Back

Vrishank

Startups/VC/tech • 23d

While reading about the key metrics used to measure a startup’s growth, I came across one ratio that VCs often use to evaluate performance: 𝗟𝗧𝗩:𝗖𝗔𝗖 Before diving into the ratio, let’s quickly understand the two components: 𝗟𝗧𝗩 (𝗖𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗟𝗶𝗳𝗲𝘁𝗶𝗺𝗲 𝗩𝗮𝗹𝘂𝗲) refers to the contribution margin an average user brings over a period of time. It can be roughly calculated as: 𝗟𝗧𝗩 = 𝗔𝘃𝗲𝗿𝗮𝗴𝗲 𝗢𝗿𝗱𝗲𝗿 𝗩𝗮𝗹𝘂𝗲 × 𝗖𝗼𝗻𝘁𝗿𝗶𝗯𝘂𝘁𝗶𝗼𝗻 𝗠𝗮𝗿𝗴𝗶𝗻 × 𝗥𝗲𝘁𝗲𝗻𝘁𝗶𝗼𝗻 𝗙𝗮𝗰𝘁𝗼𝗿 𝗖𝗔𝗖 (𝗖𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗔𝗰𝗾𝘂𝗶𝘀𝗶𝘁𝗶𝗼𝗻 𝗖𝗼𝘀𝘁) is the cost incurred to acquire a customer- this includes spend across marketplaces, ads, sales teams, etc. A commonly accepted benchmark for a healthy 𝗟𝗧𝗩:𝗖𝗔𝗖 𝗿𝗮𝘁𝗶𝗼 𝗶𝘀 𝟯:𝟭 This means that for every ₹1 spent on acquiring a customer, you’re generating ₹3 in return over that customer’s lifetime. If the ratio is too low, it indicates that acquisition costs are too high relative to the value customers bring

2 Replies
3
10
Replies (2)

More like this

Recommendations from Medial

Image Description

mg

mysterious guy • 1m

CAC vs LTV – The Unit Economics Every Founder Must Know You’re getting users. You’re spending on ads. But is your startup actually making money per customer? If your CAC is higher than your LTV, you’re not building a business — you’re burning cash.

See More
2 Replies
2
14
Image Description
Image Description

Jaswanth Jegan

Founder-Hexpertify.c... • 1y

Is there any way to find the valuation of Cryto? For ExampleWe can find the value of a stock by its P/E ratio.

10 Replies
5
Image Description
Image Description

Rohan Saha

Founder - Burn Inves... • 3m

Today's startups that are going public through their IPOs have a PE ratio that, even if observed currently, is 100x or even 300x higher than the market average, despite the market sentiment being poor right now. It's unclear how these companies will

See More
4 Replies
8
Image Description
Image Description

Anirudh Gupta

CA Aspirant|Content ... • 15d

Daily dose of financial ratios by Anirudh Gupta Debt service coverage ratio: =Earnings available for debt services/(Interest+Installments) Where earnings available for debt services are EBITDA or EBIT based on the case. Purpose: -Yesterday,we d

See More
4 Replies
3
11
1
Image Description
Image Description

Pranjali Mhatre

Hi • 8m

What is a PE ratio? The Price-to-Earnings (P/E) ratio is a crucial metric for investors, calculated by dividing a company's current share price by its earnings per share (EPS). It helps assess whether a stock is overvalued or undervalued compared to

See More
8 Replies
1
11
Image Description
Image Description

Anirudh Gupta

CA Aspirant|Content ... • 16d

Daily dose of financial ratios by Anirudh Gupta Debt/equity ratio =Total debt/Shareholders equity Purpose: It helps users of financial statements understand how much debt the company is using for every ₹1 of equity invested by shareholders. Cred

See More
13 Replies
2
13
Image Description

Anirudh Gupta

CA Aspirant|Content ... • 12d

Daily dose of financial ratios by Anirudh Gupta Quick ratio: =Quick assets/Current liabilities Where quick assets means, (current assets-inventory) Purpose: -Unlike the current ratio (as we have discussed in the previous post), the quick ratio s

See More
Reply
5
1

Thakshina Moorthy G M

Brand Designer • 5d

Do You Use the Golden Ratio in Your Design Process? As designers, we talk so much about layout, balance, and composition — but how many of us actually use the Golden Ratio (1.618) in our creative flow? The Golden Ratio has existed in art, architectur

See More
Reply
2
Image Description
Image Description

Tejas Deore

🧸 • 1y

a dating app where you get a new match daily. men get 1 per day. women get a maximum of N per day. where male: female ratio in the app is N:1

9 Replies
5
Image Description
Image Description

Aryan patil

Building SwapEat | I... • 1y

SEBI warned ⚠️ investors about Stock market bubble is about to burst anytime soon 📉 because The price-to-book (P/B) ratio of the Nifty Midcap 150 index is 4.26, and the Nifty Midcap 50 index has a P/B ratio of 3.64 This Means valuations of the Mid/s

See More
3 Replies
8

Download the medial app to read full posts, comements and news.