When you're a SaaS founder seeking capital, your story is important. But the numbers behind that story are what get deals done. Investors see hundreds of pitches, and use a core set of metrics to quickly see if a business is healthy, scalable, and a smart investment.
This guide breaks down the seven SaaS metrics investors focus on most. We’ll explain what they are, why they matter, and how to use them to show your company’s true potential.
Your Monthly Recurring Revenue (MRR) Growth Rate is the vital sign of your startup. It shows the net change in your subscription revenue month over month, blending new customers, upgrades, downgrades, and cancellations into one powerful number.
How to Calculate MRR Growth Rate:
First, find your end-of-month MRR:
`MRR at Month End = MRR at Month Start + New MRR This Month + Expansion MRR This Month - Churn MRR This Month`
Then, calculate the growth rate:
'MRR Growth Rate = [(MRR at Month End - MRR at Month Start) / MRR at Month Start] x 100`
Why This Metric Matters:
For investors, this metric is a direct measure of your growth momentum. A strong, consistent growth rate proves you have a product the market wants and that you can scale efficiently.
What to Watch Out For:
This metric can be misleading for very early-stage startups that see huge percentage jumps at the beginning. An investor will look for a steady trend over 12–18 months to understand your true growth pattern as you mature.
Industry Benchmark:
While growth rates vary by company stage, a healthy monthly growth rate for a growing SaaS company typically falls between 10-20% for early-stage companies, with annual growth rates often between 50-100% for companies under $2 million ARR. More mature companies may see 15-45% annual growth.
What is another signal of product-market fit aside from customers spending more over time? Gross revenue retention. Gross MRR Churn measures the total monthly revenue lost from downgrades and cancellations, excluding the impact of upsells.
This metric gives investors a clear, honest look at customer satisfaction and retention. A high gross churn rate signals a potential problem with your product, your pricing, or the customers you're attracting. It's a red flag that your business might be a "leaky bucket."
Investors love to see this number at or near zero. This is a powerful signal of a sticky product and strong customer health.
How to Calculate Gross MRR Churn Rate:
`Gross MRR Churn Rate = (MRR Lost to Downgrades & Cancellations / MRR at Month Start) x 100`
Why This Metric Matters:
It shows you exactly how much revenue you lose each month. This helps you understand if you're targeting the right audience and how well your product is meeting their needs.
Industry Benchmark:
Acceptable monthly Gross MRR Churn varies by customer type:
Expansion MRR is the revenue you generate from your existing customers through upsells, cross-sells, and add-ons. It's one of the most efficient paths to growth because you're selling more to customers who already trust you.
Investors see a high Expansion MRR rate as proof that your product delivers increasing value over time. It shows you can grow without relying only on finding new customers, which is a key part of improving your SaaS unit economics.
How to Calculate Expansion MRR Rate:
`Expansion MRR Rate = (MRR Gained from Existing Customers / MRR at Month Start) x 100`
Why This Metric Matters:
Your goal should be for Expansion MRR to outpace your Gross MRR Churn. When this happens, you achieve net expansion, the gold standard for SaaS growth.
ARPA measures the average revenue you generate from each customer account, usually on a monthly or annual basis, helping you understand the value of a typical customer.
How to Calculate ARPA:
`Monthly ARPA = Total MRR / Total Number of Customers`
Why This Metric Matters:
Investors use ARPA to spot trends. Is the value of your new customers increasing over time? This could mean you are successfully moving upmarket or that your pricing strategy is working. A rising ARPA is a strong sign of a healthy business model.
What to Watch Out For:
A few very large accounts can skew your ARPA, making it seem higher than it is. Consider segmenting ARPA by customer cohort or pricing plan to get a more accurate picture.
Lead Velocity Rate measures the month-over-month growth of your qualified leads. It’s a forward-looking metric that acts as a real-time predictor of your future sales and revenue.
While MRR tells investors what you *did* last month, LVR tells them what you're *likely* to do in the next few months. A strong LVR shows that your marketing and sales pipeline is healthy and growing, giving investors confidence in your future growth forecasts.
How to Calculate LVR:
Why This Metric Matters:
LVR is an early warning system. If you see lead growth slowing, you can take action immediately instead of waiting for revenue to dip a quarter later.
The Customer Acquisition Cost (CAC) Payback Period answers the question "How quickly do I recoup the costs associated with acquiring a new customer?". It tells you how long it takes to earn back the sales and marketing costs spent to acquire a new customer.
How to Calculate CAC Payback Period:
`CAC Payback Period (in months) = CAC / (Monthly ARPA × Gross Margin %)`
Why This Metric Matters:
This is a top metric for investors because it measures capital efficiency. A shorter payback period means you can reinvest your money faster to fuel more growth. When CAC Payback Period decreases while MRR Growth increases, it signals efficient scaling, exactly what investors want to see.
What is a good CAC payback period for SaaS?
For most SaaS companies, a CAC payback period of **under 12 months** is considered excellent. High-growth, efficient companies often see this number in the 5-to-7-month range.
These six SaaS metrics for investors don't exist in isolation. Smart investors look for patterns across metrics that indicate sustainable, profitable growth. For example, decreasing CAC Payback Periods alongside increasing MRR Growth and low Gross MRR Churn points to product-market fit and scaling efficiency.
The strongest SaaS companies show improvement across multiple metrics simultaneously, proving they're not just growing fast, but growing smart.
1. What's the minimum MRR I need before investors will seriously consider my startup?
There's no magic MRR number, but context matters. Pre-seed investors might engage with strong traction metrics even before $10K MRR, while Series A investors typically want to see at least $100K-$250K MRR with strong growth rates. More important than the absolute number is your growth trajectory: investors would rather see $50K MRR growing 20% month-over-month than $200K MRR growing 2%. Focus on demonstrating consistent growth and improving metrics rather than hitting a specific revenue threshold.
2. If I can only track three metrics perfectly, which ones should they be?
Focus on the metrics that give you the clearest picture of growth, retention, and efficiency. We recommend:
3. What metrics do investors want to see before revenue?
For pre-revenue startups, investors focus on leading indicators that predict future success. Instead of MRR, they'll analyze user growth rates, engagement metrics (like daily active users), product usage frequency, and your Lead Velocity Rate. These early signals show you're building something people want, even before they start paying for it. Tracking them builds the discipline you'll need when revenue starts flowing and helps you understand how to calculate MRR growth once you launch paid plans.
