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Andreessen Horowitz "16 Startup Metrics"
Andreessen Horowitz "16 Startup Metrics" is a tier 2 source on AskedWell — Established editorial reference. Cook’s Illustrated, King Arthur, Serious Eats class. It's cited in 12 cooking, fermentation, and baking answers. Click any answer below to read the cited claim in context.
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what is the difference between… · business
What is the difference between CAC and LTV?
CAC (Customer Acquisition Cost) is what you SPEND to get one customer. LTV (Lifetime Value) is what that customer is WORTH to you over time. The CAC:LTV ratio is the canonical SaaS health metric — 1:3 is the benchmark, <1:1 means burning money, >1:5 usually means under-investing in growth.
Why we cite it here: Definitive unit-economics framework; both CAC and LTV calculation methodology
what is… · business
What is customer lifetime value (LTV)?
LTV (Lifetime Value, sometimes CLV) is the total profit one customer generates over their entire relationship with you. Formula: ARPU × Average Customer Lifetime × Gross Margin. For healthy SaaS, LTV should be ≥3× CAC. Best-in-class: ≥5×. Most founders overstate LTV by 2-5× using revenue not gross profit.
Why we cite it here: LTV definition + relationship to CAC + payback period
what ratio of… · business
What ratio of CAC to LTV is healthy?
The canonical SaaS health benchmark is 1:3 (David Skok, Bessemer). Below 1:1 = burning money. 1:2 = marginal. 1:3 = healthy. 1:4-1:5 = strong but possibly under-investing in growth. Above 1:5 = either undermonetized OR understated CAC OR inflated LTV — investigate the inputs.
Why we cite it here: Definitive unit economics framework
what ratio of… · business
What ratio of sales to marketing spend should you target?
The Magic Number — net new ARR added / total Sales+Marketing spend — measures growth efficiency. Healthy Magic Number is 0.75-1.0+ (1× means each $1 of S+M spend produces $1 in new ARR within 4 quarters). Within S+M budget allocation: PLG (50/50 ratio) · enterprise sales-led (70-80% sales) · SMB marketing-led (60-70% marketing).
Why we cite it here: Magic Number + sales productivity framework
what is the difference between… · business
What is the difference between CAC and CPA?
CAC (Customer Acquisition Cost) is total sales and marketing spend divided by new PAYING CUSTOMERS, across all channels, fully loaded with salaries and tools. CPA (Cost Per Acquisition) is spend divided by a single conversion ACTION — a lead, signup, or trial — usually per ad campaign and counting media spend only. CAC is a unit-economics metric; CPA is an ad-optimization metric.
Why we cite it here: CAC, CAC payback period, and LTV:CAC industry standards
what is… · business
What is gross margin?
Gross margin is revenue minus cost of goods sold (COGS), expressed as a percentage of revenue. It measures how much of each sales dollar survives the direct cost of producing or delivering the product. SaaS targets 70–85%; gross margin sets the ceiling on LTV, CAC payback, and the Rule of 40.
Why we cite it here: Gross margin as a quality-of-revenue signal
what is… · business
What is runway?
Runway is how many months a company can keep operating before it runs out of cash: current cash ÷ net monthly burn. The common post-raise target is 18–24 months; under 6 months is the danger zone. You extend runway by cutting burn OR growing revenue — not only by raising more money.
Why we cite it here: Cash, burn, and months-of-runway as core operating metrics
what is… · business
What is net margin?
Net margin (net profit margin) is net profit divided by revenue, as a percentage — what remains after ALL costs: COGS, operating expenses, interest, and tax. It is the true bottom-line profitability. Net margin is always less than or equal to gross margin, because it subtracts everything below the gross line.
Why we cite it here: Margin quality + the gross-to-net gap as a growth-spend signal
what is the difference between… · business
What is the difference between gross margin and net margin?
Gross margin is profit after only direct costs (COGS), as a percentage of revenue. Net margin is profit after ALL costs — COGS plus operating expenses, interest, and tax. Gross margin measures product/delivery efficiency; net margin measures whole-business profitability. Net margin is always ≤ gross margin; the gap is everything below the gross line.
Why we cite it here: Reading the gross-to-net gap as a growth-spend signal
what is… · business
What is conversion rate?
Conversion rate is the percentage of people who take a desired action out of those who had the chance to. Formula: (conversions ÷ total visitors) × 100. A landing page with 1,000 visitors and 25 signups has a 2.5% conversion rate. It is the central efficiency metric of every funnel — small improvements compound across the whole acquisition pipeline.
Why we cite it here: Conversion in the acquisition-economics chain (CVR → CAC)
what is… · business
What is ARPU?
ARPU (Average Revenue Per User) is total revenue divided by number of users over a period. Formula: revenue ÷ active users. A SaaS earning $50,000/month from 1,000 users has a $50 ARPU. It feeds the LTV formula (LTV = ARPU × gross margin ÷ churn) and reveals whether growth comes from more users or more revenue per user.
Why we cite it here: ARPU + ARPPU definitions in the SaaS metrics canon
what is… · business
What is burn multiple?
Burn multiple is net cash burned divided by net new ARR added in a period — how much you spend to add one dollar of recurring revenue. Formula: net burn ÷ net new ARR. Coined by David Sacks and tracked by Bessemer. Under 1× is amazing, 1–1.5× great, over 3× bad. It is the cleanest single measure of growth efficiency.
Why we cite it here: Capital-efficiency metrics in the SaaS canon
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