Your Traction “Tracker”
Tracking your traction is only possible if you know what your “traction” is, how to calculate it, and if you understand that everything you think you know is likely wrong. Every month you are in the accelerator you are required to update your traction for the previous month. It is important to make sure this data is accurate so we can track trajectory and growth.
*Start with your KPI’s for the full month prior to launch of your cohort and then after you complete each month, enter that months complete data in the tracker. Example- After month 1 ends, enter M1 ‘s data and for Pre-Start, you enter it’s data for the month prior to you starting the program. So if you started in January, Pre-Start would be December and M1 would be January, however you have to submit the KPI’s for M1 in M2 because we need a full complete set vs partial data.
The goal of this tracker is to capture your KPI’s and traction from the month prior to your joining the accelerator to graduation and one month after.
This information and tracker help you understand and track your companies traction so that you can: understand where your strengths are, your weaknesses, and ultimately lead to investment from investors.
Please enter this information for every full of month of data at the end of each month as accurately as possible. If you don’t know something or if you notice that something is inaccurate later, you can always adjust/fill it in.
*If you notice a KPI that you don’t think is relevant to your business, ask your advisor as this tracker was built to cover all types of startups and that means some fields are not going to be relevant to every business type or industry.
Team Size, or headcount, is your full-time and part-time employee count. You can include contractors that work for you full-time but are still under 1099 in some cases. Do not include agencies, freelancers, or outsourced teams. Headcount is actually a key indicator of growth in the startup space.
Industry is the broadest categorization in the investment space. We recommend you use standard public equities industry categories. The easiest way to identify your industry is to identify any competitors that are already public and use that industry. At the early stage it is acceptable to choose more than one industry, even though there are never multiple industries in the public market.
Vertical is similar to sub-industry in public equities, but more detailed. A company can have multiple verticals stemming from one more products or business lines.
B2C is Business-to-Consumer. The product or service is designed to be used by an individual consumer. Business that have intermediaries that are other businesses are still B2C if the end user is the consumer. For example, most food products are B2C even if sales are through a wholesaler or distributor. Selling and shipping to the consumer with no intermediary is Direct-to-Consumer (D2C) and is a marketing and sales channel not a business type. It is possible to be B2C and B2B, think Microsoft Office.
B2B is Business to Business. The product or service is used by a business. This is not just for enterprise scale. B2B applies from independent contractors all the way to multi-national corporations.
B2B2C is a relatively new designation that means Business-to-Business-to-Consumer. Note that this does not include the manufacturer, distributer, and retail relationship that would be classified as B2C. B2B2C is where the first business partners with a second business for all its sales to consumers, but it is a separate service or offering than what the second business sells. An example is Affirm offering financing services through Caspar Mattresses. Instacart delivers groceries from supermarkets, but this is an add-on service. However, consumers need the supermarket to tie with Instacart before they can get the value of the service.
Marketplace is a place where buyers and sellers (or a similar dynamic) can meet to swap services or goods. This designation does not suggest any specific revenue model, though taking a percentage of the transaction is common. Membership models are also common, including a combination of both. It is possible to have a marketplace that is free to the users but supported entirely by ads.
Total Addressable Market
This is the total amount of money spent in a startup’s defined space.
While incredibly important, there is a huge amount of fuzziness in any sort of market analysis. Startups may want to define themselves a certain way, and venture capitalists may have an entirely different market in mind when they analyze a startup.
Generally speaking, markets greater than $1 billion are good, and any market definition that uses the word “trillion” is likely to get a laugh from a venture capitalist, with the exception of real estate but only if you are taking a percentage fee of real estate transactions. Often, describing the TAM is more an opportunity for a founder to demonstrate an understanding of their startup’s market than it is about actually getting a quantitative figure.
Keep in mind that the TAM is the total market you could possibly go after, while the SAM is the angle you are taking into the market. Imagine you are Fintech and your TAM includes spend from huge banks all the way to tiny credit unions. Your SAM might be medium to small regional banks and credit unions, because the large players can design their own solution. The SAM is a pitch deck KPI and we do not ask for it here. TAM is a quick number that gives investors an idea of the scale of your market.
Percent Ownership in 5 Years
The percent of the total market that you’ll own within the next five years. A simple formula is your revenue 5 years from now divided by your TAM. If you want to do the extra work, which is recommended, you’d increase the TAM by the CAGR of the market and then divide your year 5 revenue by that amount. This is presented as a percentage.
