Is Your Revenue Real? - Key Metrics That Drive Investor Confidence

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Aug 09, 2023
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Is Your Revenue Real? - Key Metrics That Drive Investor Confidence
When it comes to attracting investors, revenue is often seen as the ultimate indicator of success. However, simply reaching a certain revenue number is not enough to secure funding. Investors are more interested in the underlying factors that contribute to revenue growth and sustainability. In this article, we will explore the key metrics that investors look for when evaluating a company's revenue potential, and how fintech product managers can use these metrics to drive investor confidence.
Product-Market Fit: The Foundation of Revenue Growth
Investors want to see early evidence of product-market fit. They want to know that the founders understand the needs of their customers and have built a product that solves a real problem. Revenue is not the end goal; it is merely a reflection of how well the product is meeting those needs. Therefore, the number of customers is a more important metric than the revenue itself. Investors are looking for a growing customer base that demonstrates a genuine demand for the product.
Understanding Revenue Growth Rate
Revenue growth rate is another crucial metric that investors consider. It shows how quickly a company's revenue is increasing over time. A high growth rate indicates that the product is gaining traction in the market and attracting more customers. Conversely, a stagnant or declining growth rate raises concerns about the long-term viability of the business. Product managers must focus on sustainable growth practices to ensure that revenue continues to increase steadily.
The Importance of Churn Rate
Churn rate is a proxy for the quality of a product and its ability to retain customers. It measures the percentage of customers who discontinue their subscriptions or stop using the product. A decreasing churn rate demonstrates that the product is effectively addressing customers' needs and minimizing dissatisfaction. Product managers should analyze churn rate to understand why customers are leaving and take proactive steps to address those issues.
Net Revenue Retention: Keeping the Revenue Bucket Leak-Free
Net revenue retention measures how leaky a company's revenue bucket is. It determines the ability to retain existing customers and maximize revenue from them. By categorizing customers into different cohorts, such as new customers, renewing customers, and churned customers, product managers can analyze the revenue generated from each group. This metric helps identify areas for improvement, such as onboarding processes, customer support, and product enhancements.
Average Revenue Per User/Customer: Maximizing Revenue Potential
The average revenue per user or customer is a crucial metric for assessing the financial health of a company. It measures how much customers are willing to pay each month for the product. Product managers should continuously evaluate the pricing strategy to ensure that it aligns with customer expectations and market value. Additionally, they should explore opportunities to upsell or cross-sell to increase the average revenue per user.
Ensuring a Sustainable Business Model
To attract investors, it is essential to demonstrate a sustainable business model. This involves assessing the market size and potential, improving the product to achieve better product-market fit, and establishing a profitable revenue generation model. Product managers should analyze the market demand, competition, and scalability to determine if the business model can sustain long-term profitability.
Actionable Advice for Fintech Product Managers
- 1. Collect and analyze session-based data to understand customer behavior and improve user retention. By tracking metrics such as session duration, bounce rates, and active users, product managers can identify areas for improvement and optimize the app's performance.
- 2. Leverage customer feedback metrics, including median customer ratings, survey response rates, and Net Promoter Score, to measure customer satisfaction. Actively seek feedback from customers and use it to drive product improvements and enhance the overall user experience.
- 3. Monitor technical metrics, such as crashes per session, crash incidence per app version, and network response times, to ensure a seamless user experience. Address technical issues promptly to minimize user frustration and maximize engagement.
Conclusion
When it comes to attracting investors, revenue is just the tip of the iceberg. To instill confidence and secure funding, fintech product managers must focus on metrics that indicate product-market fit, revenue growth, customer retention, and overall business sustainability. By understanding and leveraging these key metrics, product managers can drive investor confidence and pave the way for long-term success.
Actionable advice:
- 1. Continuously analyze and optimize session-based data to improve user retention and app performance.
- 2. Actively seek and respond to customer feedback to drive product improvements and enhance user satisfaction.
- 3. Monitor and address technical metrics to ensure a seamless user experience and minimize user frustration.
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