MRR, ACV, NRR - SaaS metrics investors really care about

113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWk3q3nJV1-WJV7CgSJLW3xq1Zr4s3qFcN2sWjGsN85wrV39tnF1HZSrnW8pgXbk1bZt3SW2Q_ysy556tcXW89bTYV1ClldSV6DBcy6Mk233W4t-sj73PWvPwVKD6lJ4DD47HVZJk7-87vn59MPPWR8yLCvbW1GtBdb2wdhrPW3gbyX_168W8lW38zNML540TbmW6g-DW-7zCvjpW2qhtTP1kLhN9W102vbn7D0TbTW1mJlXc3bVF4DW3gFl667lg2npW4qWtwN5jqjV-W52J20n5rL93JN6Lnk6rqjh2pW50lWPN1Ss44pN2dj134tQxmM3hlQ1 [pw-paddle-logo-white@4x] PRESENTS The SaaS metricsinvestors really care about Every SaaS leader knows the anxiety involved in pitching to investors. It’s an inevitable part of the journey from startup to exit. Paddle CEO Christian Owens knows this all too well, having sat through countless presentations to secure a $1.4 billion valuation Series D funding round earlier this year. Tracking measures of your business’s long-term commercial viability is crucial when working with investors. This week, we share the SaaS metrics that we’ve found are most insightful. [See full post](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWX3q3phV1-WJV7CgzNQW7H1Jhw7ts3GHW2kVpGj3FzL8cW3HTNs_3mXMdCW2F71pS2dx2qVW5rnn2D1GlQvSW2cNVbx3xsLHKW2ZnNzk3xKs8TN5Zl-6b1c6RCVtL9cn4GstSlW3HsNjp72KVg7W7s-63C9hpVzSW5Yj6736cwGJHN1Zf0qFsqThBW8lKBYj5VkQ4MW5PbThK6WYrl5W9bC7jb68-8ypW2vX96N3zQGzsW1jp7mx3V0rf3W3hSh0s4PRG7jW5Nzj4B5m95-4VxRxhg91F0NVN7p-rGT_L_WjW39zT7J4MX6w5W1r-z4V6KsnMJN2mvZb-wqCmdW93r45p4R2LYzN77tTzFW5vt_W1L9p7_8pYqnb37xh1) Reports and forecasting are an important part of the [due diligence](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWD5nCW9V3Zsc37CgM9GW7CBhmF3vpvQZW8Xs1bB8mByh_W3K5-7b6XGxhbW1R_vWl6bpcGLW4pYm1m1c2-XRW8rm9XD62kkxfV8Lntq2gw0HxW5NrJzK3zH44pW8LLgz716crB4W2WKQ_j6nlVlKW3px_Lb1BKHM7W1xMBlf6cY4DQW8bLQZp4M01KVW7dMqrg6V4bGyW55KN4B7mswW2W94jlbG53GC-cVh6YGJ3KLxG2W2QxwwX5t8wX6W6_c1Ty1wMtyxW9d8lgF7-3WDkV9V96j1bcq4nW7bbHxF6JhdHqW4wQ43L4lWnpcW3BnMtg7725sSW6yw5H87dx-P1W2F--jN3z3_kzW1SlMW58cFhcTW7Cp7kM6Lg-6bW2qjMjM5KjTPxW5YZst88Jdv0fW1pnnTC3vd2DSN5nWdw5JL-F_W72hYM834fQzJMwWHcbVcM4wN8bh544nwxB1W1kbZKB95DL8hW8G1dpG1FCc0-W7ScL8w6Z1Q4JN8p7Cj8rPJ6_W42zl3V3rx6xpW96yxz45MzsrDW82HvXD6BBFFZ3gRQ1) process. These include providing the investors with a financial model, and providing the context to show that you understand it. The importance of storytelling As a business seeking venture capital funding, your ability to clearly communicate your financials and key metrics is one of the key factors in convincing investors to fund you. But just showing them page after page of numbers won't always cut it. Instead, you need to grab and hold their attention from the beginning of your pitch. One way to do this is by weaving your metrics into a compelling story. We [spoke to VC investors and a leading SaaS