Module 3 — Preparing the Raise · Lesson 3.2
The Metrics Investors Read
Defining the numbers so they survive the first question
What you'll learn
- Choose the handful of metrics that prove your company's specific claims
- Define revenue, recurring revenue, gross margin, acquisition cost, churn and burn precisely
- Avoid the presentation mistakes that make investors distrust the rest of the deck
- Anticipate the information rights a priced round will require
A number in a deck is a claim, and the first thing an investor does with a claim is ask what it means. 'Revenue' that turns out to be bookings, 'growth' that turns out to be a cumulative chart, 'customers' that turns out to include free users — each is recoverable once, and each costs more than the number was worth. The work in this lesson is unglamorous: pick the right metrics, define each one exactly, and present them so the first follow-up question has an easy answer.
Pick the metrics that prove your claims
No company needs every metric. It needs the few that prove the specific claims in its narrative. If the deck says customers love the product, show retention by cohort. If it says the market will pay, show revenue and gross margin. If it says growth is efficient, show acquisition cost against lifetime value, and burn.
Andreessen Horowitz's widely used 2015 list of sixteen startup metrics is a good checklist because it is organised around exactly these questions. On the business side: bookings versus revenue, recurring versus total revenue, gross profit, total versus annual contract value, lifetime value, gross merchandise value versus revenue, deferred revenue and billings, and customer acquisition cost. On the engagement side: active users, month-over-month growth, churn, burn rate and, where relevant, downloads. Read the list, cross out what does not test your story, and define what remains.
Definitions that cost credibility
The same a16z piece is most useful for its warnings, because the mistakes it names are the ones investors look for.
Bookings are not revenue. A common mistake, the authors write, is to use bookings and revenue interchangeably. Bookings are a contractual commitment to pay; revenue is recognised as the service is delivered. A three-year contract signed this month is a booking now and revenue over three years.
Recurring revenue is not total revenue. Annual or monthly recurring revenue should include only what recurs — not one-off services, set-up fees or pilots.
Gross merchandise value is not revenue. A marketplace's revenue is its take, not the value of everything that crosses it.
Blended acquisition cost flatters. Blended CAC, which spreads spending across customers who arrived organically as well as those who were paid for, does not tell an investor whether paid acquisition works or is profitable. Show paid acquisition cost separately.
Cumulative charts hide growth rates. A cumulative line always goes up and to the right; it says nothing about whether growth is accelerating. Show period growth rates, and churn measured by cohort, gross and net.
Burn has two meanings. Gross burn is total spending; net burn is spending minus revenue. Say which.
How investors use the numbers
Investors read metrics through the return arithmetic from Lessons 1.1 and 2.3. The 2016 survey by Gompers and co-authors found cash-on-cash multiples and internal rates of return were the most common valuation tools, and that many early-stage investors do not forecast cash flows at all. So the question behind a metric is rarely 'what is this company worth on a discounted basis?' It is 'does this evidence make the large outcome more believable?'
That changes what to emphasise. Early on, a few numbers that show customers behaving the way the story predicts — retention, expansion, a repeatable sale — matter more than a revenue total. Later, efficiency matters more: how much it costs to add a dollar of recurring revenue, and how long the company can run. In every case, the number should arrive with its definition and its trend, so the investor spends the meeting on what it means rather than what it is.
The reporting standard after a priced round
A priced round formalises what investors receive. The NVCA model Investors' Rights Agreement, last updated in October 2025, gives Major Investors — holders above a negotiated threshold — information rights. In its model form the company delivers annual financial statements within 180 days of year end; quarterly unaudited statements of income and cash flows and a balance sheet within 45 days of each quarter, along with a statement of outstanding shares and convertibles; optionally, monthly unaudited statements within 30 days of month end; and an annual budget and business plan. The model also contemplates delivering this information through a portfolio management platform at a Major Investor's reasonable request.
The practical lesson for a founder raising now is to build the metric definitions you present today so they can be reproduced every month afterwards. A metric that was calculated once for a deck and cannot be recalculated for a board meeting is a liability. Lesson 5.1 covers the reporting itself.
Make every number in the room say the same thing
- 1
In /knowledge, create one page that defines each metric you will show — formula, source system, period, and whether it is gross or net. Every deck, update and model refers to this page.
- 2
Let the data-room reader check your consistency
When the round's Drive folder is linked, Analyze data room on the deal (or the agent's analyze_deal_data_room) extracts an investment profile and sourced insights. It keeps an insight only if its quote is found verbatim and every number in it appears in that quote — so a figure stated two different ways across your documents is a figure that gets dropped. Treat dropped insights as an inconsistency report.
- 3
Rehearse the follow-up questions
In /ai-agent, paste your metrics page and ask for the ten questions a sceptical investor would ask about the definitions. Answer each in the dictionary before the first meeting.
Metric hygiene
- Metrics with written definitions
- Share of numbers shown to investors that have a definition in the metric dictionary.
- Healthy signal: 100%. An undefined metric is an invitation to the wrong interpretation.
- Consistency across documents
- Number of figures that appear with different values or forms across the deck, model and memo.
- Healthy signal: Zero. The data-room analyzer's dropped-insight count is a quick way to find them.
- Reproducibility
- Whether each metric in the deck can be recalculated from source for next month's report.
- Healthy signal: Yes for every metric. If it cannot be reproduced, it should not be in the deck.
Key takeaways
- ·Show the few metrics that test your narrative's claims, each with its definition and trend.
- ·Bookings are not revenue, GMV is not revenue, blended CAC flatters, cumulative charts hide growth.
- ·Investors use metrics to judge whether the large outcome is believable, not to discount cash flows.
- ·A priced round brings monthly, quarterly and annual reporting; define metrics you can reproduce.
The deck and the metrics get you the meeting; diligence decides whether the term sheet survives it. The next lesson builds the data room diligence will read.
Sources
- 1.16 Startup Metrics
Jeff Jordan, Anu Hariharan, Frank Chen, Preethi Kasireddy (Andreessen Horowitz) · a16z.com (August 21, 2015) · 2015
The business and engagement metrics checklist; bookings are not revenue; blended CAC does not show whether paid acquisition is profitable; cumulative charts versus growth rates; net versus gross burn.
- 2.How Do Venture Capitalists Make Decisions?
Paul Gompers, William Gornall, Steven N. Kaplan, Ilya A. Strebulaev · NBER Working Paper 22587 · 2016
Cash-on-cash multiples and IRR as the dominant evaluation tools; many early-stage investors do not forecast cash flows.
- 3.NVCA Model Investors' Rights Agreement
National Venture Capital Association · NVCA Model Legal Documents (updated October 2025) · 2025
Model information rights for Major Investors: annual statements within 180 days, quarterly within 45 days, optional monthly within 30 days, the annual budget, and delivery through a portfolio management platform on request.