All Good to Great companies began the process of finding a path to greatness by confronting the brutal facts about the reality of their business. When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident.”
— Jim Collins, author of Good to Great
I joked the other day that some of the best fairytales are written in Excel. Forecasting is sometimes done by dragging the mouse based on many assumptions, because it’s hard to predict the future.
One question that keeps coming up when speaking with early stage entrepreneurs when it comes to funding, is what metrics the company needs to hit to raise seed/series A/B etc:
- What’s a good conversion rate?
- What should our MRR growth be?
- Is my churn rate below the category average?
While there isn’t a single magic number or set formula, understanding industry benchmarks can be really helpful to keep a finger on the pulse to measure the health of the company and make more informed forecasts. Benchmarks are typically specific to stage/business model/geo.
In this post I’ll focus on benchmarking resources for seed and series A in the following three categories:
- SaaS
- B2C / Consumer apps
- Deep tech
The following table from Rob Go at NextView Ventures is a great start to help answer the question of what traction/milestones are needed to raise seed and series A (US focus).
It’s important to mention that benchmarks alone can’t guarantee funding. Investors look beyond top line metrics to assess other important factors. In Rob Go’s words:
For seed and Series A deals, investors will also need to see a high-potential team with founder/market fit, a large and attractive market opportunity, and a business model with increasing returns to scale. Top-line metrics are indicators of success, not the one bar to clear to raise funding for your startup.
Rob Go: How Much Traction Do You Really Need to Raise a Seed or Series A Round?
Software as a Service (Saas) benchmarks
In SaaS the main benchmarks being measured are revenue growth, sales efficiency (unit economics), churn and burn rate. One of my favourite resources for SaaS benchmarking is The SaaS Napkin by Point Nine Capital. If nothing else, for its simplicity (back of the napkin) but also for the fund’s commitment to keep updating the metrics since 2016. You can read more about the methodology here and download a high res PDF here.
Other interesting SaaS benchmarking tools/figures:
- Bessemer’s Cloud 100 –
- Tom Tunguz (Redpoint Ventures) – SaaS metrics Benchmark including a Google Docs template and how to benchmark
- Openview Partners – 2019 expansion SaaS Benchmarks
- The four vital signs of SaaS – Techcrunch
- The journey to series A in Europe – Local Globe, Atomico & Dealroom
- Baremetrics open benchmarks – data pooled from over 800 startups
Consumer apps and services
The main B2C benchmarks have to do with traction: growth in user acquisition, user retention/churn, monetisation, as well as the effectiveness of consumer marketing + virality. 500 Startups created a helpful primer on key B2C metrics.
B2C benchmarks tend to be specific to the type of service or business model. eCommerce is different than free consumer apps, games are on a league of their own, etc. With the explosion in DTC products (see my post on VC Cafe), they probably deserve a category of benchmarks on their own.
Andrew Chen is a partner at Andreessen Horowitz consumer team, and I particularly enjoyed his series of tweets and LinkedIn posts on ‘what good looks like in consumer tech’.
For example, this post on 10 magic metrics indicating a consumer tech startup probably has product/market fit
- cohort retention curves that flatten (stickiness)
- actives/reg > 25% (validates TAM). power user curve showing a smile — with a big concentration of engaged users (you grow out from this strong core)
- viral factor >0.5 (enough to amplify other channels)
- dau/mau > 50% (it’s part of a daily habit)
- market-by-market (or logo-by-logo, if SaaS) comparison where denser/older networks have higher engagement over time (network effects)
- D1/D7/D30 that exceeds 60/30/15 (daily frequency)
- revenue or activity expansion on a *per user* basis over time — indicates deeper engagement / habit formation
- >60% organic acquisition with real scale (better to have zero CAC)
- For subscription, >65% annual retention (paying users are sticking)
- >4x annual growth rate across topline metrics
Other resources on B2C benchmarks:
- Pear Ventures – Seed Financing Landscape
- Mixpanel – what’s a good retention rate for apps and websites
- Hubspot – NPS Benchmarks
- Humanlytics – a beginners guide to cohort analysis
Benchmarks for deep tech startups
Deep tech is harder to measure/compare, especially in the early stage. Deep tech startups can take a risk on market timing, which means that there’s less traction to evaluate and more emphasis is put on the team and the defensibility of the IP. Part of the challenge in deep tech is getting to revenue and scaling it. There’s a slower adoption curve than SaaS or consumer, and often requires market education and selling services to enter the market.
Other resources for benchmarking deep tech startups:
- European investment bank – financing the deep tech revolution
- SOSV – Deep tech investing 101 and Deep Tech Trends
- BCG – the dawn of the deep tech ecosystem
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I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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