advisor](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWD7m8pmV5X_Kf7CgNTRVhGdjP2pClkBW8jrt2y5H5bMdW8qchB575rRRKW1JlnBF6JjQW0W8wvqV670f8hhW5txNQJ5-kdYmW1J0k_q8s1-CNW78zTrp29LcLmW1TLCKX5X3-d7W1VgrGl44HkdlW8vQHBc2g9zx7W4k02x_63HvR9W81y9997jlNbzW4GQqBc2JtyftVhWXK47Sy9XKW3DSpX46S1R5nW6hsdtd3rKb6vW3M4dGx7_8pgsW87Kfzp8KYwLvW3hL7hR5W4T2pW8SNk9P84bv-qW4SJ5Gv7GwpZGVBKcZ68RtD6SW3T44Qd3JxjzGW3SHX-j8QNpTHW12XGR28nBsVSW2q60QQ5ttcR-W1JZsnL8ywkPzW8n_JLQ4R-5D8N2vrGc2xKDFMN6BK78Gb5bMwW4p8QB08_vZTHW8g0vJC3cBhNYW4SMV2r378FdpN6Mjy-l2gk8QW22RSfM5scmYyW5Ty4Nk2JJNzHW8KnxTm3JRRmWW719DZV1Q46v4W1GzHBS9d_kRSW5SfVqN1873NvW1DtSKT79JC2JW5gV3ZQ3r4hGXW5CGjdL4WWKJNW6BwJzR1k8g41W4j3L2C4W_cGBW5sSRg_2cMsdwW2b1rbL44XH9LW263zdj2tj3l7W29r3GG76jBQbMgjzHHXNcGdW2nKShp7-tdzZN6XVXy9j8q1GW65zlGw7y3N0MW70c4K15fqZ2QW20hr8b3pVqrPW9kdbzR3MVww0W8Xx7Jq7-bBY433151), who suggested placing a revenue trajectory slide near the beginning of your presentation, perhaps after the team members. This slide should contain a clear diagram showing momentum, growth rate, and the size of the business over time. Here’s an example: [wc12-mrr-ebit] The end result is to translate the growth of your business into a compelling story, rather than to simply list all those numbers. Key subscription metrics and how to calculate them - [Monthly Recurring Revenue (MRR)](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWX5nCWtV3Zsc37CgVN8W7zW5FL8T_7DVVSG6Qb4tjH19N4pQ3Hy1bhnbW7JChNf3_54hjV_fGR228ZkljW1hXVnM6lGn8rW7ZH3Pq1cxM3SW7wn7KH7JwbytVMxT4l8JJRmLW1323116qFrD9N7lVnwGmkVC9W1cCN3P6lT0mMW7j3pBf7kfcSYMrY64yxH8WhW5dL03P7bzcf2W3RmBZl9gGffpW5ylXDw35j79ZW23y4dz3v2FnXW75rgKx21rcnfW3fGn936t-G44VWX1v97dcMBRW2bp2fs8GY_qdW5jDP9d8FnmzjW4gzmZv1q34pdW57z-2n19m86DW4rhzSJ7h5K2CW53f9lh7vV3CHW31Fsv67fvpmQW51x-Yv4kfmPGW8CYy187dj9Q-W5k52JX2HcJKrVdk_HZ4rfV4rW85kdXk7yh_mRM25t-TQgc_rW66wwYl15N9gkW4Yd7FC21_jjcW5LYzxM3cY3NzW40hx8y51p5mzW6Hgn5s57L7xmW4kCq3t3pshf7W8tS2R78pcDplW2R1S8j4-90KCW2JgFn33lqBdcW4mn3p138xMpT3pC71): MRR refers to the amount of revenue your company expects to generate every month, based on the value of your existing user subscriptions. MRR is important because it pays your bills every month – essential for maintaining smooth day-to-day operations. Investors want to be sure your company can survive – and MRR plays a key role in deciding that. You can calculate MRR by adding up the monthly fee of every user. - Annual Contract Value (ACV): If your company has long (e.g. a year or more) contracts, then it's worth reporting your bookings (ACV) data alongside your MRR. This creates another easy-to-understand snapshot of your business’s traction – perfect for your potential investors. Here’s the standard formula to calculate ACV: ACV = Total contract value ÷ Number of years - [Net Revenue Retention (NRR):](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWX3q3phV1-WJV7CgRq9W7lKR-p6Qm2QmW3jfZqt62-tgHW5HmVd57JrPrTW5_Pvtq1BB761W3vzfv3169Q9BVMgZvz19TrQ6W1Z2d4b8zH99DVylNnj86btGTW74pp6y7CWl4xW5-B0GP4ZG9DwW1fQdsg5b3bmqW6cmLjy8zj2TGN1s9JYRY1hvMW1hm-DJ7PVbsHVSqbQ86wQf2yVX_Qw88k1n22VQyp4h8z4B31W1JMZB32Vm-RrW7BT5hD3Xs7MFW1w7wMN6BpT-_W7bstzS4Lm2CdW1Y4CNB7hZynkW2jWtvx8nyznfW6956LZ82SdHmN3bjwkX65zK4W3zYMfM73Z5jHW7p_DS02V6HNpW6S77ZC4Lt9lH3c201) The