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Is your startup in good financial health? Here are the financial performance indicators investors are looking for.


Key performance indicators (KPIs) are a set of quantifiable metrics or data points that are used to measure and evaluate critical aspects of your startup’s performance and your company’s financial health.

As a Founder, you understand the importance of having financial KPIs such as net income and operating income in your business, but how do you know you’re tracking the right ones? Especially if you’ve got your eyes on a capital raise in the future.

Sleek sat down with David Gowdey, Managing Partner at Jungle VC for a Q&A session. Having worked with hundreds of startups and listening to thousands of pitches, he share his perspective and advice for Founders.

David Gowdey, Managing Partner at Jungle Ventures

Q. How has the current economic climate changed investors targets and expectations?

I think investors are certainly more targeted on margin structures than they are on top line growth. Given any kind of macro uncertainty, I think most people would prefer to be investing in businesses where they felt like there was a path to ultimate profitability. Two or three years ago when the economy was in better shape, investors were trying to get the biggest business possible. Now the focus is more on margins.

Q: What specifically are investors looking for from their companies in the next 12 months?

It’s really about product market fit. The key questions that investors always ask is,

  • What’s the problem you’re trying to solve?
  • Who has the problem?
  • How big is the base of people that have that problem?
  • What is someone willing to pay you to solve the problem?

If they’re not willing to pay enough, or people aren’t willing to pay at all to make the problem go away, then Founders are really going to struggle with product market fit, and ultimately they’ll never really have a business.

Early success with investors is being able to articulate the answers to those questions and have some proof points around your path to a sustainable business.

“We speak to bootstrapped Founders daily who tell me they’ll have a period with lots of breathing room and everything’s great, then there’s a shift and it looks like they’ll run out of runaway and the business will die. These fluctuations are part and parcel of start up life but most people don’t realise it until it’s happening to them.”

Q: What can startups do to improve margins?

I think about margins depending on what stage the startup is at. Most companies will be unprofitable, profitable, and then unprofitable again as they scale and grow. This is just an evolution of business. How much you can improve on margins depends on where you are in the cycle.

Margin is a function of variable costs and fixed costs.

Variable costs are linear to revenue. As your revenue grows, your variable costs will increase over time. For example, if you’re an E-Commerce site, every time you sell something, there’s a shipping cost and a transaction cost attached to that sale. The more you sell, the more of these costs you incur.

Then we think about fixed costs. Things like employees, rent, warehouse spaces etc. You can achieve an increased volume of revenue without having to increase your fixed costs. And that’s where you improve your margins.

Eventually, you’ll reach a level where you start eating into your fixed costs. It’s usually at this point you aim to raise money, so you can invest more in people and move the business up, changing your fixed costs which at first will reduce your margin but then again, you’ll be able to sell more until it reaches the next level of eating into your fixed costs and then it could be time for another raise.

So improving your margin depends on the stage your business is at and profitability is definitely a rollercoaster.

Q: What good financial habits should founders get into from the start to improve their chance of a successful raise?

One is to really understand financials. Unless you’re a Founder with a business or commerce degree, I’d encourage you to spend time getting up to speed on Profit & Loss (P&L) and your Cash Flow Statement. Because in some businesses, the two can be dramatically different.

If we take that E-Commerce company as an example. It has suppliers and manufacturers it has to pay. They don’t have credit so it’s paying up front on the order. It takes 30 days for them to manufacture and 15 days to ship. That’s cash out of the business for 45 days. Then, if it’s a B2B, it’s sold on to distributors who may have to give a 30 day credit. So now you’re up to a 70 day working capital rotation. The more you grow, the more expensive that becomes.

It’s similar for software companies. It may have a customer that pays $1m upfront in cash for a 12 month subscription, but that translates into $83,000 per month on your P&L. So there can be quite a huge difference between where the business is on the P&L and the cash flow. Understanding that is essential. Don’t just rely on a controller or finance person, ensure you have a good knowledge about the basics of your company’s financial statements.

The second thing is focus more on projecting your cap table vs projecting your P&L. While investors want confidence that you have a real business model, they also want confidence that you’ve thought deeply about where you are going to end up and how much of the company you’ll own when you get there. This can be hard in the early stage because you don’t know how things are going to change. But it’s vital to recognise that with every raise, you’re increasing shareholder equity and investors want to see your ideal plan for the future.

