Why Retention and Unit Economics Matter

In Part 1 of our Seed VC Metrics series, we broke down the foundational metrics of traction and engagement. Getting people in the door is only half the battle.

For Seed VCs, sustainable growth is the ultimate validation. If customers leave as quickly as they arrive or if the cost to acquire them outpaces their value, you don’t have a business. You have a leaky bucket.

This second installment focuses on the two pillars that prove your model is built to last: Retention and Unit Economics.

Pillar 3 – Retention: The Anti-Leak Metric

Retention measures your ability to keep customers coming back and generating value over time. It’s one of the strongest signals of real product-market fit (PMF).

Cohort Retention Curves

  • What VCs Look For: A curve that flattens the “happy face,” not one that crashes to zero.
  • Why it Matters: A flattening curve signals core usage that sticks.
  • How to Present: Show 6–12 months of cohorts and clearly define what “retained” means.

Logo Churn & Revenue Churn

  • What VCs Look For:
    • Logo churn: % of customers who cancel.
    • Net negative churn: expansion revenue outweighs lost revenue (the holy grail).
  • Why it Matters: Net negative churn proves defensibility and growth from your base.
  • How to Present: Show both gross and net churn, highlight expansion uplift.

Time-to-Value (TTV)

  • What VCs Look For: How quickly a new user reaches their “aha” moment.
  • Why it Matters: Faster TTV = better onboarding and stickier retention.
  • How to Present: Chart average days or sessions to first retention.

Pillar 4 – Unit Economics: Proving Profitable Scale

Unit economics prove whether your business can scale efficiently. VCs use these metrics to gauge whether $5M in turns into $50M out.

Customer Lifetime Value (LTV)

  • What VCs Look For: Net revenue over the full customer relationship.
  • Why it Matters: Sets your ceiling for acquisition spend.
  • How to Present: Single, clear LTV with assumptions.

LTV: CAC Ratio

  • What VCs Look For: 3:1 or better.
  • Why it Matters: Efficient acquisition = scalable growth.
  • How to Present: Show trend over time (e.g., 2:1 → 4:1).

Payback Period

  • What VCs Look For: Under 12 months.
  • Why it Matters: Fast payback fuels capital-efficient growth.
  • How to Present: Show the CAC line and where cumulative gross profit crosses zero.

The Takeaway

  • Traction = demand
  • Engagement = product value
  • Retention & Unit Economics = sustainability

These are the metrics that prove your product isn’t just hot, it’s built to last.

Next in Part 3: Financial Health & Scalability burn rate, runway, and forecasts that give investors conviction.

Author: Laura Lirette