks like in a term sheet.” If you’re looking for a breakdown of a term sheet specific to Series A, check out our blog post, “Navigating Your Series A Term Sheet.” In order to help founders best understand their term sheets, many firms and individuals have come up with their own term sheet templates. In fact, many investors and founders now use a 1-page term sheet template. Check out our breakdown of term sheet components with a few templates below. As a note, this is not legal advice and we suggest consulting with your lawyer while reviewing your term sheet. Related Resource: How to Choose the Right Law Firm for Your Startup VC Fundraising Timeline As we often write about at Visible, we believe a startup fundraise shares a lot of characteristics of a B2B sales funnel. In the most simple breakdown — at the top of the funnel you are bringing in new investors, in the middle you are nurturing them through investor updates and meetings, and at the bottom, you are signing term sheets and building relationships with new investors. Kicking off a VC Fundraise Once you have formed your company and launched/are preparing to launch a product you may decide to pursue venture fundraising (to learn more about determining if VC funding is right for you, check out this post). Before kicking off a fundraise, especially at seed stages and later, you likely have some form of product-market fit. Finding Investors If you’ve decided VC funding is right for your business. You’ll need to start finding investors to “fill the top of your funnel.” Check out Visible Connect, our free investor database, to filter and find the right investors for your business. If you’re earlier in your company lifecycle and want to find angel investors, check out this post. Pitching Investors Once you start reaching out to investors (via cold email or warm intros) you’ll begin a series of meetings and pitches with the hopes of moving them down the funnel. Check out our template and guide for pitch decks here. Related Reading: How to Write the Perfect Investment Memo Due Diligence and Final Steps If an investor is interested in moving forward, you will likely begin due diligence where they will audit your data, get feedback from customers and investors, and confirm their conviction in your company. If they decide to move forward, next comes a term sheet. Term Sheet At the end of a fundraise comes the term sheet. Assuming both parties are happy with the terms, you’ll be able to onboard your new investor. 6 Components of A VC Term Sheet Liquidation Preferences Liquidation preference is simply the order in which stakeholders are paid out in case of a company liquidation (e.g. company sale). Liquidation preference is important to your investors because it gives some security (well, as much security as there is at the Series A) to the risk of their investment. If you see more than 1x, which means the investor would get back more than they first invested, that should raise a red flag. To learn more about liquidation preferences check out this article, “Liquidation Preference: Everything You Need to Know.” Dividends In the eyes of an early-stage investor, dividends are not a main point of focus. As Brad Feld puts it, “For early-stage investments, dividends generally do not provide “venture returns” – they are simply modest juice in a deal.” Dividends will typically be from 5-15% depending on the investor. Series A investors are looking to generate huge returns so a mere 5-15% on an investment is simply a little added “juice.” There are 2 types of dividends; cumulative and non-cumulative. YC warns against cumulative dividends; “the investor compounds its liquidation preference every year by X%, which increases the economic hurdle that has to be cleared before founders and employees see any value.” Conversion to Common Stock Common practice will automatically convert preferred stock into common stock in the case of an IPO or acquisition. Generally, Series A investors will have the right to convert their preferred stock to common stock at any time. As Brad Feld puts it, “This allows the buyer of preferred stock to convert to common stock should he determine on a liquidation that he is better off getting paid on a pro-rata common basis rather than accepting the liquidation preference and participating amount.” Voting Rights On a Series A term sheet, the voting rights simply states the voting rights of the investor. Generally, your Series A investors will likely receive the same number of votes as the number of common shares they could convert to at any given time. In the Y Combinator example, as with most term sheets, this section can include some technical jargon that is not easy to understand. The most important vetoes that a Series A investor usually receives are the veto of financing and the veto of a sale of the company. Board Structure One of the more important sections when navigating your Series A term sheet is the board structure. Ultimately, the board structure designates who has control of the board and the company. How your Series A investors want to structure the board should be a sign of how they perceive you and your company. The most “founder-friendly” structure is 2-1. A scenario in which 2 seats are given to the common majority (e.g. the founders who control a majority of the common stock) and 1 given to the investors. This allows founders to maintain control of their company. On the flip side, there is a 2-2-1 structure (2 founders, 2 investors, 1 outside member). In this scenario, it is possible for the founders to lose control of the company. While a common structure, be sure that the board structure is in line with conversations while fundraising. As Jason Kwon of YC puts it, “So when an investor says that they’re committed to partnering with you for the long-term – or that they’re betting everything on you – but then tells you something else with the terms that they insist on, believe the terms.” Drag Along As defined by the Morgan Lewis law firm, “Drag along is the right to obligate other stockholders to sell their securities along with securities sold by the investor.” Drag along rights give investors confidence that founders and the common majority will not block the sale of a company. While there is no way around drag-along rights, some people will suggest that founders negotiate for a higher “trigger point” (e.g. ⅔ votes as opposed to 51%). You can learn more about drag along clauses in this post, Demystifying the VC term sheet: Drag-along provisions. VC Term Sheet Examples The Y Combinator Term Sheet Template With thousands of investments under their belt, Y combinator is always a great place to start when looking for startup best practices. The team at YC put together an awesome 1 page term sheet template (with a focus on Series A) that any founder can use. While your actual term sheet may look different the Y Combinator Term Sheet template is a great place to get familiar with the subject. YC does a great job of breaking down the different components and laying out terms and language that founders should keep their eye out for. Check out their term sheet template here. Buffer Series A Term Sheet The team at Buffer raised a $3.5M Series A back in 2014. Check out the signed term sheet and the terms from their raise here. VC Term Sheet Templates As term sheets are a necessary part of any fundraise there are hundreds of templates and examples to choose from by the investors, founders, and lawyers that have been there before. Check out a few popular templates below: The One Page Term Sheet Template from Ben Milne Ben Milne, Founder of Dwolla, has spent his fair share of time navigating term sheets. Ben is a Midwest founder and has seen the amount of time midwest founders and investors waste negotiating term sheets. As he put it, “Midwest investors and founders lose a lot of time trying to figure out the term sheet. Sometimes, they lose even more time deciding what the terms should be.” In order to help bring some guidance to both startups and investors, Ben put together a one-page term sheet template. You can check out the template below: You can check out the one-page term sheet template from Ben Milne in this blog post. The NVCA Term Sheet Template The National Venture Capital Association recently released their latest version of their term sheet template. As the team put at NVCA wrote, “The Enhanced Model Term Sheet allows an investor to draft term sheets while comparing terms against market benchmarks. Version 2.0 is powered by a database that now includes more than 100,000 venture transactions, representing over 40,000 investors with a combined network of over $1 trillion in assets under management.” Check it out and download the template here. Let Visible Help We are here to help with any fundraise. Use our free investor database, Visible Connect, to kick off a raise. From here, use our fundraising CRM as you move investors through your funnel and sign a term sheet. Start your free trial here.