Q: What financial performance metrics are vital for a successful raise?

Every business model is different and it’s important to research and understand the metrics for your industry and model.

Typical metrics for an E-commerce startup might be :

  • Average Order Value (AOV),

  • Inventory Turnover Ratio,

  • Cart Abandonment Rate

  • Repeat Purchase Rate

  • Average Shipping Time

  • Churn Rate

For a software company metrics might be:

  • Annual Recurring Revenue (ARR)

  • Monthly Recurring Revenue (MRR)

  • Customer Acquisition Cost (CAC)

  • Customer Lifetime Value (CLV)

  • Average Revenue Per User (ARPU)

  • Recurring Revenue Growth Rate

Businesses openly talk about these online, so my advice is find a company with a similar business model to yours and use the same set of metrics.

Q: What’s one thing that startups can do to increase their chances of a successful raise?

Succinctly articulate what it is that they’re doing and why. VCs see thousands of companies a year. At Jungle, we see around 3000 a year, physically meet with 4-500 and make 6-7 new investments. Investors see your pitch deck as indicative of your business. So if it’s not hyper focused and clear on what you’re trying to do and how you’ll do it, it can be a sign that the business has not matured it’s thinking adequately enough.

Q: Do you have any other tips for startups?

Don’t spend a lot of time making your pitch slides look pretty. It’s not about that. Investors don’t give credit for really nice graphs. They give credit for understanding why you’re doing something and what you’ve learned to get here. Spend less time thinking about how you make your slides look good and more time thinking about why you’re doing this and how you can convince people to put money into it.

Finally, do your due dilligence on the investor you’re pitching to. Be aware that as you’re pitching, an investor is thinking how do I get out of this business? Who’s going to buy it? How much money am I going to make. You can ask some of these questions in the pitch meeting.

Try and understand:

  • Where the investor is in their fund cycle

  • Are they willing to invest in competitive companies

  • Do they partner with other funds?

  • Who are those funds?

An investor-founder relationship lasts on average 6-8 years, so you have to know and be comfortable with the person you’re partnering with. We made a video to help Founders choose the right investor for their startup so they can get the best outcome and go on to have a successful investment and thriving business.

Sleek’s 101 on financial metrics

What are the four financial performance metrics?

Financial performance metrics are key indicators that help assess the financial health and success of a business. There are numerous financial metrics to consider, but four commonly used ones are:

1. Revenue

This is the total income generated from the sale of goods or services. It’s a fundamental metric and a key driver of a company’s financial performance.

2. Profit or Net Income

This metric measures the amount of money a company has left after deducting all its expenses from its revenue. It is often broken down into different types, such as gross profit, operating profit, and net profit, each providing insights into different aspects of a company’s financial performance.

3. Earnings Before Interest and Taxes (EBIT)

EBIT represents a company’s operating profitability, excluding the impact of interest expenses and taxes. It’s useful for comparing the profitability of different companies, as it removes the influence of a company’s financing and tax structure.

4. Return on Investment (ROI)

ROI measures the return on an investment relative to its cost. It’s a critical metric for evaluating the efficiency and effectiveness of investments, and it can be applied to various aspects of a business, such as marketing campaigns, capital investments, or entire projects.

These metrics are often used in combination with other financial indicators and non-financial metrics to provide a comprehensive view of a company’s performance and to aid in decision-making and strategic planning.

What is Gross Profit Margin?

Gross Profit Margin measures a company’s profitability by evaluating the percentage of revenue left after deducting the cost of goods sold (COGS). It’s an essential indicator of a company’s ability to produce goods or services profitably.

The formula for calculating Gross Profit Margin is:



  • Gross Profit: This is the revenue a company earns from its products or services minus the direct costs associated with producing those products or services. These direct costs typically include expenses such as raw materials, labor, and manufacturing overhead.

  • Revenue: This is the total income generated from the sale of goods or services.

The Gross Profit Margin is expressed as a percentage, and it indicates how efficiently a company is managing its production costs and generating profit from its core business activities. A higher Gross Profit Margin suggests that a company is more effective at controlling its production costs and is generating a larger profit relative to its revenue. Conversely, a lower margin may indicate that the company has higher production costs in relation to its revenue.

