It’s true that acquiring money can be an enormous frustration and a huge experience for entrepreneurs of all kinds. You might be wondering what the reason I have areas of gray hair and wrinkles that are clearly visible in my old age is. Don’t worry; it’s the whole story of money mon-away! It’s easy to shift your attention off the horizon for enough time to discover that your ship has gone into the rocks of the coast and is soon to explode into a mass of molten sand.
Fundraising can be a long-winded process that is about building relationships, winning, and eating investors with the goal of getting them to bed to lay around in a large sum of money. The people with the money will invest in the people they trust and respect; that’s why establishing an enduring relationship with investors is essential, as is dating. Your product or idea needs to be worth investing in. It’s all about finding the right formula the way it normally works as follows: Excellent Product + a knowledgeable and experienced team = CASH Money.
Being able to tell a compelling story present to investors will play a significant role in “The Pitch,” with the aim of providing investors with engaging, informative, and entertaining content. I’m all for wearing my best outfit for the day, being somewhat freaky, and delivering stories to VCs who will get their eyes a bit curious.
If you’re pitching your startup idea to investors, what’s going to make them shiver at their knees and then fall into the arms of a damsel who is in need of help?
In other words, we’re saying that we will say a loud “no not” to the flimsy metrics. Don’t be fooled with pages viewed or unique visits, the number of downloads, and all that stuff. These metrics are not related to the success of your company.
Investors need real-time metrics that are relevant in determining the way your company is doing in a way that can guide you towards an appropriate direction. Of course, each company is unique, so the metrics that relate to the business will differ every now and then. Below is a brief outline of some of the most important metrics our friends with the money are looking for in the earliest stages of a business. I’ll repeat it once more… measurements.
1. CAC (Customer Acquisition Cost)
What do you think? In other terms, what is it cost to obtain one client?
The maths Take the total cost of marketing and sales during a specific time period, as well as other headcount-related expenses, to divide that number by clients you have acquired during that period of time.
What do you think of the VC? We see CAC be one of the vital indicators for startups in the early stages as to scale, you will require customers, but these customers are bound to cost money. Getting the right users who convert can be costly. In order for a company to succeed with every new customer, you must keep two variables in check that are CAC and Life Time Value (LTV). If the CAC exceeds that of the LTV, then the strategy to acquire customers needs to be altered. The majority of startups that fail in the early stages are due to a weak customer acquisition plan, which is why it is crucial to do it right.
2. Retention Rate
Tell me what? What percentage of those who purchased your product during the first month still make use of it in month 2 (etc.)
By using cohort analysis, you are able to determine over the course of months the percent of users who continue to utilize your product. E.g., Customers join in January. The following month they spent 1000 dollars, but in February, they made only 800 purchases. The retention rate for this instance of 800/1000 is 80 percent.
What does what the VC is? The retention rate can help us to track the success of a business in keeping its customers. The higher the rate of retention, the more successful the business. Consider comparing the amount you spend on getting new customers with the amount you spend to reactivate existing customers. Which one is more cost-effective?
3. ARPU (Average Revenue Per User) and LTV (Life Time Value)
What is it? The amount the company makes for each customer during a specific amount of time.
The math
ARPU = Total Revenue/Amount of buyers
LTV is ARPU * (1/churn). There are many different methods to determine LTV. However, this is the simplest version.
What does what does VC? The LTV is often ignored. However, we see it to be one of the primary indicators to measure. As we mentioned previously, the LTV has to be greater than the CAC for a company to function. Knowing these numbers can help you determine whether your customer acquisition strategy requires to be altered. It’s crucial to remember the fact that LTV is merely a forecast of the future market, basing itself on assumptions that are current, but as we are aware, with all businesses, it is possible to change things on a regular basis.
4. Viral Coefficient
What do you think? This is a measure of the growth rate of your business. To achieve a viral coefficient of 1, each registered user must add one registered user.
The math
1. Determine the number of invites that are sent by registered users (e.g., database = 1000, sent invitations = 5000, average invites sent per user = 5)
2. Find out the proportion of referrals who registered (e.g., 20%)
3. If 20% of users who were referred to you signed up, you’d have 5000*20%= 1000 new users.
4. Initially, you had 1000 users. Later, you gained another 1000 referrals.
5. Viral coefficient: 1000/1000 = 1
What is the VC? The higher the rate of virality, the greater the rate at which your business will expand and the lower the cost to achieve this. A lot of young startups fail due to the poor model of customer acquisition; therefore, the more you achieve your viral coefficient, the more effective. The kind of conversions that are seen in organic users (referrals) are often higher than those of customers who are able to convert using traditional marketing, so it could benefit your company in many ways.
5. Activation
What do you think? The speed with which customers are becoming active includes events and numerous actions on the site. E.g., conversion of visitors into registered users or registered users to buyers, how long it takes buyers to buy after registration, etc.
The math is based on the activation metrics you are looking to quantify.
What does the VC do? This is dependent on the activation metrics you wish to quantify. Let’s consider the conversion rate of users who are registered to buy. An increased rate of activation is better as you’re creating a more active and lucrative vehicle. For instance, suppose there is a database that has 10000 people, and you activate 10% of them compared with similar databases with you converting 20. Which is more appealing to you?
6. Repetition rate
Tell me what? What percentage of your database uses your product again after making one purchase/reservation/whatever it may be.
The maths of how many buyers have completed more than one purchase, or the total amount of buyers.
What is the opinion of what does the VC? It is more geared toward e-commerce, but the more frequent the repeat rate is, the more involved customers will be with the product and the more intriguing the possibility. More frequent repetition rates are linked positively to LTV.
7. Revenue
What do you think? What is the amount of money your business is earning
The maths Check your account!
What does the VC do? It’s not a difficult question. The more money you’re making and the faster you can make it, the greater the return on investment for the investor.
These are just a few of the most important indicators that provide investors with an idea of the business and assist them in determining whether it’s a feasible option to invest in or isn’t. Selling a vision isn’t as straightforward as it used to be it’s important to know the metrics in and out!