Elizabeth Yin is the Founder and General Partner at Hustle Fund (and one of our favorite follows on Twitter). A few weeks back she Tweeted that fundraising is all about managing the supply and demand. As she put it, “Supply of your round. Demand from investors.” (To pick Elizabeth’s brain on the matter, we hosted a webinar with her last week. Check out the recording here.) Before I dive into what this is, let’s take a step back. Fundraising is all about supply and demand. Supply of your round. Demand from investors. It’s hard to control demand from investors. But you can constrain the supply in your round to get it done. — Elizabeth Yin (@dunkhippo33) May 29, 2020 Rewind to your Economics 101 course and you’ll remember the supply and demand curve all too well. To jog your memory, “The price and quantity of goods and services in the marketplace are largely determined by consumer demand and the amount that suppliers are willing to supply. Demand and supply can be plotted as curves, and the two curves meet at the equilibrium price and quantity.” So what does this have to do with startup fundraising? Well, a lot actually. Managing the Demand from Investors Managing the demand for your round from investors can be difficult. If you don’t have the combination or product, market, or team that an investor is looking for, drumming up demand might be difficult. However, there are a few levers you can pull to generate demand and encourage investors to move faster. If you look at your startup through the eyes of the investor, most of the time it is not beneficial for them to make an investment now. They will only benefit from waiting to see more data to make a more informed decision on your investment in 6 months. As Elizabeth explains, “It is your job as a founder to build impetus for investors to move now.” You want them to feel like the deal won’t be on the table in 6 months. The best way to do this is to generate demand from a large group of investors. This means that you are running a strong process and talking to as many investors as possible to drum up demand. This will create a fear of missing out for investors as you continue to push forward with meetings and new investors. As Elizabeth Yin puts it, “you want investors to be afraid of each other.” Constraining the Supply of Your Round When it comes to raising a smaller round drumming up demand almost feels impossible. At earlier stages, you likely lack a product or strong traction metrics that forces investors to move fast. Additionally, you’ll likely be talking to smaller investors and cashing smaller checks that don’t create the urgency for larger firms to jump in before the round is closed. Tranche Strategy One way Elizabeth Yin suggests to constrain the supply of your round is by using a tranche strategy. “As an example, Elizabeth uses a seed company going out to raise $2M total. This company may go out and raise a smaller tranche to create some demand from investors to move quickly. For example, if the smaller tranche is $500k investors may have a fear they will miss out as it is a smaller size round that is easier to raise. From here, it is a lot easier to go to larger investors as you can create some urgency around the round as you’ve already raised $500k.” Ask around and see what your founder and investor think about trying a tranche strategy. While some investors may not agree with a tranche strategy it is up to you as a founder to make the decision that is best for your business. Tranches can certainly be a powerful way to manage the supply and demand of your round. Take on Your Investors in Sets Another strategy to constrain supply and build demand is by taking on your investor meetings in sets. As the team at First Round Review puts it, “There’s nothing worse than the perception of an over-shopped deal, as VCs relish having the inside scoop on an exciting company. Group investors in batches to better evaluate and select them, like a surfer scanning sets of waves that move toward the shore.” Regardless of how you look at it, fundraising essentially turns into a founders full time job. By accepting this, you’ll be able to stack your meetings for a full schedule. This will allow you to talk to new investors regularly and build a strong process. As you continue to escalate conversations with different investors, this will also create a sense or urgency that the deal is moving forward and now is the time to get in on the terms. Fundraising is hard in good times and challenging times. By building a process and understanding what levers you can pull you will only increase your odds of a good raise. Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days.

