Venture360’s platform helps thousands of investors all over the world to track the performance of their portfolios.
The equity in private companies isn’t currently traded on an open market (more on that later), so here are the most common metrics investors on Venture360 are using to track and understand overall company performance.
#1 Cash on Hand
Cash is king and how much is left can mean the difference between life and death for a start-up. Savvy investors want to stay on top of this in order to prepare to make some tough decisions on whether to reinvest, start cutting overhead, or cut losses.
#2 Full Time Employees
This is #2 for 2 reasons. First, how many employees is an indication of how much overhead there is to support, and second it is an indicator of growth. If a company is hiring, that is a great thing!
Earnings before interest, taxes, depreciation and amortization. In other words, how much did the company make before the accountants wave their magic wands? This metric is focused on profitability, which is important for the long term viability of the business.
#4 Investment to Date
Investors want to keep a close watch on how much capital has been raised because it’s directly tied to cash flow. Opening a new round? They want to be the first to know.
#5 Gross Revenue
How much has the company sold? According to CB insights, the top reason for failure is building a product that the market didn’t want (42% of the time). The market votes with their dollars.
#6 Net Burn Rate
Every investor understands a company may be losing money now to make money later. That pile of cash recently invested in the last round is evaporating each month, and quick math will tell you how long before it’s gone, which is known as the “Runway.”
#7 Email Subscribers
Subscribers to an email list are a good litmus test of interest in a product or service, and whether it’s growing or contracting can be a sign of how the market feels. This can also be a vanity metric – one that seems to tell a good story but can either be masking a problem or completely manipulated.
#8 New Customer Acquisitions
This is more important as a trend than as a standalone number. As a company grows, it should get better at acquiring new customers. New features are released, the marketing budget grows, and the sales process gets better. All this hard work should be reflected in an upward trend.
#9 Total Paying Customers
Paying customers are important, they show traction and should also be considered as a trend. Keeping a close eye on this metric helps investors understand if they need to be concerned or if the company has it squarely under control.
#10 Contribution Margin
Contribution Margin is a product’s price minus all associated variable costs, resulting in the incremental profit earned for each unit sold. Is the company making money on what it is selling? This number should also go up over time with added efficiencies to the business.
Reporting can be time consuming, which takes people away from their core business. But investors need transparency, particularly when things aren’t going well. The best thing that a company and investor can do is to agree with the reporting requirements up front, which sets the expectations going forward. Venture360 helps founders spend less time preparing their metrics and gives investors a simple way to keep track of their companies.