industry standard approach is known as the static pool method. Here, you examine your customer base from a year ago, comparing their MRR from then with their MRR now. That leads to your net revenue retention rate – a critical number for investors. - Gross Revenue Retention: Other potential funders, such as private equity investors, may also want to know your gross revenue retention rate. The gross figure gives a clearer picture of your customers’ actual churn, which the net figure may not reveal, especially if your business has experienced significant organic growth. Gross revenue retention rate allows potential investors to strip away other forms of growth and focus on the underlying retention. CAC Payback Ratio: Customer acquisition cost (CAC) payback ratio is one of the most useful sales efficiency metrics to include in your pitch. Investors like it because it's intuitive. They know that if they invest a certain sum in sales and marketing, it will take X number of months before that money gets paid back for each new user that signs up. What to include in your P&L sheet The profit and loss (P&L) sheet is another central part of your pitch deck. There’s a standard P&L format that investors are used to seeing. It's best to stick with the standard, so investors don't have to put in any extra mental effort to understand your numbers. Using the standard format also helps investors to easily benchmark you against other SaaS businesses. [Check out an example from SaaS Capital below.](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSV75nCTJV3Zsc37CgQ8jW7nsG3727mcGpW5NcvWr83gjrZW1G9gTv6YrVrcW9jfpXS8nzvRlW4HNSkW8khg9jW7S1sNp7lB6pSW39yMzB8MjThyW5nkjXH2JDgFtW3mj_gD6Hs4cpW17qWW663zyWQW5nkwr587VjJNN2f_Cb4kPXCDW3QYvCt36dvrSW3TcbYC3-NmhrVhb3jF8TC1q6W5Fx94B5_b-HyW1V5ccw4hjk5PW6w_5pJ2pccvWW8_kBpJ4zrMJxW88cDgz2h7SVRW1dhBBQ6VymQ9W1dmyyB344RpqW2cZrX16BKtJGN9ky2H6pggG-W3sdYSG3WTHK5W2sXNsl3-g28qW5XK6Fj75Ld9RV_1C0Q4NjJJWW6HdZJ12svmpYW2bxQBT4D01S_N82LGrd2QVGHW8W-xkm7HvSFX3fmM1) [wc12-income-table] Notion Capital recommends adding extra granularity to the Revenue section, incorporating separate lines for recurring revenue, usage-based revenue, and implementation fees, then summing these up into total revenue. Breaking it down like this allows you to more clearly align your cost of goods sold (COGS) with different revenue line items. It also allows investors to dissect your business a little more and understand the financial drivers. The potential dealbreaker: revenue recognition Revenue – both amount and momentum – is critical because it drives the investment process and valuation. That's why investors will devote most of their due diligence process to unpicking it. Because revenue is so important, there are several factors that can trip you up. For starters, your revenue numbers must be 100% accurate. Here’s a real-life