You're considering investing in early-stage startups. What key performance indicators should you focus on?

Growth isn't everything. While scaling rapidly, 3x year-on-year can attract investors, the quality of growth matters even more now. Gone are the days of growing at any cost. Today's startups must focus on efficient growth, best measured by burn multiples. You're on the right track if you're generating more future Annual Recurring Revenue than your growth costs. Optimizing this metric is crucial for sustainable success. Remember, it's not just about growing fast. It's about growing smart.

When investing in early-stage startups, focus on these key performance indicators: 1)Traction: Look at user growth, sales, or other signs of market interest. 2)Revenue: Check current and projected revenue to gauge financial health. 3)Customer Acquisition Cost (CAC): Know how much they spend to get a new customer. 4)Lifetime Value (LTV): Assess the total revenue from a customer over their relationship with the company. 5)Burn Rate: See how quickly they’re spending money and if they have enough runway. These indicators help you understand the startup’s potential and risk.

The 5 key metrics that any early stage investor must look at are: 1. Team - Does atleast one founder have strong domain expertise in the industry, working knowledge of finance, above average people skills. 2. Relook at Team - Yes, Team again - but the softer aspects this time: Their working equations, can they keep going when things are going down etc. 3. Product / Service - Is it a Must-have or Can-have kind of product, has a real market survey been done. 4. Market & Competition - Is there a real and growing market for the product and are there large players already, are they competing on price or features 5. Stage & financing plan - What the traction and revenue run rate, what the burn and runway available.

Não acredito que esse seja o ponto mais importante quando se trata de um investimento em empresas iniciais, muito mais importante é quem são as pessoas envolvidas, qual é o projeto e o quanto de engajamento em buscar soluções estão os envolvidos

Investor will understandably focus on the "same" indicators when considering investing in an early stage startup. Now look, you can have an overly exciting tech, business model, early recurrent revenues and a founder(s)/team made of lunatics, unethical or without a drop of leadership but instead, a bossy attitude and you can understand that building a culture will be hard, attracting talents with a low turnover will be very hard...and therefore, scaling up will be challenging on top of all other common issues. You invest in people, once some key indicators are here, the discussion should be around the founder(s) where you can gauge their ability to listen, their ego and their ability to execute.

Forget about burn rate. Focus on burn multiple. It shows how efficiently you're turning capital into a new ARR. Calculate it like this: Burn multiple = Net Burn / Net New ARR A lower ratio means you're acquiring customers more cost-effectively. Here's the breakdown: Amazing: < 1x Great: 1 < ... < 1.5x Good: 1.5 < ... < 2x Bad: 2 < ... < 3x Very Bad: > 3x A high burn multiple means you burn too much capital for each growth unit. If you're chasing growth at all costs, be cautious. An unsustainable rate can scare off investors. Optimize your burn multiple to showcase capital efficiency and secure future funding.

Toda empresa inicial irá queimar caixa antes de começar a se desenvolver se você que ser um investidores e não tem ciência disso, primeiro aprenda sobre as formas depois busque começar

There's a massive difference between startups with founders that took the bootstrapping path and those relying on fundraising. A strict analysis of the current situation and past spending gives you an idea about the financial literacy and remaining lifetime of the firm. Too many startups talk about financial runway as being a deadline before being out of business...although the logic is right, it's also completely wrong to me. I believe one should see the financial runway as a period where the firm has to demonstrate its ability to capture a strong momentum..see it as a plane on the runway and off to take off. That's what an investor wants to see, within 6-8 months, based on current figures, the startup should be able to "take off".

A startup's burn rate is a critical measure of its financial health. Understanding how quickly they’re spending cash—and how it aligns with their runway—helps assess whether they’re managing resources wisely or risking premature burnout.

The most important thing to me when looking at a angel investment is the traction the team can build. I want to know if customers care about the product or service and how customers are finding them. If a company can attract and retain users then usually, capital can accelerate that growth. The cost of acquiring a customer is of course also important but that cost can often come down over time as the company scales and improves on marketing. The rate at which new users are being signed up is therefore important to me.

