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The New KPIs: Navigating Start-up Metrics in a Changing Economy

founders fundraise kpis start-ups & fast growth businesses Nov 10, 2023

In 2022, the venture capital landscape experienced a big shift.

With venture capital funding down by 35% and the end of near-zero interest rates, the macroeconomic environment surrounding start-ups has dramatically changed.

Gone are the days of free money, massive Series A funding rounds and founders not getting too concerned with short cash runways....

Asides from changing the focus to more about breakeven point and extending cash runway, in order to raise funds in this tougher market, there is also a new focus on the key performance indicators (KPIs) that VCs and investors scrutinise.

Customer Acquisition Cost (CAC) and Lifetime Value (LTV), while still important, they no longer dominate discussions in boardrooms.

As a founder (and a support finance leader) seeking VC funding, understanding these evolving KPIs is now crucial for your start-up's success.

The Shift in Metrics:
Founders used to run their businesses focusing on month-on-month growth of their North Star metric - a singular guiding light, be it gross merchandise value (GMV), the number of transactions, or monthly active users (MAUs).

However, Tessa Clarke, co-founder & CEO of OLIO, points out that while these metrics provide a sense of business momentum, they fall short in indicating the true underlying health and long-term prospects.

New Metrics for a New Era:
In today's higher interest rate environment, sustainability and solid business fundamentals have become more important.

Here are some crucial KPIs founders & Finance director's / CFOs should consider including in their presentations and board packs:

  1. Annual Recurring Revenue (ARR): Shifting focus from growth metrics like the number of listings to revenue-based metrics like ARR is critical. Revenue is now more significant than growth in this new economic climate.

    While ARR is very common for SaaS businesses, it's worth taking a look at your recurring or "sticky" revenue when you don't have a subscription business.  What revenue can you almost "rely" on and what revenue do you need to generate through your sales and marketing funnels?  It's worth understanding this, especially when fundraising.
  2. Burn Multiple: This metric measures how efficiently a company is growing.  It is calculated = Net burn/Net new annual recurring revenue. 

    Or put simply it measure how many £/$ a company burns to create 1 £/$ of ARR.  Unlike LTV where the focus is more on Sales & Marketing spend, this metrics is looking at the entire business.  You can read more about the burn multiple here.

  3. Rule of 40: Again, more common in the SaaS world, this metric combines a company's growth rate with its profitability, offering a balanced view of performance. 

    Using the Rule of 40: SaaS Growth Rate plus Profit Margin should be equal to or greater than 40%: SaaS Growth Rate + SaaS Profit Margin > 40%.  More about this metric here.

  4. EBITDA Margin: Understanding the path to positive EBITDA and what sort of EBITDA margin a business is ultimately building is now imperative.

    This metric, as accountants, we have all be tracking, however it probably hasn't had as much focus as Gross margin and Contribution margin.  Largely because in the early stage of start-ups and when growth was 100% of the focus and we had lots of fundraising monies coming in, the EBITDA margin was such a huge negative number that it was largely ignored.  Not any more.  
  5. Payback Period: This metric can replace the CAC/LTV as it's looking at the similar inputs but focusing on the time needed to recoup the costs of acquiring a customer.

    To calculate this one, again if you have recurring revenue - think of how much it costs to acquire a customer and how long it takes to get that money back in revenues.
  6. Productivity Metrics: Metrics such as revenue per head are becoming crucial as investors focus on "right-sizing" portfolio companies.

    For example, with an agency. Revenue per head is a common metric - especially when looking at this metric over time.  As the company grew - did the team become more or less efficient?  Word of caution, I would be careful when comparing these types of metrics to "industry averages".  Like LTV, every company can calculate this formula differently.  So it's best to look internally over time.
  7. Market Leadership: Demonstrating how a start-up will achieve and maintain a leading position in its market is increasingly important.

    Along with market size, the is thinking about the opportunities.  When a company is very early stage a focus on the market size or market opportunities is much more important as it's demonstrating how big the company could get.  However, as the company becomes more of a scale-up than start-up - looking at how the company is overtaking it's competitors becomes more important.
  8. Impact Metrics: Start-ups need to understand their impact beyond revenues and customer numbers, including their environmental and social impact.  NPS is a common score, however there is now a bigger challenge for all businesses to consider diversity within their company as well as how the company is impacting the wider world.  Here are examples of 5 metrics for social impact measurement.

The new economic era requires founders & finance leaders to be proactive in adapting their approach to metrics and KPIs.

This is not just about appealing to investors but about steering the start-up towards sustainable growth and market leadership.

Founders & finance leaders need to master these new KPIs to become masters of their destiny.


  1. Try our Quiz!  Financial Leadership Foundations Scorecard.  
  2. Register for the mini-course, Upgrade your Management Accounts and get noticed by the business 
  3. Work with me in the Financial Leadership Foundations course  that includes monthly Q&A sessions where we can discuss all of your questions and how to apply your learnings to your current role. 
  4. Work with me as a Founder needing guidance and support from experienced Finance leaders. Take a look at our guide on Outsourced bookkeeping.


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