The Short Answer
Startup metrics fall into categories: acquisition (how you get customers), activation (first value), retention (keeping customers), revenue (money made), and referral (word of mouth). The specific metrics that matter most depend on your business model.
Focus on a few key metrics that matter for your stage. Early on, retention matters more than acquisition. Don't optimize for vanity metrics.
Why Metrics Matter
What gets measured gets managed. The right metrics help you understand if your startup is healthy, identify problems early, and make better decisions. They're also essential for fundraising—investors evaluate startups largely based on metrics.
But not all metrics are created equal. Vanity metrics (like total registered users) can be misleading. Focus on actionable metrics that drive real business outcomes.
Metrics by Category
Understand these core metric categories and their key measures:
Revenue Metrics
How you measure the money coming in and its predictability.
Monthly Recurring Revenue (MRR)
Sum of all recurring revenue in a monthThe foundation metric for SaaS. Track MRR growth rate month-over-month.
Annual Recurring Revenue (ARR)
MRR × 12Annualized revenue, preferred for enterprise SaaS with annual contracts.
Average Revenue Per User (ARPU)
Total Revenue / Total UsersHow much each customer pays on average. Track this to optimize pricing.
Growth Metrics
How fast you're growing and whether it's sustainable.
Month-over-Month Growth
(This Month - Last Month) / Last Month × 100Your growth rate. Top startups grow 15-20% MoM early on, 5-10% at scale.
Net Revenue Retention (NRR)
(Starting MRR + Expansion - Churn) / Starting MRR × 100Revenue retained from existing customers. Over 100% means expansion exceeds churn.
Unit Economics
The profitability of acquiring and serving each customer.
Customer Acquisition Cost (CAC)
Sales & Marketing Spend / New Customers AcquiredHow much it costs to acquire a customer. Should decrease as you scale.
Lifetime Value (LTV)
ARPU × Gross Margin × Customer LifespanTotal value a customer brings over their lifetime. LTV should be 3x+ CAC.
LTV:CAC Ratio
LTV / CACThe health of your unit economics. 3:1 is good, 5:1 is excellent.
Engagement & Retention
Whether customers stick around and get value.
Churn Rate
Customers Lost / Starting Customers × 100Monthly customer loss rate. Under 3% monthly is good for B2B SaaS.
Daily/Monthly Active Users (DAU/MAU)
Unique active users in periodEngagement measure for consumer apps. DAU/MAU ratio indicates stickiness.
Key Takeaways
- Focus on metrics that drive decisions, not vanity metrics
- LTV:CAC ratio of 3:1 or higher indicates healthy unit economics
- Retention is often more important than acquisition early on
- Net Revenue Retention over 100% means you can grow without new customers
- Track leading indicators (engagement, activation) not just lagging ones (revenue)