Industry Multiples, also known as Industry Exit Multiples, is a number used as a multiplier to revenue to determine the current valuation of a company. Industry Multiples are things you just have to look up. Companies that straddle industries should choose the one that best fits their messaging and product, and if that doesn’t lead to one number aim to sell the higher number to any potential investors or buyers. The reason it can be called an exit multiple is that it can be a guide for what the company can be sold at, however it can also help determine what to use as a valuation for a round of financing. The number is calculated by using all the deals and valuations done in the market for a particular industry and deriving the number. It gives you an average multiple for the industry, which can form the starting point for your own calculations.
Valuation is the valuation or valuation cap on your current or anticipated (within 6 months) round of financing. Otherwise tell us the last valuation or valuation cap you completed a financing round at.
Active User KPIs
Daily Active Users (DAUs) is a daily measurement of the number of users who take an action in a website or app. DAU doesn’t always indicate product health. Frequently, this will be a measure of opening an app, logging in, or some other gateway activity. To make this number more useful, track something that designates meaningful engagement. For example, Venmo wouldn’t measure the number of times the app is opened, but would measure whenever the user made a transaction, asked for money, or interacted with the social media element.
Weekly Active Users (WAUs) is a weekly version of the DAU.
Monthly Active Users (MAUs) is a monthly version of the DAU.
Note that each of these KPIs has to be tracked individually, and every company should track all three. The WAU cannot be multipled by 4 to get the MAU, because the same user can appear in two separate weeks and would add +1 to each WAU measure but would be just +1 on MAU. Multiplying would over represent users.
While all three should be tracked, the one that should be reported to investors and other interested parties is the one thats most relevant for the type of product or service. For examples, games or news apps have a useful DAU. WAU can be a useful measure for personal finance apps, varied retail sites like Amazon, or food delivery. MAU is the most common KPI reported and is generally a good measure and can be used over the other two. Exceptions are things that really require daily engagement to retain customers such as freemium games.
Types of Users
Report the type of user that is likely to be the most useful metric at your stage for the investor. If you are not yet monetizing then reporting general users works, but if you are using a subscription model then report subscribers.
Users are people on the app or website. Use this when you have a low amount of paying customers compared to total users.
Customers are people who have given the company at least a dollar. This does not include subscribers. This KPI is for those models where a customer makes individual purchases rather than a recurring one.
Subscribers are people who pay a recurring fee to continue using the product or service.
Suppliers (or Vendors) are for marketplaces that are just starting to show how many “sellers” are willing to use the platform with “buyers” tending to resemble users for non-marketplaces.
Business Customer is the number of active business customers, whether SaaS or LOI or MOU or other engagement, for B2B companies.
Use the User Type (user, customer, subscriber, etc.) chosen in that section. Growth rate is the number of new users that have joined divided by total users. Note that if you do not reduce total users by those that churn out (because they are still in your database or whatever) then you are calculating Gross Growth Rate. Net Growth Rate is new users over total users with churned users removed.
Take all of the users who joined a product in a given time frame (usually a week). Then calculate how many of these users engaged with the product over every successive week.
Churn is slightly different and is calculated by taking the number of users who leave and dividing by the number of total users (regardless of start time).
Advanced: Cohort Analysis
Cohort analysis is a metric by which we see the decay in user engagement. Users leave even the most sticky products for any number of reasons. For instance, small and medium businesses may leave your product because they are shutting down operation. VCs really like to see cohort-analysis tables, because they give us a perspective on when users are leaving the platform.
First-week retention is probably the most immediately interesting number. For social media, 80 percent one-week churn is very high, 40 percent is good, and only 20 percent is phenomenal. For paid products like SaaS, churn and other conversion metrics tend to make more impact here rather than pure cohort analysis. SaaS churn in the low single digits (1–3 percent) is strong.
Seasonality can be an important component to elucidating cohort analysis. Education startups often see their users return at the beginning of the school year as people think through their software choices. Be sure your story includes all facets of your cohort analysis.
Net revenue typically refers to a company’s revenue net of discounts and returns. This is not after COGs. Net revenue minus COGs gives you gross profit. Net revenue is designed to get to the true top-line revenue numbers because discounts and returns from an accounting perspective do not affect top-line gross revenue on the income statement. Therefore, a company may report $1M in revenue and be telling the truth, even though they had $500,000 in returns. Net Revenue would be $500,000 which is a much more accurate number.
