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2 resources from a16z.com we point founders to, and the questions each answers.

📄 Article

✓ Link checked Free Intermediate

The canonical investor's-eye view of why LTV:CAC drives valuation, and why 3:1 became the rule of thumb. Read it to understand what a growth-stage investor is really testing when they poke at your unit economics.

Why Do Investors Care So Much About LTV:CAC?

From a16z.com by Andreessen Horowitz (a16z)

LTV should be computed on gross/contribution profit, not revenue.
Roughly 3x LTV:CAC signals efficient sales-and-marketing returns.
Higher LTV:CAC compounds into higher margins and higher valuation.

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Answers How do I calculate CAC, and what's the difference between blended CAC and new-customer CAC? What's a good LTV:CAC ratio, and when is my D2C brand actually profitable?

📄 Article

✓ Link checked Free Intermediate

The classic investor vocabulary for CAC, LTV, gross margin and the metrics that get misused in decks. Even though it's SaaS-flavoured, it's the shared language your investors speak, so it pays to know exactly what each term means and how it gets gamed.

16 Startup Metrics

From a16z.com by Andreessen Horowitz (a16z)

Precise definitions for CAC, LTV, gross margin and burn.
Common ways founders unintentionally misstate each metric.
The baseline vocabulary investors expect you to use correctly.

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Answers What's a good LTV:CAC ratio, and when is my D2C brand actually profitable?

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