example to illustrate why investors are so watchful about revenue. Around 10 years ago, [HP acquired the UK-based software company Autonomy](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWX3q3phV1-WJV7CgGZYW8wxz5Y8NDhZyW3SrdKL3cxX5rW5Kg_My1MG17SW1T_PVK8pf8mxVnx1rk4p-7PpN1CqvDr2ckJrW5rTrLf5JFWwlW3zdSkg4pthBjVmVM_n7Ccw__N5KNJ8GCkXvnW6DZskn8STbJPW3C_jkl97LTXZW8R-P746KFchdW80wqvG4YQGhJW9j_R_c6QwzjPW462kb52hr0l4W4dTWcq91dl8cW3TKHRG8qrgkDW4LzLzR3bjW2kW4GJXTt70Yc9QW7759kn97YQw1W6_Czx73mvyB-W9gC4my1KRN8kW4B0BjS15GwqMW5dsXnp6WLgPsW2xX-CB2d29MwW46t5Tl789D7mW3Bx0gK6v1V7B2-81)for $11 billion. Just a year later, they had to write off $8.8 billion of revenue because HP didn't recognize Autonomy’s [revenue recognition](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWX3q3phV1-WJV7CgJRPN2s2Zt34MLvvW6w8Fz28Y495bW7l9Sq01X8zljN56BLWGHHvz5T2NzR8J4PXmW5ZzvN691B17_W1F7J2c246SB-N8phRz7Hd9NVW6hjRSs1wkLVrVkCDN58ppt4NW5F6x9Z8SXDDzN4pf9rc34LXBW2W-PsF1x9C6GW7tm_HZ88wLqbW7M2c2L7YWb1BVvBjxr4GVdHDW4_0FF994L-0nW1CZYC_4DkC_9W6xzTMm8tdrGzW2MTPM_25JzN7W1phV4c4CKGhzW4QBjJ64HMJqZVwQcth91mwlDN76HvtwQq8RhM5Z-xMTjV0ZVk4LGh7ZNkmTW80mR0d7czdGVW67Q5vG8czc9L3hqK1) practices. They’re still in court to this day. Revenue recognition and real-time visibility Accuracy and real-time visibility is crucial when presenting your business in the best position to investors. Gaining real-time visibility of your revenue position should not mean hours of relentless data transfers and manipulation across multiple payments and billing platforms. Paddle gives you instant access to a ready-built, all-in-one payments infrastructure. This allows you to manage payments, and subscriptions from one platform – giving you a single source of revenue and user data. If you want to find out more about the value that an all-in-one platform can play in your next investors pitch, speak to Paddle. Their funding round experience alone will be valuable to hear about. [Speak to Paddle](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWk3q3nJV1-WJV7CgZR_W1ycnNp8kvS3VW7jfmPw5qFW5LW61F8zc3BFf2fW5166SQ7gNhL4N2jJFSrl8CrtW5vCJ_l48x2SZW4gXFS32f9G5YW5TM8vp95gdgLW94qyfT1G3_zrW3rNXGz7QqY-hW4SjS9W153SHbW33DG716g3F2CW71wZ-l3C5T9LW12fgfN4D-z9tW6n0sXZ3Qmw4tW8CB0DY6JcWkjW5Sx30324Jz0QV8SDKY7fLtR0W80tW--243c-hW5ZkC_-8Hp08XW7ts-rC2m0w6bW4HP6Q93xG0VNW8_vpv599sq_5W2XJ1k_4sJfMB3bMd1) ico_in_2_10_sep_2020 SHARE ico_tw_2_10_sep_2020 SHARE [1-click here](113/bNfN04/VWp8Pb93K9BpW6W9bm42dzl4SW2dmkKk4P-XfqN6fpSWD3q3n_V1-WJV7CgX22W4v3g3R1pptb1VMHxdK4mvBhqW81zJmM55lJpfVvQgTD22mM02MKR9TyMFjWDW3YZlYZ4yqxhsW7xMzN45PxZYlW29Fm412r2xLvW4HMYwW9fJDq2W5FMD513ztyPmN2v91xWZD-rbW4HV0Zs4HQ7gHW3qf8__7QbtXVW8fYnY28K81WQW8jwwM_62zTrCW1fRk273RmKWXW6zp-FZ6zx9YqW8DS1NZ7lxll9W6j0GbW5n6HFqW8Hp1G711cpF6V8zfyq5rR_WXTjNF46XZnhGW98X-qV8bM_FHW2pw18y27fl50W2QGj0S5kvyyCW81M_kR4WW40S3bnz1) to unsubscribe from all future Free Content emails and data reports. 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