The latest edition of our Dear Abby for startup founders. A VC explains what metrics investors are likely to track for a seed stage company. By Renee DiResta (Principal, O’Reilly AlphaTech Ventures)
Once a promising seed-stage company is funded, what are the business milestones that stage-A VCs like to see before investing? -Female technologist, San Francisco
Meaningful ones! That answer isn’t a cop-out; it really varies according to the type of business the company is in. Generally speaking, the metrics that matter are the ones that track meaningful customer engagement with your product. B2B metrics are very different from B2C, and investors evaluating a company will compare your metrics to comparable companies in the same sector.
Seed stage capital is for finding product-market fit. You want to show trends over time which demonstrate that fit: user numbers continuing to increase, revenue (if you have it) picking up, a growing number of enterprise clients moving through your pipeline. The specifics may vary, but ultimately you’re looking to demonstrate that your market is excited about what you’re building.
Founders who have taken seed funding may or may not have a board; if they do, they will generally work with the board to establish metrics that best track the core value propositions of their business. If they don’t have a board, they may want to ask an advisor for help choosing what’s important; sometimes it’s difficult for a first-time founder to identify what later-stage investors will care about. Page views, for example, are a vanity metric for many types of companies - but they are critical to a media startup with an advertising-driven business model. It’s important to identify the levers that are most relevant to your future success. Work to keep the numbers in those areas moving up and to the right and you’ll be in a good position when you head out to raise your Series A.
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About the guest blogger: Renee DiResta is currently the Principal at O’Reilly AlphaTech Ventures, where she researches emerging technology trends and supports portfolio companies. Prior to OATV, she spent six and a half years as a trader at Jane Street Capital, a quantitative proprietary trading firm. Follow her on Twitter at @noupside.