What We Like to See In a Start-Up

There are a myriad of different data points that early stage investors want to noodle over after they have made an investment. Here is what we like to see.

Figure Image

The things that matter to VCs can differ wildly depending upon their style, stage, sector or investment horizon.

As Hillfarrance is an early-stage fund that invests predominantly in software for the enterprise, we look to our founders to keep us updated on a number of key factors related to their business performance, some of which are as much qualitative than they are quantitative.

We think the best way to frame this is by following the customer journey — from when they are your earliest prospect to when they renew their contract and buy additional products.

Here are just a few thoughts on things that an investor might like to chew on and might help you with tracking your own business’ performance.

Your wellbeing

At Hillfarrance, we take the health and wellbeing of our Founders and their teams extremely seriously.

We understand that there will always be an innate sense of pressure when you have finite resources and time to conquer your next milestone, however we also think that having a structure to help you accomplish this without compromising your health and wellness is essential.

As each situation is different, we refrain from having a specific approach. We prefer to ensure that we have enough open dialogue channels with our entrepreneurs so that if they need to chat about something at 10 pm on a Saturday they can give us a buzz.

One initiative we will be launching this year is the Hillfarrance Whānau subsidy that is available to our portfolio founders that they can spend on a range of services such as:

  • 1:1 executive coaching or counseling.

  • Gym membership or another health and wellness program of their choice.

  • Access to non-profit programs that will welcome some extra helping hands.

  • A curated away-day experience for the company.

If you are raising I would recommend asking your potential investors on their philosophy when it comes to founder wellness.

Finding customers

When I was on the other side of the coin and building models to predict customer acquisition, I was fascinated by identifying trends in the earliest sales phases:

  • Direct marketing campaign open and response rates.

  • Progression from an initial sales discovery call to having a demo or setting up an in-person meeting.

  • Tracking that the SDRs (sales development representative) are progressing from the initial gatekeeper through to the decision maker. This is where I see a lot of early stage companies get hung up. Try to move as quickly (and politely) as you can to the stakeholder who is able to approve your proposal or a purchase order for your product.

Customer acquisition cost (CAC).

This is probably one of the most important and anticipated numbers to be included in any reporting or pitch document. To calculate this you must take your entire cost of sales and marketing over a given period (including salaries and other people-related expenses and divide it by the number of new customers that you acquired in that same time frame.

I would recommend gauging and balancing how much granularity that your lead investor(s) would like to see with how much time it will take you to record this data.

Established CRM platforms can spit this out in seconds but they can be expensive for a startup. Also, there is always an opportunity cost for the time taken in creating detailed reports, which could be used for business or strategic development.

I would recommend considering a masterclass in AirTable as this has become an essential tool within my portfolio.

On-boarding customers

Customer activation is another critical data point that you should be tracking and hopefully reporting positively to those who matter to your business.

The majority of this is focused on two things:

  1. How quickly, efficiently and effectively you on-board a new customer.

  2. Once they are on-boarded, how much they use your product or platform — usage.

Let’s explore on-boarding in more detail. Note: As I am a largely enterprise software investor I am going to draw from experience in this area.

One particular area to examine is customer signup. While obvious, if you are a pure SaaS play, this might be the first interaction a customer has with your company. You could consider tracking customer prospects who are:

  • Dropping off after completing x number of questions - the earliest possible churn.

  • Completing their sign-up using social buttons, such as LinkedIn.

  • Filling out any non-mandatory on-boarding questions - signs of love.

If your customer sign-up process is more nuanced than a simple sign-up form I would recommend considering:

  • Tracking how much time it is taking to integrate your product into their processes.

  • How many of your employees are needed to complete the on-boarding.

  • Satisfaction scores from a customer survey after on-boarding.

Product usage

Whether you are launching an IOS app or a $500k per annum custom software subscription, tracking and reporting on how much your customers use and benefit from your product is essential. Whilst this is extremely nuanced to your own respective business, here are few ideas on metrics;

  1. Number of support tickets raised by customers - if they aren’t having any issues (such as finding bugs etc. ) or are trying to learn about a product feature they aren’t using your product as much as you might like.

  2. Obvious one but if your customer satisfaction scores (NPS) are declining then you have something to worry about.

  3. Sales volumes generated from cross/up-sells into your existing customer base.

  4. Follow your customers on social media. If your customer is showing off your product to the world then that is a positive sign. If they aren’t, maybe make it easier for them to do so?

