#22 Monthly Metrics Matter! Just Do It!

Every business (including VC funds) should have a set of metrics that it tracks regularly

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Key Business Metrics for a VC Fund

“Every business should have a set of metrics that it tracks on a regular basis. These metrics could include cash, revenues, profits, etc but it should not be limited to those kinds of metrics.” Fred Wilson, Union Square Ventures

Legendary VC investor Fred Wilson wrote about this more than a decade ago and many others have since expanded on this. He wrote about how this is applicable for both running his own VC fund and the portfolio companies they invest in.

Whenever I ask another VC fund investor to share their metrics, most want to talk about their portfolio companies? I often have to redirect with a question: what about your VC fund? What are your key business metrics?

Management Company Metrics

A VC fund (and almost all types of funds including private equity, hedge funds, etc.) has a management company to “run the business.” It’s important to start with a key metrics to understand what’s happening on a monthly, quarterly, and annual basis. A simple Excel or Google Sheet is a great place to start! We recommend tracking the following:

  1. Beginning Cash

  2. Cash Inflows (i.e. Revenue)

  3. Cash Outflows (i.e. Expenses)

  4. Ending Cash

That’s it! Simpler than expected I know - you’d be surprised at how many don’t do it! The most important thing is a commitment to tracking each month and using it to build a budget or forecast from there. You can get much more detailed with our VC Fund Budget,” which you can download here.

Fund Level Metrics

For each fund raised by a VC firm (typically ever ~3 years), it’s important to know your metrics so you can understand where you’ve been and forecast for the future! Here are some key metrics we recommend tracking:

  1. Called capital from investors

  2. Invested capital (in companies)

  3. TVPI & DPI (learn more here)

  4. Pacing: companies invested in per month/quarter/year

  5. Pacing: dollars invested in companies per month/quarter/year

Again, simple! We’re following Fred Wilson’s advice to focus on 4-6 key metrics within your fund. They can vary by fund strategy, size but a commitment to regular tracking and review is what really matters!

More Metrics Resources

Don’t just take our word for it. We’ve aggregated our favorite metrics resources here:

  1. Key Business Metrics by Fred Wilson (2010)

  2. The SaaS Metrics That Matter by David Sacks and Ethan Ruby (2021)

  3. 16 Startup Metrics by a16z (2015)

  4. The Metrics You Need to Raise a Series A by Alda Dennis (2021)

  5. A Founder’s Guide to Startup Metrics by Baz Banai (2020)

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