Startup metrics

Unit economics

Profitability at the level of a single customer or transaction. The test of whether growth is healthy.

Written byDenis VoldmanHead of Product, DealMatrix
Edited byPhilipp SakulerBusiness Development, DealMatrix
Reviewed by✓ Berthold Baurek-KarlicCEO, Venionaire Capital & DealMatrix
Business Angel of the Year 2023
Updated10.06.20264 min read

Unit economics asks a simple question: does each customer generate more value than it costs to win and serve? The core metrics are customer acquisition cost (CAC), customer lifetime value (LTV), the LTV to CAC ratio, CAC payback period, and retention or churn. The Rule of 40, which adds growth rate to profit margin and looks for a sum of at least 40, is a common summary test for software businesses.

Positive unit economics signal that a model gets more efficient as it scales, which is the green light for valuing a company on revenue multiples drawn from peers. Weak unit economics undercut a high EV/Sales multiple no matter how fast revenue is growing.

These metrics are central to growth-stage valuation, covered in How to Value a Startup.

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ArticleHow to Value a StartupGrowth-stage metrics in context.GlossaryTAM, SAM and SOMThe market-size side.ArticleValuation MultiplesWhere the multiple meets the metrics.

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