What is Net Profit Margin?

Net Profit Margin is a financial metric that measures a company’s profitability by evaluating the percentage of its total revenue that remains as profit after deducting all operating expenses, interest, taxes, and other costs. It provides insight into the company’s overall profitability and efficiency in managing its expenses.

The formula for calculating Net Profit Margin is:


  • Net Profit: This is the profit left after deducting all expenses, including the cost of goods sold (COGS), operating expenses, interest, taxes, and any other non-operating costs or income.

  • Revenue: This is the total income generated from the sale of goods or services.

The Net Profit Margin is expressed as a percentage, and it’s a crucial indicator of a company’s overall financial health and profitability. A higher Net Profit Margin suggests that a company is effectively managing its expenses and generating more profit from its operations, while a lower margin indicates that a company is less efficient at controlling costs or may have higher interest or tax burdens.

Investors and analysts often use Net Profit Margin to assess a company’s profitability and compare it to competitors within the same industry. It’s also a valuable metric for evaluating the impact of various expenses and taxes on a company’s bottom line.

What are Fixed Operating Expenses?

Fixed operating expenses, also known as fixed costs, are costs that a business incurs as part of its regular operations and do not vary significantly with changes in the level of production or sales. These expenses remain relatively constant over a specific period, regardless of the company’s output or sales volume. Fixed operating expenses are an essential part of a company’s cost structure and are incurred even if the business produces nothing or experiences low sales. Some common examples of fixed operating expenses include:

1. Rent or Lease Payments: Monthly rental or lease expenses for office space, manufacturing facilities, or equipment are generally fixed costs.

2. Salaries and Wages: The salaries and wages of permanent employees who are not paid based on production levels or sales are considered fixed costs.

3. Insurance Premiums: Insurance costs, such as property insurance and liability insurance, are usually fixed expenses.

4. Depreciation: The depreciation of assets, like machinery and equipment, is a fixed cost that is spread over the asset’s useful life.

5. Utilities: Basic utility costs, like electricity, water, and internet, may be relatively fixed unless there are substantial changes in usage.

7. Office Supplies: Regular office supplies and consumables may be considered fixed costs if they do not vary significantly with production levels.

8. Subscription Services: Fixed fees for services like software subscriptions or maintenance contracts are considered fixed costs.

9. Loan Payments: The regular payments on loans, including interest and principal, are fixed expenses.

Fixed operating expenses are essential for businesses to maintain their day-to-day operations and provide a level of stability in budgeting and financial planning. These costs are distinct from variable operating expenses, which change with production levels or sales, and understanding the composition of fixed and variable costs is crucial for cost analysis, budgeting, and financial decision-making.

What is Operating Cash Flow Ratio (OCF)?

Known as liquidity ratio this is how much the business is able to repay and how much of the cash generated by its core operations. It is calculated by multiplying operating revenues with actual liabilities. OCF is money created through the operation of the company and its current debt includes accounts payables and other obligations due on an annual basis. A statement of cash flow rather than the financial statements is used to reduce costs for non-revenue-generating activities.

What is debt to equity ratio?

The Debt to Equity Ratio is a financial metric that measures the proportion of a company’s financing that comes from debt (liabilities) compared to equity (ownership or shareholder’s equity). It’s a key indicator of a company’s capital structure and financial leverage, and it’s used to assess the level of risk associated with a company’s financial obligations.


  • Total Debt: This includes all of the company’s interest-bearing liabilities, such as long-term loans, bonds, and short-term debt.

  • Shareholders’ Equity: This represents the ownership interest in the company and is typically calculated as the difference between a company’s total assets and total liabilities. It includes the value of common stock, retained earnings, and additional paid-in capital.

The Debt to Equity Ratio provides insights into a company’s financial risk and its ability to meet its long-term financial obligations.

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Disclaimer: The information on this website is intended for general informational purposes only and may not be specifically relevant to everyone’s personal situation. It should not be considered financial advice or a substitute for professional tax or accounting advice. Each individual’s circumstances are unique, and laws can vary. For tailored advice, please consult a qualified professional. Contact Sleek for further information on how we can help you.

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