Startup Metrics

"What are your metrics?"

Priya was sitting across from an angel investor in a Starbucks in Dehradun. She'd rehearsed her pitch. She knew the problem, the solution, the market size. She had a working app with 500 farmers and real transactions.

The investor nodded through the first fifteen minutes. Then he asked: "What are your metrics?"

"We have 1,200 downloads," Priya said confidently.

"Downloads. Okay. What's your DAU?"

Priya blinked. "DAU?"

"Daily Active Users. How many of those 1,200 open the app every day?"

"I... I'd have to check."

"What's your D7 retention? D30?"

Silence.

"Cohort analysis? LTV? CAC?"

More silence.

The investor wasn't being rude. He was asking the basic questions that every startup investor asks. Priya had built something real, but she hadn't learned the language of measuring it.

She left that meeting without funding, but with a notebook full of terms to look up. Within two weeks, she had a metrics dashboard. Within a month, she understood her business better than she ever had.

This chapter is about the numbers that matter. Not accounting numbers (we covered those in Part 1). Startup-specific numbers that tell you whether your product is working, your business is growing, and your money will last.

Why metrics matter

You can't improve what you don't measure.

"Users seem happy" is not a metric. "67% of users who signed up in January are still active in March" is a metric.

"Growth feels good" is not a metric. "We're growing 15% month-over-month in transaction volume" is a metric.

Metrics do three things:

1. Tell you the truth. Your gut says things are going well. The numbers might disagree. Or your gut says things are terrible, but the numbers show steady improvement. Trust the numbers.

2. Help you make decisions. Should you spend money on marketing or product improvement? If retention is low, more marketing just means more people leaving. Fix the product first.

3. Communicate with investors. Investors evaluate startups through metrics. If you can't speak this language, you can't raise money — even if your product is great.

The metrics every startup should track

Let's break them into categories.

Users

DAU (Daily Active Users) — How many unique users open your app or use your service on a given day.

MAU (Monthly Active Users) — How many unique users in a 30-day period.

DAU/MAU ratio — What percentage of your monthly users use the product daily. This measures how "sticky" your product is.

• DAU/MAU of 50%+ = excellent (users come back almost every day)
• DAU/MAU of 20-50% = good for most apps
• DAU/MAU below 10% = users signed up but aren't coming back

Priya's app: 500 farmers registered, 180 open it daily. DAU/MAU = 36%. Not bad for an agri-tech app where farmers check prices primarily during harvest season.

Growth rate — How fast your user base is growing, measured month-over-month (MoM).

Growth rate = (This month's users - Last month's users) / Last month's users × 100

Priya: 420 users in March, 500 in April. Growth rate = (500-420)/420 × 100 = 19% MoM. That's strong.

Engagement

Session time — How long users spend in the app per visit. For Priya's app, farmers spend an average of 4 minutes per session — enough to list produce and check prices.

Retention — The percentage of users who come back after their first use. This is measured at intervals:

• D1 retention (Day 1): What % of users come back the next day?
• D7 retention (Day 7): What % come back after a week?
• D30 retention (Day 30): What % come back after a month?

Good retention benchmarks (vary by category):

Priya's retention: D1 = 55%, D7 = 38%, D30 = 28%. Farmers who find value keep coming back. This is a strong signal.

Revenue

MRR (Monthly Recurring Revenue) — The predictable revenue you earn every month. For subscription businesses, this is straightforward. For transaction-based businesses like Priya's, it's the commission earned from transactions each month.

ARR (Annual Recurring Revenue) — MRR × 12. Investors love this number because it shows the annualized run rate.

Priya's app charges a 3% commission on each transaction. If monthly transaction volume is ₹15 lakh, her MRR = ₹45,000. ARR = ₹5.4 lakh. Early, but growing.

ARPU (Average Revenue Per User) — Total revenue divided by number of active users.

Priya: ₹45,000 revenue / 500 active users = ₹90 ARPU per month.

Unit economics

This is where it gets crucial. Unit economics tell you whether each customer is worth the money you spend to get them.

CAC (Customer Acquisition Cost) — How much you spend to acquire one new user.

