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The Top 10 VC Metrics


Top 10 VC Metrics

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1️⃣ Monthly Recurring Revenue (MRR) / Annual Recurring Revenue


MRR represents the amount of recurring revenue from customers who have monthly contracts with you


ARR represents the same thing, but for customers committed to annual contracts


2️⃣ Average Contract Value (ACV) / Average Revenue per User (ARPU)


ACV is more common for B2B companies


ARPU is more common for B2C companies


Formula:


ACV = Total revenue / # of contracts


ARPU = Total Revenue / total users


3️⃣ Customer Acquisition Cost (CAC)


CAC is the total $$ amount that it takes to acquire a customer


It’s calculated by taking Sales & marketing expense for a specific period / new users acquired for a specific period


4️⃣ Lifetime Value (LTV)


LTV represents the total amount you can expect from a customer over their lifetime with using your product / service


5️⃣ CAC Payback


CAC Payback helps you understand how long it takes to make back the money you spent to acquire a customer


Formula:


I’ve seen this calculated 2 ways…


CAC / New MRR


Or IMO more accurately..


CAC / Gross Profit


6️⃣ Churn


Churn represents the amount of lost customers, or revenue, from customers who were once active


7️⃣ Net Dollar Retention


Net Dollar Retention helps a company understand how much contract value is being retained over a specific period of time


Formula:


Ending MRR specific customer or cohort / Opening MRR


8️⃣ Cash Burn


Cash Burn represents the total cash that left your bank account in a given period, not including transactions related to financing activities (equity / debt)


Formula:


Cash from Operating Activities + Cash from Investing Activities


9️⃣ Expansion / Contraction


Expansion represents the added MRR from existing customers


Contraction represents the lost MRR from existing customers (who haven’t fully churned)


🔟 Gross Profit / Gross Margin


Gross Profit is what’s left over after you subtract out your Cost of Goods Sold from your Revenue


Gross Margin is your Gross Profit as a % of your revenue


Formula:


Gross Profit = Revenue - COGS


Gross Margin = Gross Profit / Revenue


Those were the Top 10 VC Metrics...

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