Finding Your SaaS Metrics The software-as-a-service industry has experienced rapid growth in the past few years. Typical SaaS companies have added staff at rates exceeding 50 percent a year. At the same time, not every SaaS company grows at the same rate. Rapid growth and the nature of this sort of business can also expose startups to certain vulnerabilities that other kinds of companies may not have to contend with. On the positive side, digital companies should have access to the right SaaS metrics in order to track and manage growth. Take a moment to understand these important performance indicators to make certain they’re properly collected and analyzed. With the explosion of the SaaS industry has come the explosion of the resources and data surrounding the industry. There are more SaaS metrics benchmarks available than ever before to make sure that your company is on the right track. Related Resource: Check out our free Google Sheet Template to track your key SaaS Metrics here. Related Resource: How to Start and Operate a Successful SaaS Company Churn Rates New companies may focus upon customer acquisition. Still, businesses almost always find they spend less keeping loyal customers than always having to seek new ones. The nature of SaaS billing makes it even more important to ensure customers keep renewing their monthly or annual subscriptions. Typical forecasting depends upon customers keeping their accounts active. With that in mind, consider a couple of churn rates to track: Customer churn rate: This simply refers to customers lost within specific time periods. Hopefully, you can also enhance these SaaS metrics with information about why the churn rate may have either spiked or declined under various circumstances. Revenue churn rate: A SaaS business model may include various prices, based upon the number of unique accounts or levels of features or services. Hopefully, customers upgrade over time; however, if they’re not, SaaS companies should find out why. Customer Value & Cost Metrics SaaS businesses should track various SaaS metrics that help them compare the costs and revenues associated with acquiring and keeping customers. This helps them understand if they need to improve marketing, retention, and various other areas. Customer Lifetime Value You can estimate the lifetime value of your customers by following these steps: Estimate your customer lifetime rate with this formula: 1/average churn rate. With an average churn rate of one percent, for example, your CLR would be 100. Divide monthly revenue by the number of customers to calculate your average revenue per account, or ARPA. For example, 100 customers and a monthly revenue of $100,000 would work out to an ARPA of $1,000. Finally, calculate the customer lifetime value, or CLV, by multiplying the ARPA by the CLR. In the example above, your CLV would be 1,000 X 100 = $100,000. You can use the CLV to help you estimate the lifetime value of each customer. Companies can also use this handy metric to illustrate their value to investors. Customer Acquisition Cost After estimating how much value an average customer contributes to a SaaS business, it’s important to balance that against the price of acquiring them. Obviously, businesses need to compare these two numbers to demonstrate their business model’s viability. To accomplish this SaaS companies track their customer acquisition cost. The customer acquisition cost is the monetary cost it takes to acquire one new customer. Presumably with a SaaS company the cost of acquisition will lower as they acquire more customers. Simply divide all marketing and sales expenses by the number of customers acquired during a given month. If a SaaS company spent $10,000 to gain 10 new accounts, the CAC would be $1,000. Related Resource: Customer Acquisition Cost: A Critical Metrics for Founders Months to Recover Acquisition Cost Figure out how long it takes for a business to recoup their acquisition costs by using customer acquisition cost, monthly gross margin, or MGM, and monthly recurring revenue. Your formula would look like this: CAC / (MGM X MRR). Acquisition Cost to Lifetime Value Ratio Such metrics as acquisition costs and lifetime value are only truly informative when compared to each other. Some financial experts will say that your LVR should exceed CAC by a factor of at least three. Ratios closer to one mean that you need to trim expenses. On the other hand, too large of a ratio may mean that you could spend more to gain even more business. Customer Scores Since SaaS businesses live and die by their ability to maintain customer subscriptions, they should consider SaaS metrics that help measure how well they keep customers active with their product subscriptions. For instance: Customer engagement: To create a customer engagement score, each business will need to figure out unique measures that apply to their product. Some examples could include how often customers login or stay logged in. Customer health — Net Promoter Score: Similarly, companies should create customer health scores using factors that may indicate the likelihood of keeping accounts active or letting them expire. Seeking input from various players, like sales and customer service, can help develop good customer health scores. Marketing Scores Since new companies need to focus mostly upon custom acquisition, marketing scores will offer important insights for both marketers and upper management. These SaaS metrics for marketing include: Qualified marketing traffic: As your customer base grows, so will your traffic. For marketing, you need to separate prospects from existing customers when you analyze website visitors. Qualified marketing and sales leads: Depending upon the SaaS product, the customer lifecycle can vary considerably. You can work to identify which step in the customer journey your leads are in. For instance, a qualified marketing lead may have already downloaded a marketing eBook or used a free demo. A qualified sales lead may have made a phone call and is ready for another contact. Lead-to-customer rate: Sales and marketing can evaluate their effectiveness by analyzing ratios that tell them how many of their leads turn into customers, how long that takes, and so on. Taking steps to improve LTC rates should increase revenues. Why SaaS Metrics Matter? Good SaaS companies have a great chance to boom as their business model grows more popular. Still, SaaS companies may have their own vulnerabilities. For instance, some companies struggle to manage rapid growth as much as they might struggle to manage slow growth. While a business onboards many new customers, they also need to keep on eye on pleasing the customers they have already attracted. At the same time, these digital businesses should have the luxury of easier metric collection. As is illustrated in the examples above, it’s not enough to simply collect gross numbers of website visitors or total revenue. Rapidly growing companies need to find the metrics that will help them make vital business decisions that can improve important business processes. That way, SaaS companies can attract investors, know who to hire, and adjust marketing and sales strategies to acquire and retain their customers. Related Resource: Top SaaS Products for Startups Related Resource: Who Funds SaaS Startups? Related Resource: 20 Best SaaS Tools for Startups The journey as a SaaS startup founder can often feel like you’re alone on the journey. Finding a reliable SaaS metrics benchmark can be an easy way to see how you are stacking up to your peers. With more data at our fingertips than ever before, there are more SaaS metrics benchmarks and tools available than ever before.

