The Best Primary Metric for Startups

A primary metric is a quick way to determine how well a launched startup is doing. It is also the one metric that founders should focus their entire company on, and VCs want to know about when asking for growth rates. So what should you pick as your primary metric?

Revenue

Revenue is the best primary metric for most startups because it can indicate and quantify how much customers really want what you’ve built. Nothing tells you more about delivering value than customers spending their hard-earned money on your product. Even better is if your product has recurring value to customers, like Monthly Recurring Revenue in Software-as-a-Service and subscription business models.

Active Users

Active Users is another primary metric, particularly for startups with marketplace business models (that need strong network effects) or advertising business models (that need a large audience before monetizing). In this case, you are measuring value delivered through customers spending their time on your product. This could be in the form of Monthly Active Users, Weekly Active Users, or Daily Active Users.

Growth Rate

A startup’s goal is simply to grow its primary metric, calculated by Growth Rate: Revenue or Active Users (Month 2) - Revenue or Active Users (Month 1) / Revenue or Active Users (Month 1) x 100. This is the one ratio founders should always know, and VCs will always ask for.

Paul Graham once wrote, “a startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of ‘exit.’ The only essential thing is growth. Everything else we associate with startups follows from growth.” Growing your primary metric proves that you’re a valuable startup, one that is actually building something lots of customers want and reaching and serving all those customers.