Monthly Recurring Revenue, almost always referred as MRR, is probably the most important metric at all of any subscription business. It’s what makes this business model so great. Once you acquire a new customer you got an recurring revenue, which means you don’t have to worry about one-off sales every month. Different from traditional sales, it gives you new challenges such as retention and churn.
The general concept is that MRR is a measure of the predicable and recurring revenue components of your subscription business. It will typically exclude one-time and variable fees, but for month-to-month businesses could include such items.
The better way of doing it is to simply sum the monthly fee paid by every single paying customer of your installed base. So let’s say you have Customer A paying $200/mo and Customer B paying $100/mo. Your MRR would be $300. See that each customers may be paying a different amount since you can have different plans or event different products in your portfolio.
Annual Recurring Revenue, or ARR, is a subscription economy metric that shows the money that comes in every year for the life of a subscription (or contract). More specifically, ARR is the value of the recurring revenue of a business’s term subscriptions normalized for a single calendar year.
For example, if your subscriber purchases a two-year subscription for $12,000, the ARR would be $6,000 for each year. ARR is predictable revenue that can be counted on every year.
Month-over-Month Growth is the Current Month Revenue minus Last Month Revenue divided by Last Month Revenue. You do this for the last 3 months and then get the average growth rate. Note that this number becomes more valuable to investors the larger the revenue number is in absolute terms (i.e. a MoM when revenues are at $1M is more useful than when they are at $1000).
MoM Additional Commentary
One surprise is that this number is used more by founders than venture capitalists. The reason is that it shows proportion without magnitude, and magnitude matters a lot because a startup’s revenue is a major determinant on what the growth rate can be. If you made $20 last month, you need to increase that to $30 to get a 50 percent growth rate. That might be a single customer. But if you have a $10 million per month revenue business, reaching the same growth is significantly more challenging.
While VCs don’t use this metric as heavily as the next one we will discuss, some guideposts are still helpful. A growth rate of 40 percent per month is very good. A growth rate below 40 percent can be considered good if you can convince an investor that additional capital placed in sales and marketing will drive the growth rate higher.
Gross merchandise value (GMV) is the total value of merchandise sold over a given period of time through a customer-to-customer (C2C) exchange site. It is a measure of the growth of the business, or use of the site to sell merchandise owned by others.
Gross sales volume (GSV) is a metric for the total sales of a company, unadjusted for the costs related to generating those sales. The gross sales formula is calculated by totaling all sale invoices or related revenue transactions. However, gross sales do not include the cost of goods sold (COGS), operating expenses, tax expenses, or other charges—all of these are deducted to calculate net sales.
Average Sale Price is calculated by gross sales divided by units sold. For large ticket items or large contract the price can differ. Imagine haggling for a car. Multiple buyers might land on a different price for the same vehicle. Average price allows you to dig into what the average price of the sale was. It is useful for unit economics and to better understand margins. If the average price is too low then, profitability might be an issue for investors (i.e. if a company excessively uses discounts to achieve sales).
Rake Percentage, also known as the take rate or the vig, is the commission or transaction fee charged by a marketplace to facilitate a transaction. It comes from the cut of the pot that the house takes in poker games to make it profitable to run said games. The rake percentage is a combination of the fee charged to buyers as well as sellers. Crowdfunding platforms typically structure their rake percentage to take some from the funder as well as the fundee. Reminder, this is for marketplaces.
Customer Acquisition Cost
To calculate the Customer Acquisition Cost (CAC), take the amount spent on all forms of user acquisition (search engine marketing, content marketing, public relations, etc.) and divide by the number of new customers within a given period. Thus, if we spent a total of $100,000 acquiring customers, and we have 100 new customers, we just paid $1000 per customer (fully-blended).
This is the bread-and-butter of almost all subscription companies, but also applies to most other startups. While the fully blended number is interesting, it doesn’t give a venture capitalist a lot of information about the channels that users are joining from. Therefore, we often split this into paid and free channels.
Free acquisition is what it sounds like – someone started using a product without seeing an advertisement, perhaps through word of mouth, or maybe reading about it in the press. In contrast, paid acquisition is generally synonymous with advertising. If you spend $60 on Google AdWords and get one customer, you had a CAC of $60. We often express the number of free versus paid acquisitions as a ratio, since this can show if the growth of the user base is primarily organic.