Last week, we had the opportunity to talk to Elizabeth Yin of Hustle Fund. Elizabeth Yin is a co-founder and General Partner at Hustle Fund, a pre-seed fund for software entrepreneurs. Previously, Elizabeth was a partner at 500 Startups where she invested in seed stage companies and ran the Mountain View accelerator. In a prior life, Elizabeth co-founded and ran an adtech company called LaunchBit. Our CEO, Mike, and Elizabeth chatted about all things related to fundraising. Elizabeth shared what she has seen in the VC market over the past few months and how founders can manage the supply and demand of their round. Check out the video recording or our favorite takeaways below: Now is Actually a Good Time to Raise Fundraising in good times and bad times is challenging. Fundraising over the past few months could almost feel impossible. Elizabeth saw her portfolio companies attempt to raise in early April and most struggled as larger firms slowed investment at the start of COVID. However, investors, both large and small, are quite active again. With US states beginning to open and more investors comfortable with making remote decisions investment activity has been picking up pace. With the uncertainty of a future lockdown in the US it may also be a good idea to raise now. As Elizabeth puts it, “now is actually a good time to raise, especially from local investors.” In fact, Hustle Fund has even increased investment over the past 2 months. Bifurcation of Terms As Elizabeth puts it, “terms have been weird.” Elizabeth has been seeing a bifurcation of terms over the last few months. On one side, you have well networked founders raising at very high valuations similar to 2019. On the flip side, you have less networked founders raising at quite low valuations. Why Invest Now? When going out to raise it is important to understand how investors think to improve your odds of success. One of the first questions an investor will ask themselves is, “Why should I invest now?” However, most of the time “now” is not a great time for investors to make an investment. Generally, it is most beneficial for an investor to drag their feet as they can get more information and data. So how do you make investors move faster? You need to make an investor feel like they cannot wait 6 months because the valuation will change and the deal won’t be on the table. As Elizabeth said, “your job is to generate demand on your deal from other investors… you want investors to basically be afraid of each other.” You can do this by running a strong process and talking to a LOT of investors. Tranches Can Be Useful When going out to raise a seed round it is difficult to get people to move faster on the deal. You have a large supply of your raise with little demand. At the earliest stages, investors rarely feel motivated to move quickly as the deal may still be on the table in 6 months. To help with this, Elizabeth suggests reducing the “supply of your round” using tranches. As an example, Elizabeth uses a seed company going out to raise $2M total. This company may go out and raise a smaller tranche to create some demand from investors to move quickly. For example, if the smaller tranche is $500k investors may have a fear they will miss out as it is a smaller size round that is easier to raise. From here, it is a lot easier to go to larger investors as you can create some urgency around the round as you’ve already raised $500k. While Elizabeth may be a black swan when it comes to her thoughts on tranches, it can certainly be a powerful way to manage the supply and demand of your round. Customer Discovery… with Investors If you are struggling to drum up any interest from investors you likely need to improve different aspects of the business. Feedback from investors can be a valuable asset for prioritizing your time. Elizabeth suggests harnessing customer development strategies when it comes to investors. While you may not hear back from most investors, getting feedback and data points from investors that rejected your company can be incredibly valuable. If you start to see a theme in why investors said no, that is a good indicator of where you need to improve your business. Founders Should Fundraise Full Time Elizabeth suggests that her founders do fundraising full time (when they set out to raise). This means that you are not working directly on the business. In a good raise, it can take anywhere from a few weeks to a few months to close your round. Juggling this and making sure the needle still moves without you there is challenging. Elizabeth promotes stacking your meetings so you may have 20+ meetings in a week as opposed to a handful. In the beginning, this is a great way to create urgency with investors. If you are taking second meetings and have a docket full of investor meetings, investors may feel the heat and move quicker. Interested in joining our next webinar? Subscribe to the Founders Forward to stay up-to-date with our upcoming webinars.

You can’t improve what you don’t measure. Implementing metrics at your startup is a surefire way to bring focus to your entire organization. As David Skok, General Partner at Matrix Partners, puts it, “One of the greatest things about putting in place the right metrics is that showing them to people will automatically change their behavior to try to improve the metrics. Furthermore, the metrics make it clear what levers they can use to change performance.” In addition to helping your team focus and grow. Metrics are often the first thing a potential investor will ask to see during a fundraise. As your company moves further and further through the venture fundraising lifecycle – from Seed to A to Growth rounds – the numbers gain importance in the overall story for the fundraise. How do you know what metrics to track for your startup? We’ve laid out a few basic metrics to get you headed in the right direction. Startup Sales Metrics Metrics are vital to track in every aspect of a startup but are especially important when it comes to sales. Generally speaking sales metrics can be measured on an individual, team, or organization basis. By setting up a strong system to track your sales metrics you will be able to make better informed go-to-market decisions. Revenue Metrics Revenue is the lifeblood of a for profit organization. Revenue can come in many shapes and sizes. There are startups that track monthly recurring revenue, annual recurring revenue, service revenue, and more. There are generally two types of revenue for a SaaS company – the first is Subscription Revenue (called MRR or ARR). This is product focused revenue that is recurring and predictable — especially if you are able to sign customers to longer term agreements. Investors prefer this type of revenue because it signals a high quality product with a path to long-term profitability. The second type of revenue is Services Revenue which often comes in the form on one-off (read: not predictable) consulting engagements or implementation fees. Because of the human-capital intensive nature of providing these services, they are far less profitable and scalable than Subscription Revenue. Related Reading: What is a Startup’s Annual Run Rate? (Definition + Formula) Annual Contract Value (ACV) ACV is “the value of the contract over a 12-month period.” If you are seeing