As companies evolve, venture firms monitor various performance metrics, or Key Performance Indicators (KPIs), to evaluate their progress. Metrics like revenue, burn rate, and cash-on-hand are commonly requested, but these KPIs shift as companies move from early stages toward IPO or exit. Here’s a breakdown of the key metrics venture firms focus on at different stages of growth.
Across all stages, revenue consistently ranks as the most requested metric. Others like net burn rate, headcount, and gross margin also hold significant importance. However, the relevance of certain metrics fluctuates as companies advance through funding rounds. For example, customer count is more critical in the seed stage but tends to decline in importance at Series A and beyond.
Advertisement
Cash Metrics: Early Priority, Later Decline
Metrics like cash-on-hand and cash runway are highly emphasized in early-stage companies but become less critical in later rounds as liquidity concerns diminish. With more detailed financial audits in advanced stages, cash management becomes less of a focal point for investors.
Operational Efficiency Becomes Crucial in Later Stages
Operational metrics, such as gross margin, operating expenses (OpEx), and EBIT, gain prominence in later stages, especially at Series D and beyond. These metrics help measure how efficiently a company is scaling as it approaches exit or IPO, particularly when larger investments are at play.
Key Takeaways:
- Revenue, burn rate, headcount, and gross margin are frequently requested KPIs.
- Cash metrics are vital in early stages but lose priority in later rounds.
- Operational metrics dominate later stages, representing half of the top 10 metrics at Series D+.
Venture firms adjust the KPIs they track based on a company’s maturity, shifting from liquidity concerns in the early days to operational efficiency as companies approach exit stages.