There are a lot of signposts for CAC, almost all of them dependent on the type of business. In general, the higher the ARPU – average revenue per user – the higher the cost of acquiring a customer can be. In social media, this number needs to be as low as possible (and can be near zero if growth is purely viral). In e-commerce, great CAC prices are around $30–$60 per user. Acquisition prices above that are not uncommon, but they do require more diligence. Prices above $200 are pretty rare in successful online businesses. Then again, financial services often have CACs in the upper hundreds, so, as always, there are exceptions.
CAC Payback is the amount of time before the cost of acquiring a customer is paid back (i.e. when do you breakeven on your marketing spend). This is a metric for SaaS companies and others who get payments over time. Even sellers of big ticket items that use seller financing or payment plans might use this KPI.
Another way to judge whether the CAC is reasonable is to calculate the payback time for a new user. In e-commerce, this is generally measured as the number of orders that need to be purchased to cover the cost of acquiring a customer. If the number of orders is one, that is fantastic – it means the customer is immediately profitable. For advertising-driven and freemium subscription startups, payback times of 3–6 months are good, and anything more than 18 months is likely going to be very hard to swallow.
This is the total value of a customer over the life of that customer’s relationship with the company.
This metric is really well-known, so I won’t cover it in-depth. It works hand-in-hand with churn, since the length of the relationship is inversely proportional to the churn. Calculating this value tends to be really hard, and getting to a number that is actually comparable across companies is challenging. VCs often have to substitute more objective metrics like ASP to get to values that are more easily measurable. Nonetheless, this number is crucially important, particularly as a company scales for the long-term.
Long-term value is the total amount of revenue generated from your customers over time expressed as a ratio over your CAC cost. Divide the LTV number by your CAC and you will get the ratio. This number is not always just for SaaS companies. Those that have recurring sales (i.e. soap, food products, or other products that have some brand loyalty). A ratio of 1:1 would mean your company makes no money. For startups anything above 3:1 means you are not investing enough in marketing to gain more customers. As the company matures 5:1 is a solid ratio. Remember that you want to increase marketing spend to acquire customers while you are in the growth phase, hence a 5:1 ratio or higher early on means you are probably not growing fast enough for VCs. However, if your aim is PE funding or a buyout based on profits a higher number is better.
Net Promoter Score
Run a survey among your customers asking how likely it is that they will recommend (i.e. promote) your product to other people on a 1 to 10 scale. Promoters are those who give an answer of 9 or 10, and detractors are those that respond with a 1 or 2. Calculate the proportion of both groups as a total of the survey population. The net promoter score is the proportion of promoters minus the proportion of detractors. Thus, if 50 percent of your customers are promoters and 10 percent are detractors, your net score is 40.
This is one of my favorite metrics. It shows how satisfied your customers are with your product and your overall experience. NPSs of 50 are considered excellent, and companies like Amazon and Google generally hover around such numbers. However, scores as high as 80 or even 90 are possible. Businesses that inculcate such fervency in its customers are highly valuable, and should raise capital easily.
Gross margin is calculated as total revenue minus the “cost of goods sold” (COGS) divided by the revenue.
Operating margin is Revenue minus COGS, marketing, sales, and general and administrative expenses divided by revenue.
Net margin is calculated by doing the same subtraction as operating margin and then subtract all other expenses such as interest, taxes, and others and then dividing this number by revenue. In other terms it is net income divided by revenue.
Margins are important because they show the ability of your startup to spend venture capital and get significant return. There are pretty bright guidelines on what your margins should be given an industry. For example, cloud storage and services companies can reach gross margins in the 90s, SAAS companies and other software businesses tend to be in the 70s, and hardware companies often struggle to get above 40 percent. Again, research your space until you know exactly what this metric should look like for your particular business. Gross and operating margin are crucial numbers for VCs, since the point is growth, net margin matters less in the early years. The reason being is that net income can be foregone by increasing marketing spend and adding more to revenue.
One additional consideration is margin compression. Margins become tighter when competition is greater, so successful businesses must develop defenses against new entrants who might force a company’s margins lower. I personally have seen dozens of startups fail to receive funding because they could not articulate a strategy to avoid margin compression.
This is the operating loss per month. To calculate runway, take the amount of available capital and divide by the monthly burn rate to get the number of months until your start-up runs out of cash. To take your runway calculation to the next level build in your increased expenditures for growth a reasonable revenue growth rate. For a very conservative estimate for internal use, build in the expenses for growth but do not increase revenues. The number to report here is the first calculation of cash divided by current burn rate.