an uptrend in ACV over time (which is generally the goal), then your company is likely doing one or many of the following things: Shifting to customers with a larger budget – more seats, usage, etc. Employing a more effective sales strategy to convince customers to invest more heavily in your product Building a product that continues to improve and provide increasing value Effectively upselling existing customers Increasing your annual contract value will allow your company to increase customer acquisition costs. Pipeline Value The pipeline value is exactly what it sounds like, the value of all active deals in your sales pipeline. For example, if you have 10 deals that are actively be sold but at different stages you can calculate the value of all deals with their likelihood of closing. For those 10 deals, let’s say they are all worth $100 and: 3 are new deals with a 30% chance to close 3 deals have sat a call and are interested in buying with a 50% chance to close 4 deals have received a contract and are ready to sign with a 90% chance to close That would be (3 new deals x $100 x 30%) + (3 calls sat deals x $100 x 50%) + (4 contract deals x $100 x 90%) = $600 in pipeline value. You can also break this number down by different stages. For example, the pipeline value of your new deals from the example above would be $90. Understanding your pipeline value gives you a good understanding of the health of your current pipeline and can help with future forecasts. Activity Sales Metrics Activity sales metrics can be used to track individual reps and teams efforts on a daily or weekly basis. A few examples of activity sales metrics would be number of phone calls made, emails sent, demos sat, etc. Tracking these numbers can be helpful for a few reasons. The first is so you can understand where an individual or team may be lacking if they are struggling to hit quota or numbers. They can also be used to create and build a predictable cadence with your potential customers. This data can be used to understand where and when your customers are buying to improve the likelihood of closing a potential customer. Startup Marketing Metrics Setting up and tracking marketing metrics can be an intimidating endeavor. There are countless metrics to track. From individual campaigns to website traffic metrics there is a lot to cover. However, properly picking and tracking your startup’s marketing metrics will set up your go-to-market team for success down the road. Without getting too bogged down by the countless metrics, we’ve shared a few of our favorites below: Customer Acquisition Costs As we have written in the past, “Customer acquisition cost is the sum total of the amount that it takes your business to acquire a customer, including time from your sales representatives and marketing and advertising expenses. The customer acquisition cost definition: the total cost it takes to bring a customer from first contact to sale.” When you sit down and think about it, a lot goes into acquiring a new customer. You may be running multiple paid campaigns online, have a dedicated marketing team, and are contributing to in-person events. Let’s say that all of your cost dedicated to acquiring customers was $10,000 for the month and you brought on 50 new customers. That would be a customer acquisition cost of $200. In order to be a successful business that means that your CAC needs to be less than the revenue that your customers will bring in the door. CAC can tell you a lot about the sustainability of your business and marketing efforts. Related Reading: Breaking Down the Nuances of Annual Contract Value (ACV) Customer Lifetime Value In order to understand how sustainable your customer acquisitions costs are you need to understand the lifetime value of your customers. Customer lifetime value is the amount that the customer will spend with the business throughout their relationship with the business. Calculating lifetime value can change greatly depending on your business. For example, a SaaS company may have a customer paying a monthly subscription fee for years (their total lifetime value) where a real estate company may only make one transaction with a customer. Constantly tracking your LTV is a great way to keep your CAC in check and make sure you are the path to a profitable and sustainable business. LTV:CAC Ratio The LTV:CAC takes the 2 metrics mentioned above and keeps it to a digestible and easily understandable metric. You simply take your customer lifetime value and divide it by your customer acquisition costs. Ideally you want this number to be greater than 3. In general, a good lifetime value (LTV) to customer acquisition cost (CAC) is 3:1. If a customer is being brought in for $100, their lifetime value should be at least $300. Otherwise, you will be spending too much drawing in your customers; it will become important to fine tune, streamline, and optimize your marketing and your advertising. If your ratio is 1:1 this would mean that you are not making any money on new customers and will eventually run out of cash and go out of business. Related Reading: Unit Economics for Startups: Why It Matters and How To Calculate It Website Traffic No matter the business, essentially every business has a website today. Getting leads to your website is a great way to increase marketing and sales metrics across the board. Having a deep understanding your website traffic is a great way to tweak and improve content, website copy, button copy, paid campaigns, and more. You will want to understand where your website traffic is coming from. This is generally referred to as the source. This can generally be bucketed into organic, paid, social, referral, and direct traffic. Knowing where your traffic is coming from will help inform your decisions for where to spend your time and budget. Example of a startup website traffic breakdown below: Next you will want to understand what pages and content is converting well. For example, if you have a page on your website that converts to your call to action at a higher rate you will want to implement the ideas behind this page across the website. You should always be testing buttons and content copy to improve the likelihood of website users taking a specific call to action. Startup Customer Success Metrics Once you have a customer in the door, the work is not done. Being able to retain and grow your current customer base is the easiest way to grow your business. In order to do so, you need to have the right metrics in place so you can optimize what is working well when it comes to your customer success efforts. Net Promoter Score If you’re not familiar with NPS, it is used to gauge the loyalty of a firm’s relationships. It is used by more than 2/3 of the Fortune 1000 and it can measure a company, employer or another entity. You have likely received an NPS survey yourself. It’s a score of 1 to 10 usually with a question of “How likely are you to recommend X to your friend or colleague?” X could be your company, your customer support experience, an event, etc. If you answer 1 to 6 you are considered a detractor and at risk of customer churn, 7 & 8 are considered passives and 9 & 10 are considered promoters. To get your score take % Promoters – % Detractors. This creates a scale ranging from -100 to 100. 