23 Terms Every Founder and Investor Must Know

Running a startup today means navigating a sea of metrics. But which numbers really move the needle? Whether you're raising funding, optimizing growth, or trying to understand your traction, these 23 metrics are the ones that matter.

We’ve grouped them into five key categories: Market, Growth, Revenue, Efficiency, and Product & Sales. Each includes definitions, use cases, and real-world examples to help you understand when and how to use them.

Market Metrics

1. TAM (Total Addressable Market)

Definition: The total demand for your product across the entire market.
Example: If you’re building a fitness app, your TAM might be the entire global digital health market, say $50B.
Use Case: Helps investors see the overall opportunity size.

2. SAM (Serviceable Available Market)

Definition: The portion of the TAM you can serve based on your business model.
Example: You’re only targeting English-speaking markets with mobile apps. Your SAM might be $10B.
Use Case: Used to define reachable targets based on current product scope.

3. SOM (Serviceable Obtainable Market)

Definition: The realistic share of the SAM you can capture in the short term.
Example: With your marketing budget and sales capacity, you estimate you can win $50M worth of that $10B market.
Use Case: Makes growth projections more grounded and credible.

Growth Metrics

4. DAU (Daily Active Users)

Definition: The number of unique users interacting with your product each day.
Example: Your app gets 25,000 daily active users.
Use Case: Measures short-term user engagement and product stickiness.

5. MAU (Monthly Active Users)

Definition: The number of unique users within a 30-day period.
Example: You track 250,000 MAUs.
Use Case: Shows your product's reach and overall growth trends.

6. DAU/MAU Ratio

Definition: Percentage of monthly users who return daily.
Example: If you have 25,000 DAU and 250,000 MAU, your ratio is 10%.
Use Case: A ratio over 20% is decent. Over 50% is strong, typically seen in habit-forming products.

7. User Retention Rate

Definition: The % of users who return after a specific time (e.g. 1 week or 1 month).
Example: Out of 1,000 signups, 300 return next week = 30% retention.
Use Case: Critical for understanding product-market fit.

8. Churn Rate

Definition: The % of users or customers who stop using your product.
Example: You had 1,000 customers and 100 churned this month = 10% churn.
Use Case: High churn can signal poor onboarding, product gaps, or lack of value.

Revenue Metrics

9. MRR (Monthly Recurring Revenue)

Definition: Predictable monthly revenue from subscriptions or contracts.
Example: 1,000 customers paying $30/month = $30,000 MRR.
Use Case: Helps track consistent revenue growth.

10. ARR (Annual Recurring Revenue)

Definition: MRR multiplied by 12.
Example: $30K MRR → $360K ARR.
Use Case: Useful for projecting annual performance.

11. ARPU (Average Revenue Per User)

Definition: How much revenue each user contributes on average.
Example: $10,000 MRR from 500 users → $20 ARPU.
Use Case: Guides pricing and monetization decisions.

12. LTV (Customer Lifetime Value)

Definition: Total revenue expected from a single customer over their lifetime.
Example: A customer stays for 3 years at $30/month → LTV = $1,080.
Use Case: A critical benchmark for sustainable unit economics.

Efficiency Metrics

13. CAC (Customer Acquisition Cost)

Definition: How much it costs to acquire a paying customer.
Example: You spend $5,000 on marketing and get 100 customers → CAC = $50.
Use Case: Essential for determining marketing ROI.

14. LTV/CAC Ratio

Definition: LTV divided by CAC.
Example: LTV = $1,080, CAC = $270 → Ratio = 4.
Use Case: A ratio >3 is generally healthy.

15. CAC Payback Period

Definition: Time taken to recover CAC through customer payments.
Example: CAC = $180, customer pays $30/month → Payback = 6 months.
Use Case: Shorter payback = faster cash recovery and reinvestment potential.

16. Burn Rate

Definition: Monthly cash outflow minus revenue (if applicable).
Example: Spending $50,000/month with $10,000 revenue = $40K burn.
Use Case: Critical for cash planning and fundraise timing.

17. Runway

Definition: Time until the startup runs out of money.
Example: $200K in bank, $50K monthly burn → 4 months runway.
Use Case: Used to calculate how urgently fundraising or cost reduction is needed.

Product & Sales Metrics

18. NPS (Net Promoter Score)

Definition: Measures customer satisfaction and likelihood of referral.
Example: Customers rate you a 9 or 10 → NPS = high.
Use Case: A good early signal of product love or issues.

19. Sales Pipeline Value

Definition: Total value of all leads and deals in your funnel.
Example: 5 potential deals worth $20K each = $100K pipeline.
Use Case: Helps forecast sales growth and hiring needs.

20. Sales Conversion Rate

Definition: % of leads that become paying customers.
Example: 50 conversions from 500 leads = 10% conversion.
Use Case: Helps refine lead quality and sales strategy.

21. Contribution Margin

Definition: Revenue minus variable costs per unit.
Example: Selling price = $100, serving cost = $40 → margin = $60.
Use Case: Shows profit per unit before fixed costs.

22. ACV (Average Contract Value)

Definition: Average deal size for B2B customers.
Example: 4 contracts worth $200K → ACV = $50K.
Use Case: Important for forecasting and setting sales quotas.

23. Gross Margin

Definition: (Revenue – Cost of Goods Sold) / Revenue
Example: Revenue = $100K, COGS = $40K → Gross Margin = 60%.
Use Case: High gross margin businesses can afford bigger growth investments.

Final Thoughts

Understanding these 23 startup metrics will sharpen your storytelling, improve your growth strategy, and make your startup more attractive to investors.

Looking for an easy way to organize and securely share your metrics, pitch decks, and financials with investors? Check out Plox — a modern virtual data room built for startups. Fast sharing, analytics, and custom branding, all in one place.