Startup Financial KPIs: Calculation, Presentation & Interpretation

1. The Art of
Startup Metrics
How to define and manage
your success metrics
European Innovation Academy
July 2016
Bill Reichert
Managing Director
Garage Technology Ventures
Twitter: @BillReichert
Capital for Innovation

2. The Art of Startup Finance

3. Financial management for
startups is not …
• Business School finance
• Fundraising drill
• Marketing metrics
The Art of Startup Finance

4. Startup Finance is …
• Turning your vision into a
business model
⎯ Converting your objectives into
quantifiable metrics
• Validating and scaling your
business
The Art of Startup Finance

5. Business Model Formula Framework:
• We sell [product or service] to [target customers].
• The reason our customers buy our product is [compelling value
proposition/benefits].
• We have an advantage over our competition because [sustainable
competitive advantage].
• We will become profitable in the [Nth] quarter of [201X]
• By selling [XXX] systems/licenses/subscriptions to [YYY] customers
• Through a combination of [channels/partners/direct sales]
• At $ [price] per system/customer/unit/subscription
• With a cost of $ [cost/margin] per customer acquired/product sold.
• At that point, our revenue run rate will be $ [revenues] on an
annualized basis.
Business Model Formula

6. Your
Management
Dashboard:
Key
Metrics
for
your
startup
company
The
top
seven
metrics
you
need
to
measure,
monitor,
and
manage
The Art of Startup Metrics

7. Why do you need a
Management Dashboard?
“You get what you inspect,
not what you expect.”
The Art of Startup Metrics

8. What is the Number 1 reason
startup companies fail?
. . . they run out of cash!
The Art of Startup Metrics

9. 1. Cash
- What is your Burn Rate?
- What is your Net Cash position?
- How much Runway do you have?
The Art of Startup Metrics

10. 2. Product
- Are you on time, on budget?
- Can you deliver on your promise?
- Your Metric of Merit
- How do users rate your features?
- Net Promoter Score
The Art of Startup Metrics

11. Net Promoter Score:
The Art of Startup Metrics

12. 3. Marketing
- Qualified Leads?
- Validation of Marketing Messages?
- Validation of Marketing Channels?
- “Viral” coefficient?
- Cost per qualified lead?
The Art of Startup Metrics

13. 4. Sales
- Sales force/rep Productivity?
- Sales Cycle (offline)?
- Conversion rate (online)?
The Art of Startup Metrics

14. 5. Customers
- Growth rate of customer base?
- Customer Acquisition Cost (CAC)?
- Customer Lifetime Value (CLV/CAC)?
- Profitability (CLV/CAC)?
The Art of Startup Metrics

15. 6. Support
- Customer satisfaction/engagement?
- Customer churn/Renewal rate?
The Art of Startup Metrics

16. 7. Team
- Alignment and morale?
- Performance and skills?
- Recruiting and retention rates?
The Art of Startup Metrics

17. CustomersCash Team
Product Marketing Sales Support
Startup Management Dashboard
The Art of Startup Metrics

18. The Art of Startup Metrics

19. 19
The Art of Startup Metrics

20. The Art of Startup Metrics

21. Objectives, Deliverables, Metrics
The Art of Startup Metrics

22. Other Metrics:
• Price: How do you test price/value assumptions?
• Costs: Do you have alternative cost models?
• Competition: Can you measure market share?
• Channels: Profitability of alternate channels?
• Revenue streams: Assumptions vs. reality?
• Operations: Manufacturing, distribution, etc.?
• Others? …
The Art of Startup Metrics

23. Building and Using your Management Dashboard:
• Simple: The best is the enemy of the good
• Cheap: Over-engineering creates tunnel vision
• Meaningful: Monitor metrics that really matter
• Flexible: Drop metrics that outlive their usefulness
• Accountable: Each metric must have an owner.
The Art of Startup Metrics

24. Final Note: Monthly Management Reports
• Standardize early: Produce monthly financials,
dashboard summary, and key action items
• Board package: Company driven, not investor driven;
but solicit investor input
• Tools vs. Grades: Focus on learning and responding,
not grading and punishing.
The Art of Startup Metrics

25. The Art of
Startup Finance
Online course at
Kauffman
Founders School
Resources for Entrepreneurs
http://www.entrepreneurship.org/Founders-School/The-Art-of-Startup-Finance.aspx

26. Art of the Start
Online course at
Skillshare.com
Resources for Entrepreneurs

27. For questions, comments, or slides
reichert@garage.com
@billreichert
R E S O U R C E S F O R
E N T R E P R E N E U R S .
Garage website:
http://www.garage.com
www.garage.com
The Art of Startup Metrics

28. The Art of
Startup Metrics
Bill Reichert
Managing Director
Garage Technology VenturesCapital for Innovation