0 to 49 is considered good, 50 to 70 is Excellent and 70+ is World Class. To give you an idea for the 4 Major Airline Carriers in the US the scores are as follows: American: 3 Delta: 36 Southwest: 62 United: 10 On the other hand of the spectrum Apple clocks in at 89. Customer Churn Customer churn is the % of customers (also called “logos”) that you lose over a given period of time. Let’s say that you have 10 customers and lose 2 of them over the past month. That would be a customer churn rate of 20%. Keeping your churn rate in check is an easy way to grow the business. Revenue Churn On the flipside revenue churn is the % of revenue dollars that you lose over a given period of time. Taking the example in the section above, let’s say that the 8 customers who did not churn are paying $100 and the 2 customers that did churn are only paying $10. That would be a churn rate of 2.4% ($20 in churned revenue divided by $820 in total revenue). For world class companies they may actually have negative churn. This means that they are expanding current customers at a greater rate than they are losing customers. Customer Retention Rate As the team at HubSpot put it, “Customer retention refers to the ability of a company to — you guessed it — retain customers. Customer retention is impacted by how many new customers are acquired, and how many existing customers churn — by canceling their subscription, not returning to buy, or closing a contract.” Startup Operations Metrics At the end of the day, every metric impacts how your business operates. If the metrics above are not falling into place, the chances of your business operating for the long run are slim. You need to constantly have a deep understanding of where you company’s financials stand. Burn Rate As Investopedia defines it, “The burn rate is the pace at which a new company is running through its startup capital ahead of it generating any positive cash flow. The burn rate is typically calculated in terms of the amount of cash the company is spending per month.” Burn rate is an essential metric for every early stage startup leader to have their eye on. If your burn rate gets out of hand it is important to bring it in as soon as possible. Potential and current investors will have their eye on your burn rate to make sure you can sustain your current business practices for the future. Months of Runway Months of runway is exactly what it sounds like — the number of months your business can go on until it is out of cash. This is particularly important for early stage companies that have yet to find product market fit or are still in the early stages of developing their product. You can find your months of runway by taking your cash in the bank and dividing it by your net burn rate. Related Resource: How to Calculate Runway & Burn Rate Revenue per Employee While revenue per employee is not the most informative metric for internal purposes it can be a great metric to benchmark against your peers. For example, if you are a seed software company comparing yourself to a publicly traded software company many of your metrics will not be comparable. However, revenue per employee allows you to break it down by the size of your business and have a benchmark to share with internal employees. Related Resource: EBITDA vs Revenue: Understanding the Difference Total Addressable Market Total addressable market (TAM) is the estimated size of the market that your business can attack. As we wrote in our “Total Addressable Market Templated”, “TAM helps paint the picture of how big the opportunity is and if the business deserves to be venture backed.” While TAM is not something that is tracked regularly it is important to have an understanding of your addressable marketing when you set out to fundraise. Related Resource: A Guide to Building Successful OKRs for Startups Startup Metrics Dashboards/Templates Building A Startup Financial Model That Works Check out our blog post and guide for building your first financial model (plus, a template to help you size your potential market). Check it out here. Andreessen Horowitz Startup Metrics Template Andreessen Horowitz (a16z) is one of the most prolific VC investors in the market today. With investments across a number of different stages, sectors, and business models, they have seen first hand the lack of (and the need for) standardization in the way private technology companies track metrics and present those metrics to current and potential stakeholders. While their well known post, called “16 Startup Metrics“, dives deep into a number of great metrics for different business models – Marketplaces and Ecommerce in particular – we focused this video on SaaS metrics and how companies can use Visible templates along with other sources to benchmark themselves against others in the market and set themselves up for fundraising success. Check out a video explaining their metrics below: Rockstart Digital Health Accelerator Startup Metrics Template As with any early-stage company, focus is key. This is why Rockstart puts each company’s Most Valuable Metric front and center on the business dashboard. The primary reason to have a single, understandable metric for your business is to cut out the noise that comes with trying to track (and take action on) every single thing so that you can hone in on the one thing that drives your success. Read any startup post-mortem and you’ll quickly realize the negative impact that lack of focus can have on a company. In the digital health sector, companies don’t all fit within the same bucket from a business model perspective. The first Rockstart Digital Heal Accelerator class has hardware companies (like Med Angel), marketplaces (like Dinst), and SaaS businesses (like Mount) who all likely have different true north metrics.

Fundraising is hard. Fundraising in the current environment can almost feel impossible. Being able to bring capital in to grow your business is a skill that all founders should hone. In this webinar you’ll learn: How the state of the venture capital has changed over the last 6 months How fundraising has changed over the last 6 months How to create supply and demand while fundraising How VCs think and work so you can better your odds of raising