  5. Number of customer meetings cancelled or rescheduled multiple times. This become especially pertinent as you reach the contract renewal stage


It costs 6-7 times more to acquire a customer than to keep a current one, thus making churn one of the most critical factors affecting an organization. Focusing on delighting the customer, trying to preempt their future needs, and building a pipeline to fill the gaps from attriting clients are all essential when managing churn.

Customer retention requires an integrated approach to gauging customer loyalty, lifetime value and the likelihood of defection. We believe that any alarm bells sounding from these categories can lead to a better understanding of how to retain a customer.

I could write an entire blog just on this section but for the purposes of brevity I am going to focus on LTV (lifetime value). LTV is the lifeblood of customer marketing and a major component of churn analysis. It is typically defined as the total net income a company can expect from a customer.

In the context of churn analysis, LTV plays a major part in the understanding of the probability of a customer churning as it gives a sense of how much is really being lost due to churn and how much resource should be concentrated on the specific customer segment.

LTV can be calculated by considering:

  • Retention: a customer’s length of service with your company

  • Frequency: how often they purchase a product or service from you

  • Value: how much your company makes from the sale

We would recommend that you build models that reflect these three factors across all of the segments within your customer base and report on them during your quarterly board meetings.

Recommend a friend

As Walt Disney once said, “Do what you do so well that they want to see it again and bring their friends”. The stats about the value of customers generated by referrals speak for themselves:

  • A referred prospect is 4x more likely to purchase the product

  • Referred customers LTV is 16% higher than those acquired by other means

  • Referred customers have a churn rate that is 18% lower than customers acquired through other means

  • Customers acquired through referral have the potential to generate an additional 16% in profits

Now that you can see why your investors are so keen on tracking referrals, here are the key things that you should consider reporting:

  • The % and profile of those customers that refer. These are your greatest assets and need to be coveted and rewarded for their behavior. I love to hear case studies on what companies are doing to delight this segment.

  • The number of customers referred. By contrasting this data with the timing of new product releases/upgrades or service outages you can provide valuable insights to your stakeholders on preemptive or reactive strategies

  • The value of those referrals. Take some time to analyse and segment the value of the referrals generated and build strategies to incentivise more of the premium referrals.


This is where the rubber meets the road. I don’t need to tell you how important this is to your business or your investors.

One of the key things that I have learned from the companies that I have invested in is to provide full transparency into your revenue streams and the type of proceeds they are creating. Transparency is best ensured through accurate reporting and discussing the good, bad and the ugly. By incorrectly calculating or concealing your actual revenue you are misinforming your investors or misjudging your growth and momentum.

It is important to break revenue down into categories such as:

  • MRR (monthly recurring revenue). Tracking MRR is vital when preparing your financial forecast/planning and for measuring growth and momentum. If you monetize using a monthly SaaS model then this is bedrock of your company’s health check.

  • ARR (annual recurring revenue). If you sell your product and service through an annual contract then this is a mandatory reporting field. ARR is the value of the contracted recurring revenue components of your term subscriptions normalized to a one year period.

Other forms of revenue tracking.

  • A number of my portfolio companies generate portions of consulting revenue in addition to subscriptions. Whilst there is nothing wrong with this type of revenue it is important to separate it from other sources as it is typically less scalable (and, subsequently, typically carries a lower revenue multiple) than that of repeatable revenue from subscriptions.

  • Receivables. I like to understand how my portfolio are handling outstanding invoices to customers. Some of the larger corporate customers can have extended payment terms (net 60/90/120 days), which can be crippling for an early stage business. Discussing this with your investors can be a great way to collect some ideas or strategies.

  • When a company relies upon third parties to complete the sale (such as a driver delivery network being used to deliver product) there may be chargebacks that take place at a later date that deflate your reported revenue.

  • Ticket size or ACV (average contract value). Typically, I invest in companies that sell their products for a relatively high price as that is where my the majority of experience lies. There are a number of considerations when calculating your company’s ACV including:

  1. If you have a one time setup fee that temporarily increases your ACV for the first year. I would recommend breaking this apart in your reporting.

  2. Incremental or expansion revenue from product cross-sells or up-sells.

  3. Ask your financial controller or accountant to layer in your CAC. Often high ACV’s have a higher acquisition cost and this should not be left out from your final ACV.

Remember, it is easy to get the calculation of your ARR and your ACV confused, however the guiding principle you should remember is that you your ACV is the average of all of your customer contracts not the sum total.


I hope you find this useful. Venture capital is a creative, bespoke form of finance and different investors have unique approaches and requirements when it comes to reporting. I would recommend discussing this with your cap table up-front and agreeing on a format that works for everyone.

Best of luck