CAC = Total marketing & sales spend / Number of new customers acquired

Priya spent ₹30,000 on marketing last month (field visits, WhatsApp promotions, demo sessions at mandis). She acquired 80 new farmers.

CAC = ₹30,000 / 80 = ₹375 per farmer.

LTV (Lifetime Value) — How much revenue a single customer generates over their entire time using your product.

Simple calculation:

LTV = ARPU × Average customer lifetime (in months)

Priya's ARPU is ₹90/month. If the average farmer stays for 18 months:

LTV = ₹90 × 18 = ₹1,620 per farmer.

LTV/CAC ratio — The most important unit economics metric.

LTV/CAC = ₹1,620 / ₹375 = 4.3x

What this means:

• LTV/CAC below 1x: You're losing money on every customer. Danger.
• LTV/CAC of 1-3x: Break-even to marginally profitable. Okay for now, needs improvement.
• LTV/CAC of 3x+: Healthy. For every ₹1 you spend acquiring a customer, you earn ₹3+ back.
• LTV/CAC of 5x+: Very strong. You could afford to spend more on marketing.

Priya's 4.3x is healthy. She earns ₹4.30 for every ₹1 spent on acquiring a farmer.

Churn rate — The percentage of customers who stop using your product in a given period.

Monthly churn = Customers lost this month / Customers at start of month × 100

If Priya started the month with 500 farmers and 25 stopped using the app:

Monthly churn = 25/500 × 100 = 5%

A 5% monthly churn means roughly 46% annual churn — nearly half her farmers leave each year. That's high. She needs to understand why farmers are leaving and fix it.

Vanity metrics vs actionable metrics

This distinction can save you from fooling yourself.

Vanity metrics look impressive but don't tell you anything useful:

• Total downloads (includes people who downloaded, opened once, and never came back)
• Total registered users (same problem — many never became active)
• Page views (high traffic doesn't mean engagement)
• Social media followers (followers don't equal customers)

Actionable metrics tell you what's actually happening and what to do about it:

• DAU/MAU (are people actually using it?)
• Retention rates (are they coming back?)
• Revenue per user (are they paying?)
• Churn rate (are you losing them?)
• LTV/CAC (is each customer profitable?)

Priya had 1,200 downloads. That's a vanity metric. What mattered was that 500 of those 1,200 were active, 180 used it daily, and the average farmer earned 40% more through the platform. Those are the numbers that matter.

Cohort analysis simplified

A cohort is a group of users who share a common characteristic — usually the time they signed up.

Why does this matter? Because averages lie.

If Priya looks at her overall D30 retention of 28%, that looks okay. But what if she breaks it down by cohort?

January cohort (100 farmers):  D30 retention = 18%
February cohort (120 farmers): D30 retention = 25%
March cohort (130 farmers):    D30 retention = 32%
April cohort (150 farmers):    D30 retention = 38%

Now she can see something amazing: retention is improving with each cohort. The product changes she made in February and March are working. New farmers are sticking around longer.

Without cohort analysis, she would have just seen "28%" and thought things were flat. With cohort analysis, she can see the trend.

How to do cohort analysis:

1. Group users by the month (or week) they signed up
2. Track what percentage of each group is still active at D7, D30, D60, D90
3. Compare cohorts to see if newer users are retaining better or worse than older ones
4. Investigate: what changed between cohorts? (product update? different marketing channel? seasonal effect?)

You can do this in a spreadsheet. You don't need expensive tools.

The North Star metric

Every startup should have ONE number that matters more than all others. This is your North Star metric — the single number that best captures the value you deliver to customers.

How to find it: Ask, "What one action represents a customer getting real value from our product?"

For Priya: Number of completed transactions per week. Not downloads, not registrations, not even DAU. A completed transaction means a farmer successfully sold produce through the platform. That's the core value.

For Ankita: Monthly repeat purchase rate. If customers buy again, the product is good enough to come back for.

For different types of startups:

Your North Star metric should:

• Reflect real customer value (not vanity)
• Be measurable weekly or monthly
• Lead to revenue growth when it improves
• Be something your team can directly influence

Burn rate and runway

These two numbers tell you the most important thing for a startup's survival: how long can you stay alive?

