You’re prepping your pitch deck for your upcoming investor meeting, and you’re wondering, “What do these folks actually want to see from my business? How can I show them we’re worth investing in?”
Today, you’ll learn from Michael Tam of Craft Ventures and his experience paging through countless SaaS pitch decks. But before we dive into the details of which metrics you should include, let’s look at what Michael suggests companies do for a quick win.
Make a great first impression with a KPI summary page
The first page Michael looks for when a new pitch deck comes across his desk? A one-page summary of the company’s most important metrics.
This page should include information like:
- A summary of your business, products, and who your customers are
- A KPI snapshot of the most relevant metrics over the last three, six, and 12 months
The aim of this page is to give VCs a solid “state of the union” look at your business and where you’re headed.
What metrics should a startup include in a pitch deck?
Now for the (multi) million-dollar question: Which metrics are the metrics to include in your SaaS pitch deck?
Michael thinks about the top startup metrics in three distinct categories:
- Momentum: These metrics demonstrate upward movement with your business. Your startup demonstrates a clear ability to scale/grow.
- Retention: Do your customers love your product and stay with you over time? Are you able to convince them to give you even more money as your product expands within their organization?
- Efficiency: As the saying goes, “You gotta spend money to make money.” The same is true in B2B SaaS. But you need to remain efficient to turn a profit and sustain growth. These metrics will indicate just how effective your business is at turning investment dollars into profit.
Each category paints a picture of the state of the business, the direction it’s growing, and what things are looking like in the future.
Let’s look at each category in more detail.
Metrics for indicating startup momentum
Momentum-driving metrics show consistent (and upward) growth. Here are two Michael and his team at Craft Ventures pay special attention to when reviewing a startup deck:
🚀 Year over year (YOY) ARR growth
How much did your ARR grow in the past year? Did you double or even triple it? Whether you’re trying to raise a Series A, B, or C, ARR growth is one of the most important metrics investors consider.
Since Michael is primarily interested in early-stage post-launch companies, he prefers to see a 3x YOY growth rate.
🗓 Net-new ARR per month or quarter
In addition to showing your YOY growth rate for ARR, investors will also want to see your ARR data for each month.
Michael prefers to assess the last three, six, and 12 months to note any trends and to understand how much revenue you’re generating from new business each month.
Metrics for identifying retention
Retention-indicating metrics reveal how your company is doing in terms of keeping (and growing) your customer base. The two key metrics Michael looks for in this category are:
🏢 Logo retention
Logo retention is an easy way to compare how many customers you started with in a period to how many you ended with in the same period.
So, if you started the year with 100 customers, and then one of them decided not to renew, your logo retention would be 99% because 99 out of 100 customers decided to stay with you. In the same vein, your logo churn rate would be 1%.
You can see why investors want to keep a close eye on this metric. It gives them a really clear sense for how much customers love your product!
💰 Net revenue retention
Net revenue retention (NRR) is the amount of recurring revenue you obtained from existing customers in a timeframe. This includes revenue increases from upsells.
This metric helps investors understand whether or not your customer’s spending grew in the last year (or the last time period you choose to highlight).
So what’s a “good” NRR? The short answer is that it depends.
What’s considered “good” for your company is based on variables like customer segments, deal sizes, and your business model, and might look different from your competitors.
Metrics for proving your efficiency
Lastly, the metrics for establishing efficiency indicate to investors how much of a money-making machine your business is. If they give you a dollar, what are you likely to turn that into?
☎️ Monthly ratio of sales and marketing spend compared to new ARR
This ratio compares your sales and marketing expenses in a given period to your new ARR in that same period. Investors look at this metric to understand if your sales and marketing spend outweighs your revenue.
This ratio is slightly different from Magic Number in that it compares expenses and revenue within the same time period, while Magic Number compares expenses of the last time period with new revenue from the current time period.
Michael typically looks for a 1:1 ratio with this metric, and depending on the business model, the time period he looks at may vary. For example, if your business has a longer sales cycle, he’ll look at your Magic Number. But if you have a shorter sales cycle, he’ll look at the monthly ratio of sales and marketing spend compared to new ARR.
🔥 Burn multiple
This metric looks at how much your company is spending (or “burning”) to generate more ARR. The higher your burn rate multiple, the more your company is burning to grow.
As a rule of thumb, you’ll want to aim for a burn multiple that is less than 2.
- Under 1x: Amazing
- 1 - 1.5x: Great
- 1.5 - 2x: Good
- 2 - 3x: Suspect
- Over 3x: Bad
💸 CAC Payback period
Another strong gauge of efficiency is your customer acquisition cost (CAC) payback period. Your CAC is the total sales and marketing cost to acquire one customer.
But your CAC payback period is the time it takes for a customer to “pay back” their acquisition costs. In other words, how long does it take for your business to see your return on investment in that single customer?
The shorter your CAC payback period, the better, but 12 months is what most startups will aim for.
What should you do if you don’t have this data available?
Having the (clean) data to demonstrate your growth over time is key to making a lasting impression on venture capitalists and board members. But for some startups, that data isn’t always accessible.
As Michael shares:
“Not many companies may have that [data] quickly accessible, although there's a lot more education now around it. I definitely try to do that with the portfolio companies I work with; get the data hygiene set up sooner than later so we can have that available in the investor updates or the board meetings to help drive some of the strategic decisions we want to discuss.”
Clean data = a strong business
Data accuracy isn’t just important for understanding where your business is now—it’s key in forecasting where you’re going. Without it, it’ll be quite the challenge to run your business (plus, bad data isn’t the best for maintaining positive investor relations).
Being able to slice and dice your data by different segments—like customer size, product lines, etc.—gives you a pulse on your business outside of the “typical” metrics and performance indicators.
If your company is considered early-stage or hasn’t practiced the best data hygiene in the past, there’s no better time to start tracking than now to show your business’ trendlines!