Dan Bowyer explains the three sales metrics a VC looks for once a startup has more than six months of data, to judge whether it is a venture-scale opportunity: pipeline, time to value and whether it is replacing competitors or opening new markets.
- VCs want evidence of 'tomorrow', meaning how big and how fast a business can grow, not just today's customers and cash.
- The three core metrics are pipeline (speed, cadence, ideal customer profile and contract value), time to value with net revenue retention, and crushing competitors or riding new trends.
- Trying to do too much for too many sectors or territories is a red flag; show a stepped TAM roadmap instead.
Am I building a venture attractive business?
3 metrics to show investors.
Beyond the promises and earliest of days in startup land i.e. when you have some data (>6 months) there are 3 core metrics a VC will look for in your sales activity that denote more than ‘today’ customers and cash.
We’re looking for tomorrow.
How big how fast.
i.e. Is this really a venture scale opportunity
(Totally fine if it’s not your track, or even if you change your mind, but if going for VC this is what we’ll need to get a sense of.)
When pitching for investment it helps us if you showcase specific KPIs – which you can do in many ways. I’ve tried to highlight some of the basics below.
In essence it’s all about showing a healthy pipeline, which moves quickly, converts quickly – owning ideally brownfield (competitor crushing) and greenfield sales (new trend) who then do more with you over time (NRR).
I’ve broken down each (KPI) with ‘why’.
Pipeline
Sales – Speed and cadence is king with a defined customer profile. i.e. Who (ICP), how much (ACV), frequency.
TTV
Get to value quickly (Time scale improving) and ideally show (NRR) scaling up.
**Crushing or Trending
**Who are you replacing (competitor crushing) and how are you opening up new #sales and channels (highlighting trends).
Beware trying to do too much for too many across too many sectors or territories which can be a red flag, instead show your forward thinking on a stepped TAM roadmap.
Also use these metrics to highlight differentiation if you’re able. The numbers add real value to the story you’re telling. And we don’t expect much in the early stages. Just the shoots to extrapolate forwards.
In simple terms, if going for VC, show your inner sexy (numbers) beast.
Frequently Asked Questions
What metrics do VCs look for in an early-stage startup's sales?
Dan Bowyer names three: a healthy pipeline that moves and converts quickly with a defined customer profile, a fast and improving time to value with net revenue retention scaling up, and evidence of replacing competitors or opening up new trends and channels.
How much traction do investors expect at the early stage?
Not much. Dan Bowyer says investors are looking for early shoots they can extrapolate forwards, with the numbers supporting the story you are telling.