Why Metrics Still Matter

There are no metrics that automatically produce a round. Rounds happen when investors believe you're on the path to a massive company, and that belief is primarily emotional. Yet metrics are critical for grounding your narrative and making your story credible.

If you don't have a firm grasp of your metrics, you are not ready to fundraise. Not knowing your numbers tells an investor you don't understand your own business well enough to know whether you have product-market fit, and it is disqualifying in a way few other mistakes are.

What "knowing your metrics" means in practice comes down to consistency and detail.

Consistency shows a predictable pattern an investor can trust as a trend. Six months of 40% monthly growth reads as a trend (though an early one). Alternating months of shrinking and growing is hard to read, even if the pattern averages out to the same number. If you believe your numbers are inconsistent you should proactively provide investors with a genuine structural explanation that helps them understand the metrics and your business.

Detail is what allows investors to trust that the numbers mean what you say they mean. It includes:

• Presenting numbers that honestly represent the business. Concealing or massaging numbers destroys trust when discovered, and it will get discovered. A few classic offenders: cumulative charts that only go up, reporting gross merchandise value as revenue, not including compute in margin calculations without disclosing what you’re doing.

• Knowing your absolute numbers and growth rates across monthly, quarterly, and annual windows.

• For every number you report, knowing how it's calculated, what data supports it, and what assumptions are baked in. Ideally, know how the number changes if you change the assumption. If you define a user as someone who logs in monthly, know what the number looks like if the definition is daily.

• Knowing most of this by heart. If you do get a question you can't answer, you should say "I'm not sure about that one, I'll get back to you today." That answer builds credibility. A made-up answer, discovered later, ends processes.

What good looks like now

When I first wrote the Series A guide at YC we crunched all the data on successful raises to create a table of benchmark ranges: revenue, growth, retention, etc. and correlated those ranges to successful rounds of various sizes. This was always a bit quixotic since no two rounds are the same, and no defined metrics ever guaranteed anything. At this point, even trying to make that kind of chart would be totally useless.

Benchmarks are a mirage. If you don’t believe me, find a VC and ask him for the revenues and growth rates are for the most recent five deals done by his firm. You will get a near random scatter plot.

That said, investors have some sense of “good” which is something like “I know it when I see it.” I think of good as:

Good is explosive. Investors are pattern-matching on explosive trajectories. Previously solid growth metrics (e.g. triple-triple-double) are not enough, but neither are large revenue targets with middling growth. Given the speed at which AI companies have demonstrated they can accumulate revenue, investors are much more interested in growth narratives.

Good is relative to the queue. Your numbers are evaluated against the other companies in that investor's pipeline. This is why fundraise timing matters so much, especially in the current fast-evolving venture market. This is also why it’s important to deeply understanding the inventors you talk with to know what companies they passed on, what companies they missed, and how you stack up. The best source of benchmark truth isn't a Carta blog post but investors themselves. You can leverage your relationships and use casual meetings to gather market data (more on that in the next chapter).

Good is consistent with your story. The number that matters most is the one that proves your specific story is coming true. There is no magic threshold for CAC, LTC, AUM, DAU. Your metrics need to demonstrate that your thesis is exceptional

Why trends beat snapshots

Think of metrics as inputs into an investor's mental model of whether your business becomes gigantic. At the earliest stage there are few data points, so their investment decision runs on your promise and vision. In the future, at the later stages of your business, you will have deep data to anchor investors. Your round, wherever it sits, is priced on how convincingly the early data points you currently have validate that the vision you sold to investors is materializing.

With that in mind, beware of three issues startups face when presenting otherwise persuasive metrics:

• Insufficient data. You launched a new product two months ago and the early numbers look great. That's a promise-based raise, appropriate for a seed or a bridge or supportive to a later round. But two months is not a trend and investors won't price it as one. Unless of course your growth is so absurdly explosive that you’ve captured all the attention in the world and are Instinct.

• Inconsistent data. Your average growth is high but the underlying months alternate between negative, flat, and positive. This indicates lack of consistency and introduces risk that you don’t fully understand the levers of your own business well enough to pull them predictably.

• Too much unflattering history. Your company has existed for years, or raised a lot, and growth was flat until it recently took off. Founders underestimate how hard it is to convince investors to trust the last four months over the previous four years. Even if you claim that the business recently pivoted, investors are skeptical of startups that took a long time to ramp up. This may feel unfair but the burden of proof rises with every month of history.

One last thing about investor psychology

Honestly my favorite way to think about metrics is to try to view a business from the perspective of a great investor (there’s two I think of, but I won’t embarrass them by naming them). Really good is important here, because the best investors are optimists. The pessimists tend to wash out because they can never find a future on which to bet. The optimists though, they keep betting, but over time they also learn to be skeptical.

When a great investor meets an interesting company the first thing they’ll do is try to figure out the future state of that business and the world it creates. That’s the only kind of company in which it is worthwhile to invest. Once the investor has that in her head, she’ll figure out all the different blockers likely to come between now and there.

Your job as a founder is to show the investor how you’re going to overcome those blockers. The metric you need to focus on first is the one most closely related to your biggest blocker. If you’re building a deeply technical product, you’ll need to show you can solve the problem or hire the team - which isn’t really a metric at all. If you’ve never sold to an enterprise before and they’re your obvious customer, you’ll need to see to them. And you need to achieve these goals and produce the metrics - aka the externally visible evidence - in a way that makes someone sit back and say “wow.”

So that’s kinda it. Make wow. Raise money.