Burn rate — How much money you spend per month beyond what you earn.

Monthly burn rate = Monthly expenses - Monthly revenue

Priya's monthly expenses: ₹1.2 lakh (developer salary ₹50,000, server costs ₹10,000, her own minimal salary ₹30,000, travel to villages ₹15,000, misc ₹15,000).

Priya's monthly revenue: ₹45,000 (3% commission on ₹15 lakh transactions).

Monthly burn rate = ₹1,20,000 - ₹45,000 = ₹75,000.

She's burning ₹75,000 per month — money going out faster than coming in.

Runway — How many months of cash you have left at the current burn rate.

Runway = Cash in bank / Monthly burn rate

Priya has ₹6 lakh in savings remaining.

Runway = ₹6,00,000 / ₹75,000 = 8 months.

She has 8 months to either become revenue-positive or raise funding. After that, the money runs out.

The 6-month rule: Always start raising money when you have at least 6 months of runway left. Fundraising takes 3-6 months. If you wait until you have 2 months left, you'll negotiate from desperation — and investors can smell desperation.

Monthly reporting: what investors want to see

If you have investors (or want to attract them), send a monthly update. This builds trust and keeps them engaged. Here's what a good monthly report includes:

1. Key metrics dashboard

                    This month    Last month    Change
Active users:       550           500           +10%
DAU:                195           180           +8%
Transactions:       340           290           +17%
Transaction volume: ₹18.5L        ₹15L          +23%
Revenue:            ₹55,500       ₹45,000       +23%
Burn rate:          ₹64,500       ₹75,000       -14%
Runway:             9.3 months    8 months      Improving

2. Highlights — Top 2-3 wins this month.

3. Challenges — Top 2-3 problems you're facing. Investors respect honesty.

4. Asks — Do you need introductions? Advice? Hiring help? Be specific.

5. Cash position — How much money is in the bank right now.

Keep it to one page. Investors get hundreds of emails. Make yours scannable.

Tools for tracking metrics

You don't need expensive tools to start. Here's a progression:

Stage 1: Spreadsheets (₹0) Google Sheets with manual data entry. Track DAU, MAU, transactions, revenue weekly. This is how Priya started.

Stage 2: Basic analytics (free tier)

• Google Analytics — for web-based products. Tracks visitors, sessions, and basic behavior.
• Firebase Analytics — for mobile apps. Tracks events, user properties, and retention. Priya added this to her app.
• Mixpanel (free up to 1,000 MAU) — tracks user events and builds cohort analysis.

Stage 3: Purpose-built tools (paid)

• Amplitude — deep product analytics and cohort analysis.
• CleverTap — analytics plus engagement tools (push notifications, campaigns).
• Metabase — connect to your database and build custom dashboards.

Start with Stage 1. Move to Stage 2 when you have 100+ users. Most early-stage startups don't need Stage 3.

Priya's setup: Google Sheets for financial metrics (revenue, burn, runway). Firebase for app metrics (DAU, retention, session time). A Sunday evening ritual: 30 minutes updating the dashboard and reviewing the week's numbers. Simple, but it transformed how she ran the business.

Key takeaways

1. "What are your metrics?" is the first question any investor will ask. Know the answer.
2. Track users (DAU/MAU), engagement (retention), revenue (MRR/ARR), and unit economics (CAC, LTV).
3. The LTV/CAC ratio is king — it tells you if each customer is worth acquiring. Target 3x+.
4. Downloads and registrations are vanity metrics. Active usage and retention are what matter.
5. Use cohort analysis to see if your product is improving over time. Averages hide trends.
6. Pick one North Star metric that captures the real value you deliver.
7. Know your burn rate and runway. Start fundraising with 6+ months of runway left.
8. Send monthly reports to investors — one page, key metrics, honest about challenges.
9. Start with spreadsheets. Free tools are enough until you have real traction.

Priya now understands her metrics. Her LTV/CAC is healthy, her retention is improving, and she has 8 months of runway. But an investor wants to invest ₹50 lakh for 20% of her company. How does she know if that's a good deal? What is her company actually worth? And what happens to her ownership as more investors come in? Next chapter: Valuation and Equity.