Are you building your first pitch deck? The Guy Kawasaki pitch deck is a great place to start. It is not easy getting started on a pitch deck for you startup.A great pitch deck is concise, but thorough, informative, but not boring, simply designed, but with personality. Although you have a wealth of knowledge on your startup and market it is often intimidating trying to get everything you want to say in just a few slides. Enter: the Guy Kawasaki Pitch Deck Template. Who is Guy Kawasaki? Guy Kawasaki is a marketing specialist. He worked for Apple in the 1980s and is responsible for marketing the original Macintosh computer line in 1984. Guy is infamous for coining the term evangelist in marketing. He might be most famous for his simple pitch deck template and the 10/20/20 rule of Powerpoint and pitch decks. What is the 10/20/30 Rule of PowerPoint? What is the 10/20/30 rule of PowerPoint. The 10/20/30 rule is a presentation rule coined by Guy Kawasaki. As he wrote, “It’s quite simple: a PowerPoint presentation should have ten slides, last no more than twenty minutes, and contain no font smaller than thirty points.” The 10/20/30 rule is a great place to start when you are evaluating what should be in your pitch. By only allowing for 10 slides you’re required to have a hyper-focus on what truly matters to your business. Of course, every business is different. Some may require more than 10 slides and some may even require less. However, start with the 10/20/30 rule and see what you need to add or subtract from there. Before even getting too deep in the weeds by laying out your 10 slides you’ll have a skeleton of what your presentation will look like. The Guy Kawasaki Pitch Deck To go along with the 10/20/30 Rule, Guy also has a pitch deck template that he uses for lay out the 10 slides for a pitch. It looks something like this (originally from our pitch deck guide): Pitch Deck Slide 1 The first pitch deck slide of your business pitch is straightforward. A simple slide that shares your company name and contact info. Use this slide to set the stage for your pitch deck design. Pitch Deck Slide 2 The second pitch deck slide consist of what problem you are solving. This can take form in what the opportunity is or what the pain your potential customers are feeling. Pitch Deck Slide 3 The third pitch deck slide should explain the value proposition that you are offering. This explains the direct value that your customers receive when choosing your product or solution. This is where your business pitch template will come in handy as your describe your value. Pitch Deck Slide 4 The fourth pitch deck slide explains what differentiates your solution than others in the market. Guy Kawasaki suggests using a visual pitch deck design here by using images, charts, and diagrams of your “secret sauce.” Pitch Deck Slide 5 The fifth pitch deck slide should contain your business model. This shows how you are, or plan, to make money. Another slide where knowing your business pitch will be vital. Pitch Deck Slide 6 The sixth slide should contain your plan for acquiring customers. This slide will share how you can effectively find new customers and the costs associated. Pitch Deck Slide 7 The seventh pitch deck slide should show what the market looks like. This includes your competitor landscape. Guy suggests that “the more the better” for this slide. Pitch Deck Slide 8 The eighth pitch deck slide should be a highlight of your management team. Include a brief profile of your company’s managers and any other associated stakeholders. This can include your investors, board members, and advisors. Pitch Deck Slide 9 The ninth pitch deck slide should contain your financial projections and key metrics. The key to building a business is generating revenue and having a financial plan to effectively scale and grow. Use a top-down, not bottoms-up, projection to wow your investors. A visual pitch deck design will also help here by using charts to make your projections easy-to-understand. Pitch Deck Slide 10 The last pitch deck slide should be an overall timeline of your business. Where have you been in the past? What are the major accomplishments you’ve achieved so far? Where is your business headed and will the person you are pitching fit into this timeline? While every business differs, the Guy Kawasaki pitch deck template is a great place to start. Lay out your pitch using his style and see what you think. From here you can tailor it to your businesses’ needs. Once you’ve got your pitch deck in place, it is time to kick off your fundraise. Check out our guide on fundraising to make sure you’re making the most of your fresh pitch deck.

Leading under the current circumstances is an audition to lead for the coming years. Being able to step up as a leader amid the COVID-19 pandemic is an opportunity to cement a strong future for your company and yourself. Last week, Scott Dorsey, Managing Director of High Alpha, joined us to chat about all things leadership and fundraising. Prior to High Alpha, Scott co-founded ExactTarget and led the company as CEO and Chairman from start-up to global marketing software leader. ExactTarget went public on the New York Stock Exchange in March of 2012 and was acquired by Salesforce in July of 2013 for $2.5 Billion. Post-acquisition, he led the Salesforce Marketing Cloud which encompassed 3,000 employees around the world. It is safe to say that Scott knows what it means to be a leader. Scott started ExactTarget during the Dot-com Bubble and successfully IPO’d shortly after the Great Recession. The webinar was full of stories and anecdotes from Scott’s time building ExactTarget. Check out our favorite takeaways below: Cash is King While cash has always been king, Scott mentions that it is even more important during a downturn. As a founder, you need to have a deep understanding of your cash flow and burn rate. It may be difficult to fundraise during a downturn but you need to be able to show your investors that you can (1) make it through a downturn and (2) thrive on the other side. If you can successfully display that you’re in a good cash position and ready to thrive after, you’ll improve your odds of raising capital. Closer than ever with Customers During uncertain times, it is more important than ever to be close to your customers. Your customers are going through the same things that you are going through. Establish and preserve your relationship so you can grow together on the other side of the downturn. In the early days, Scott suggests companies project confidence, show they’re stable, and are growing & innovative. One of the best ways to do this is by envisioning your 3, 5, and 10 year journey with potential customers. Where will you be in 10 years? What will the product and relationship look like? Clients want to lock-in on a long-term relationship. If you don’t have everything built in the immediate, that’s fine. Show that you can be all the way there in the future. The Friday Note During uncertain times most leaders communicate less. However, communication is one of the best ways to make it through a downturn. Scott has almost become synonymous with the “Friday Note.” Simply put, the Friday Note was an email Scott sent every Friday to everyone in the company letting them know what was happening with the business. During the Great Recession, Scott found himself communicating with employees less. From that point, Scott made it a point to send a note every Friday to the team so everyone always knew what was happening and there was a path to 1-on-1 communication. In fact, Scott turned all of his Friday Notes into a book when ExactTarget was acquired by Salesforce. Personal Board of Directors According to Jim Rohm, “You’re the average of the 5 people you spend the most time with.” With that being said, it is important to surround yourself with a diverse mix of people who are smart, friendly, and can grow with. Scott himself has a personal board of directors made up of about 5-6 people. These are people that Scott can lean on for guidance, faith, personal balance, etc. This is your inner circle — don’t be afraid to approach people you admire to ask for help. We hope this is helpful as you work through these uncertain times. Scott is the definition of a leader and a reminder that great leaders and businesses can be built during downturns. As a reminder, you can check out the full webinar recording here.