Para empresas iniciais esses custo interferem em grande modo o quanto de tempo elas podem pivotar até terem um produto construído de forma a atender as dores do mercado de objetivo

Customer acquisition and retention is the blood of any firm and too often inefficient or neglected. Once again, you need to go in details about the startup CAC, process, how it deals to keep customers and gather data...turns out you cannot rely exclusively on AI or bots...The biggest mistake I often see is firms hiring so called young "talented" customer success manager "I know everything type" that set their own playbook (agreed with the founders though) and ruin the company..I recently been following 4 startups I had serious doubts about the knowledge about customer service..and I was right..Once the founder(s) are obsessed with the customer and use all available tools to gather data and satisfy their users/customer...you'll have traction

The cost and speed of acquiring customers can make or break a startup. Low customer acquisition cost (CAC) and high customer lifetime value (CLTV) signal that the startup has found efficient channels and is likely to achieve sustainable growth.

With CAC always high and increasing each year, an LTV/CAC ratio well above 2 still indicates long-term viability of the unit economics.

Achieving product market fit is about more than meeting current demands—it's about anticipating future needs. Startups must be willing to pivot, iterate, and embrace bold experimentation. By adopting a mindset that nothing is impossible, they can transcend conventional limitations, creating solutions that resonate deeply with the market. Continuous refinement based on customer feedback ensures the product evolves with market trends, transforming it from a good product to a market-defining innovation.

PMF is a correct concept but tricky for many investors. If you're given a deck about a sector that is overly innovative, most investors will claim there is no PMF and they're right for the present time, completely wrong for the coming years. To me PMF is a short term indicator whilst I like investing on tomorrow's techs which means having a clear idea of where the tech is heading. Second issue is that the PMF is often wrong when realising the market is already in the hands of 3-4 giants leaving a smaller percentage to evolve .

Arguably the most crucial KPI, product-market fit indicates that the startup has found a viable market for its solution. Look for evidence that customers are not just using the product but are enthusiastic advocates—a strong sign of future growth potential.

At early stage we still don’t have the liberty of having customer data and traction. In that scenario, the below factors play a major role 1. Founders and Founding team - relevance of founders, what’s their right to win, ability to attract talent 2. Customer insight - even when there is no product or commercial ready product, how a founder is able to keep their ears to the ground and gain key customer insights demonstrates several factors

4Ps 1. Problem-Founder Fit= This is most important. Why these founders. Why they have a unique advantage of building something different and impactful. 2. Problem Scope - large= Globally scalable. Large problems with ability of the solution to be relevant for decades to come 3. Perseverance and Passion of team= How far can this team go when the going gets though. How creative can they get. 4. Paying capacity for the solution= How much value capture can you take of the impact you deliver. Will that be enough for building a profitable business in the long run. Unit economics

Para mim esse é o ponto mais importante de uma empresa que está surgindo são as pessoas o grande diferencial elas que permite ou não um rápido adaptação as adversidades e de altos desempenhos

Founder(s) and team strength, ego, vision, resilience and ability to listen, be coached...communication..are to me, the most important points either as an investor or myself working in a startup. These points determine the viability of a company in many ways

The startup’s team is often the most significant predictor of success. Evaluate their experience, adaptability, and ability to execute on their vision. A strong, cohesive team can pivot when needed and drive the startup toward its goals.

The investment potential of a startup largely depends on customer willingness to pay for the product/service aka traction. At early stages (upto Seed), the entrepreneurs are either working on their ideas or have a MVP/Prototype/PoC, but rarely a full offering, with paying customers. To assess them, we need to look at several intangibles like: - Whether the startup's idea addresses a sufficiently large customer needs gap - Whether the solution (Idea or MVP/PoC/Proto) will make the customers pay - Whether the talent (especially top team) have skills to pull it off - Whether the external factors are favorable (timing, competition) Much of above is subjective and so investors limit their risk exposures by limiting their investment size.

Longo prazo é o principal horizonte para se buscar investir em empresas nascentes em sua maioria acabam por não se provar no tempo mais é só a parte de uma visão de adaptação e validação que se poder surgir grandes empresas e os momentos de saída subsequente

Even in early stages, it’s important to consider the startup’s exit strategy. Whether it’s an acquisition, IPO, or other exit, understanding their endgame helps align your investment with your own financial goals.