These numbers show the efficiency of a business, the timeline for fundraising, and the need for capital. While startups are often run quite cheaply until their first fundraise, VCs will want to understand how you will increase your expenses to grow the business more quickly with any new infusion of capital. Lest anyone get the wrong impression, most investors expect their entire investment to be spent within 18–30 months. So if you’re asking for a fundraise of $10 million, but your monthly burn rate is $100,000, you must develop a very clear plan on how the burn rate is going to increase, and how that will propel the growth of the business.
Choose a time frame, such as one week. Take the number of users at the beginning of the week as a base. Now, track all invites that these users make to other people (for example, using an “Invite Your Friends” link). Aggregate the number of new users entering through this channel and then calculate the ratio of new users to old users and add 1. So, if you start with 1,000 users, and they bring on board 200 new users, we have a ratio of .2 + 1 (our base population) and that leads to a k-value of 1.2.
The k-value is a measure of virality, and is borrowed from epidemiological studies of disease progression. This number is exponential, and defines the magnitude of the user growth rate by word of mouth (as opposed to paid acquisition). For social media startups, this is often the only metric that matters (the other is retention).
Thankfully, there are some clear guidelines for performance. A value less than 1 means that the population is dying and will cease to exist. A value of 1 means that the population is stable. A value of 1.2 is strong, and a value of over 1.4 means incredible growth.
If you start with 1,000 users and have a k-value of 1.2 per week, after 30 weeks you will have about 200,000 users. But if you have a k-value of 1.4, you will have more than 17 million users within the same period. Growing at such a speed usually doesn’t last long, since old users are not as likely as new ones to bring additional users to the product (they already invited everyone!). However, some companies like Facebook and Snapchat have exhibited extremely high growth like this for an extended period of time, so it is certainly possible.
Take the net growth of subscription revenue over two quarters, multiply by 4, and then divide by the total spend on sales and marketing. So if in Q1 we had $200,000 in subscription revenue, and in Q2 we have $400,000, and we spent $300,000 in sales and marketing in Q1, we would have $400,000-$200,000, which is $200,000 net growth, multiplying by 4, we have $800,000, and dividing by our expenses, we have a ratio of 2.66.
This is arguably the best-named metric here, and a favorite of Scale Venture Partners, which popularized it. Essentially what this metric calculates is our return on investment of spending a dollar on sales and marketing. For each dollar we spend, we get the magic number back in additional revenue. A magic number above 1 means that a company has found a way to scale sales and marketing to build sustainable profit growth. A number below 1 isn’t necessarily terrible, but it also means that the company is not scaling as efficiently as other companies.
Last Month Revenue
Your revenue for the previous closed month.
Revenue Run Rate
Take the revenues recognized in the most recent month and multiply by 12.
VCs often talk about the current revenue run rate as well as the projected run rate in 12 months. So they will say something like “The company is currently at a $2 million run rate, but will be $10 million by the end of the year.” These numbers are often preferred, since they solve the magnitude problem.
Furthermore, almost all startups at the early stage are going to have to raise further capital. So when evaluating a startup, VCs are thinking about where the business has to be in 18–24 months when the next fundraise will happen. Getting a sense of the projected revenue run rate allows us to surmise whether series B or C growth investors are likely to be interested in a company. Thus, great performance is a revenue run rate that allows the next fundraise to happen. To get that number, reach out to investors and other founders until you have a good handle on the trajectory needed for your company.
Basket Size and Order Velocity
The average sales price (ASP) is the price of a typical order. Order velocity is the time it takes for a customer to make a repeat purchase.
For e-commerce businesses, these are among the most important metrics to calculate. ASP often drives the rest of a startup’s fundamentals, and so like run rate, acts as a clustering algorithm to quickly assess a startup’s business model for VCs. A high ASP generally means wealthier customers, fewer repeat purchases, more flexibility on the cost of acquiring a customer, etc. Order velocity also is influenced by ASP.
For instance, Uber is a low ASP, high-velocity e-commerce business, whereas One Kings Lane tends toward a high ASP but low-velocity business. There is no “best” answer regarding these metrics, but generally, the lower the ASP, the higher the velocity of sales needs to be to compensate.
# of Investor Meetings
How many investor meetings did you have this month?
Funding Secured this Month
How much funding was committed this month. This is not closed, or money is in the bank, capital but committed capital.