Leading under the current circumstances is an audition to lead for the coming years. Being able to step up as a leader amid the COVID-19 pandemic is an opportunity to cement a strong future for your company and yourself. In this webinar, you’ll learn: How to communicate with team members, investors, and customers during uncertain times How to be an effective leader through turbulent moments How Scott started ExactTarget during the dot com bust, managed The Great Recession, took a company public, and was eventually acquired by Salesforce for $2.5B How to raise capital amid COVID-19 and uncertainty

Raising capital is hard. Raising capital during a pandemic can feel impossible. As we discussed with Lolita Taub in our webinar last week, more founders are looking for alternatives to venture capital. Founders are looking to solutions like Pipe, Earnest Capital, ClearBanc, Angels, Friends & Family, among others. Raising from angels and friends/family came into focus during our webinar with Lolita. Note: Check out our “How to Find Angel Investors” guide if you’re searching for angels for your business. Friends and family often make for an easier fundraising process. Less stringent due diligence combined with less pitching can make friends and family be an attractive option. However, a friend or family member could be less startup savvy than a traditional VC and can become a burden to you and your business. Internally we call the burdensome investor, “Dr. Dan.” Maybe a family member or friend invested in your business but calls every week for status updates or to ask questions about a metric, etc. With the investor + founder relationships (8-10 years) lasting longer than the average U.S. marriage it is important that you are taking on investors that you can build a relationship with. So how do you approach a potential “Dr.Dan?” Set Expectations Early As we previously mentioned, a friend/family or angel investor may not be as startup sophisticated as your traditional VC. Sometimes an inexperienced investors’ expectations may be wildly different from reality. It is your job as a founder to make sure a potential angel investors expectations and reality are aligned. Before you cash a check, make sure that these investors are aware of the realities of investing in a startup. Make it clear how and when they will hear from you, what the possible outcomes are, and where their capital will be going. Even though someone is an “accredited investor” they are investing their own money and it could be a considerable chunk of their savings. Explore Other Options If you’re talking to a potential “Dr. Dan” you may need to weigh other funding options. As we mentioned at the beginning of the post there are quite a few alternatives for raising capital. While the most ideal is using customer revenue to fuel growth, that is generally not an option for most startups — especially early stage. There are countless alternatives and more popping up every day. You can check out a few of our favorite alternatives here. Trust Your Gut As Lolita Taub put it in our webinar, “You just have to hustle and do what you need to do for your business.” At the end of the day, only you know what the right decision is for your business. If you’re in dire need of capital, it may be worth the burden of bringing on a “Dr. Dan.” If you’re in a good spot financially, it may be time to re-evaluate and take your time to explore other funding options. There are countless pros of bringing on a new investor — capital, new networks, fresh eyes, etc. On the flipside, an angel or family/friend investor can quickly become burdensome if they are inexperienced or unsure of what to expect from you. Remember bringing on a new investor means bringing on a new business partner for the foreseeable future — only you know what the right decision is for your business. Already have angel investors? Send them a quick Update to let them know how your business is doing.

Fundraising is hard. Fundraising in the current environment as a first-time founder can feel impossible. Being able to bring capital in to grow your business is vital during these trying times. In this webinar, you’ll learn: How will COVID-19 impact the fundraising environment How to split focus between fundraising and cash efficiency How to conduct pre-fundraising research How to build relationships with potential investors How to manage and track my fundraise How to raise as an underestimated founder

Seth Godin wrote “beware of experience asymmetry.” Reading his post, I thought about the time I got my first mortgage. I remember thinking, Am I getting a good rate? How much house should I buy versus how much house can I buy? It was stressful. I felt vulnerable. The internet and publicly available data helped me call around and shop rates. (I still would have paid handsome money for a local guide.) Seth calls out venture capital in his post. This is an important place to get a local guide. In my opinion, the best local guide is another venture firm. This may sound counterintuitive, let me explain. If you’re looking to make a deal, having more than one venture firm in the mix will help you get a truer understanding of your market value and secure the fairest terms. If you have more than one venture firm looking at your business, congrats. You are in rare air. Most are lucky to even get one interested. In those less-competitive cases, it’s still important to find a local guide. It could be a fellow founder, angel investor, trusted advisor, or a blog post from 2012. Regardless of your path, always surround yourself with local guides for the various stages of your business. When fundraising, run a process with multiple firms and always do your homework on potential investors. Call up the companies in their portfolio that weren’t home runs. You will learn a lot. It is hard to turn down money but sometimes you might want to because it is much easier to change your preferred airline than it is your cap table.

Last week, our CEO surveyed founders asking them, “How likely are you to refer your current lead investor(s) to fellow founders?” in his weekly note. The results from the survey are below: The Investor NPS An NPS score of 23 falls below the average for the airline industry. Not a great industry to be compared to in terms of customer satisfaction scores. Granted, there can be quite a bit of bias when surveying a founder asking their opinion of an investor (e.g. passed on a round). Nonetheless, founders are clearly looking for more out of their investors. Once a check is cashed, there is no turning back. With the average length of a founder + investor longer than the average marriage in the U.S. (8-10 years) it is important for both founders and investors to strive for a strong relationship. Founders will get out of their investor relations what they put into it. At the end of the day, the investor and founder relationship comes down to communication, starting from the first fundraising meeting to company exit. Before a fundraise, a founder should have a set of expectations from their investors outside of capital. It is the duty of the founder to communicate and gauge this during conversations and pitches. Easier said than done. Determining what investors to talk to, how to talk to them, and what to expect from them is a difficult process for founders. Fundraising is an Asymmetric Experience Fundraising is an asymmetric experience. Investors see hundreds of deals a year where founders may only talk to a handful of investors in a year. Investors are strapped with an abundance of data used during the decision-making process. As Seth Godin writes, “In these asymmetric situations, it’s unlikely that you’re going to outsmart the experienced folks who have seen it all before. It’s unlikely that you’ll outlast them either. When you have to walk into one of these events, it pays to hire a local guide.” Our goal is to uncover more data, advice, and resources to become a “local guide” for founders to lean on during the fundraising process. In order to do so, we’ve started laying the ground work with Visible Connect, our community-sourced investor database. We will be able to uncover things like investor NPS with Visible Connect and create more symmetry in the fundraising process. Find Investors with Visible Connect Interested in learning more? Check out the Visible Connect database here.