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Startup Evaluation Metrics: A Guide for Pre-Series A

Pre-Seed Stage

If you are a Pre-Seed Stage startup, investors that might be interested in working with you will be looking at the list below. At this stage, the focus is often on the foundational elements of your startup, including team capabilities, initial traction, and the fundamental viability of your idea.

Quantitative Metrics

  • Initial Capital Raised: Amount of funds raised from various sources.
  • Burn Rate: Rate at which the startup is spending its initial capital.
  • Runway: Duration the startup can operate with its current funding.
  • Early Customer Metrics: Number of sign-ups, pilot users, or early adopters.
  • Product Development Milestones: Progress in product development.

Qualitative Metrics

  • Founder’s Background and Expertise: Education, work history, industry experience. More on this here
  • Market Problem Identification: Clarity in understanding the problem being solved.
  • Solution Uniqueness: Novelty of the solution.
  • Founder's Passion and Commitment: Dedication to the project.
  • Team Dynamics and Co-Founder Compatibility: Teamwork effectiveness.

Seed Stage

At the Seed Stage, investors are looking for more concrete evidence of your startup’s potential. This includes user growth, revenue generation (if applicable), and other indicators of market fit and business scalability.

Quantitative Metrics

  • User Growth Rate: Increase in number of users or customers.
  • Revenue Growth: Rate of revenue increase.
  • Customer Acquisition Cost (CAC): Cost to acquire a new customer.
  • Lifetime Value (LTV) of a Customer: Predicted revenue from a customer.
  • Monthly/Annual Recurring Revenue (MRR/ARR): Revenue from subscriptions.
  • Churn Rate: Rate at which customers stop using the product.
  • Product-Market Fit Metrics: Feedback indicating product-market fit.

Qualitative Metrics

  • Market Size and Growth Potential: Potential market size and growth rate.
  • Competitive Landscape: Understanding of competition.
  • Business Model Scalability: Potential for scaling the business.
  • Product Differentiation: Unique selling points of the product/service.
  • Founder and Team Resilience: Ability to handle challenges.
  • Intellectual Property: Patents or unique technological aspects.
  • Customer Feedback and Engagement: Quality of customer interactions.

Pre-Series A Stage

In the Pre-Series A Stage, the focus shifts towards scaling and preparing for more substantial funding rounds. Investors will scrutinize your startup’s market position, growth metrics, and strategic direction more thoroughly.

Quantitative Metrics

  • Gross Margin: Profitability after cost of goods sold.
  • Sales Efficiency: Effectiveness of the sales process.
  • Market Share: Share in the target market.
  • Unit Economics: Profitability per unit sold.
  • Capital Efficiency: Effective use of financial resources.

Qualitative Metrics

  • Strategic Partnerships and Alliances: Beneficial business partnerships.
  • Go-to-Market Strategy: Effectiveness of market entry strategy.
  • Founder and Team Experience: Experience in scaling companies.
  • Regulatory and Legal Compliance: Adherence to regulations.
  • Societal or Environmental Impact: Impact on society or environment.
  • Scalability of Tech Infrastructure: Ability to scale technology.
  • Corporate Governance: Corporate governance practices.

General Qualitative Metrics (Across All Stages)

  • Founder and Team: Leadership and team synergy.
  • Market Timing: Readiness of the market for the product.
  • Traction and Momentum: Overall progress and growth trajectory.
  • Investor Fit: Alignment with investor's portfolio and interests.
  • Exit Strategy: Planned approach for eventual exit.