The unit economics of a startup determine its success.

The stronger the unit economic case, the higher the margins, the faster the company grows.

In analyzing a startup, measure the unit economics regarding customer acquisition cost and lifetime value.

Calculate it at the unit level to understand the health of the business.

Many venture-funded startups appear to be growing well, but this is often from infusions of capital from investors rather than growth from the customers.

The unit economics show how the startup is doing regardless of the funding.

It also works with early-stage startups where the top-line revenue is low. 

By looking at the systems behind the startup, such as sales, service, and support, one can see if the basic systems are working.

The margin on each sale, the cost to acquire a customer, and the lifetime value give an accurate accounting of the business.

If these numbers look good, then the startup may be a candidate for investment.

Consider the use of unit economics in your startup diligence.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.