An investor is someone who will put money into a business and expect to make not only their investment back but also a profit. A decent investor will want to minimize risk (i.e. lower profits or loss) and want maximum return on their investment.
Getting an investor and generating rounds of funding can mean long-term equity — a key attribute that will help generate other investment and contribute to growth. Aside from financial contributions, investors can also help with broadening your little black book of contacts, provide invaluable advice, and be used as a motivator for business owners to work harder and ensure success.
During your quest for fundraising, you’ll come across some great investors and possibly some more questionable characters. When looking for an investor, do your research before pitching. Have they been involved in any shady activities? Have they invested in any corrupt or morally wrong businesses? A good investor will have a squeaky clean record alongside positive feedback from businesses and peers.
The essential SaaS metricsIt’s a known fact that newspapers obtain readers by creating bold, compelling, and interesting headlines. In order to get investors for your SaaS business, you’ll need to do the same. Knowing your SaaS metrics will allow you to craft some big data-based headlines for your business and get noticed amongst a sea of startups.
Month on month (MoM) growthOne of the key areas that an investor will be interested to know is how your business is performing. By showing investors the MoM growth of your business, you’ll be presenting them with a clear picture of what your business trajectory looks like.
Ideally, an investor will be looking to see double figures when it comes to growth — especially in the early stages of a business. Double figures will show an investor that your business has legs and can walk on its own.
Measuring your churn rate will show an investor the percentage of people who leave your SaaS business. Whilst you might feel like this isn’t data an investor will want to know — churn can actually help sell your company.
Knowing your churn rate will show an investor that you have good knowledge of your customer base. If you have a low churn rate it’ll show an investor that you’re able to target the right type of customers and retain them long enough to make a profit.
Cost per acquisition (CPA)
Any good investor will want to know your cost per acquisition — essentially a metric that shows how much money you’re spending on acquiring customers. A simple calculation to access your cost per acquisition is to add up the amount of money spent on marketing and sales, then divide that figure by the number of customers acquired over a set period.
If this figure is too high — i.e. you’re spending more on gaining customers than you’re bringing in profit — your business is in trouble. If your CPA figure is lower, this will show an investor that your paid marketing and sales techniques are working.
Customer lifetime value (CLV)
CLV predicts the overall net value of your customers. Showcasing your CLV will tell an investor that you have a deep knowledge of your customer base and prove to them that you understand not all customers are equal.
Knowing your CLV will also prove to an investor that you recognize what types of customer are valuable to your business and that you’re able to focus on retaining high-value customers.
EngagementAny investor who is worth their salt will want to know the general health of your business. Are you clients interacting and engaging with your software? How do people rely on your SaaS model? For example, you could inform how many daily, weekly, monthly or quarterly active users you have or how long they spend using your product.
Showcasing the overall engagement with your product can help install security with an investor. They’ll be able to see that your SaaS model is actively used by consumers and is a popular choice in the market.
Every investor is different but when it comes to putting money on the table they will all have the same goal: to make a profit. As a business owner, you’ll need to use SaaS metrics to show investors that you have a rock solid business model and that nothing is hypothetical. Use the data wisely and an investment could be right around the corner.