"Our MRR is $150K and growing 15% month-over-month." That sounds great. A Series A investor will nod, then ask about NRR, CAC payback period, and gross margin — and the answers to those questions determine whether they write a check.
Here are the 8 metrics that actually matter for SaaS valuation, and the benchmarks that separate fundable from unfundable companies.
1. Net Revenue Retention (NRR)
Formula: (Starting MRR + Expansion − Churn − Contraction) ÷ Starting MRR
NRR above 100% means existing customers are paying you more over time — even without any new customers.
| NRR | Investor signal |
|---|---|
| > 130% | Exceptional — top-tier Series B/C |
| 110-130% | Strong — fundable at most stages |
| 100-110% | Acceptable — needs growth to compensate |
| 90-100% | Weak — churn concern |
| < 90% | Red flag |
Why it matters: An NRR of 120% means the company grows 20% per year with zero new sales. The compounding effect is enormous: at 120% NRR, existing revenue cohorts double every 4 years.
2. Customer Acquisition Cost (CAC) Payback Period
Formula: CAC ÷ (ARPU × Gross Margin %)
How many months to recover the cost of acquiring one customer?
| CAC Payback | Interpretation |
|---|---|
| < 6 months | Excellent efficiency |
| 6-18 months | Good — standard for mid-market SaaS |
| 18-24 months | Acceptable for enterprise deals |
| > 24 months | Risky — needs long customer lifetime |
Why it matters: Long payback periods mean growth requires a lot of upfront capital. Short payback periods let you reinvest quickly and grow efficiently.
3. Gross Margin
For SaaS, gross margin = (Revenue − Cost of Revenue) ÷ Revenue. Cost of revenue includes hosting, support, and implementation.
| Gross Margin | Benchmark |
|---|---|
| > 80% | Excellent — pure software |
| 70-80% | Good — minor services component |
| 60-70% | Moderate — high support burden |
| < 60% | Concerning — may not be "true" SaaS |
4. Rule of 40
Formula: YoY Growth Rate % + EBITDA Margin %
A company growing 50% YoY with -20% EBITDA margin = Rule of 40 score of 30 (below threshold). A company growing 20% with 25% EBITDA margin = 45 (strong).
| Rule of 40 | Investor view |
|---|---|
| > 50 | Exceptional |
| 40-50 | Strong — attractive Series B/C |
| 30-40 | Acceptable for earlier stages |
| < 30 | Needs improvement |
5. Annual Recurring Revenue (ARR) Growth
Expected ARR growth by stage:
| Stage | Expected ARR | YoY Growth |
|---|---|---|
| Seed | $500K-1M ARR | n/a |
| Series A | $1M-5M ARR | 150-300% |
| Series B | $5M-25M ARR | 100-200% |
| Series C | $25M-100M ARR | 75-150% |
| Pre-IPO | $100M+ ARR | 50-100% |
6. Churn Rate (Monthly)
| Monthly Logo Churn | Annual equivalent | Interpretation |
|---|---|---|
| < 0.5% | < 6% | Excellent |
| 0.5-1% | 6-12% | Good |
| 1-2% | 12-22% | Moderate concern |
| > 2% | > 24% | Serious problem |
7. LTV:CAC Ratio
| LTV:CAC | Interpretation |
|---|---|
| > 5x | Excellent — underinvesting in growth |
| 3-5x | Target zone |
| 2-3x | Marginal |
| < 2x | Losing money per customer |
8. Burn Multiple
Formula: Net Burn ÷ Net New ARR
How much cash are you burning to generate $1 of new ARR?
| Burn Multiple | Efficiency Rating |
|---|---|
| < 1x | Excellent |
| 1-1.5x | Good |
| 1.5-2x | Acceptable |
| > 2x | Inefficient |
Use the SaaS MRR Calculator, Churn Rate Calculator, and Customer LTV Calculator to track all eight metrics in real-time.