What to consider in the quarterly KPI collection process

Portfolio monitoring helps tell the story of a company’s growth, but getting a complete and accurate picture on an ongoing basis is sometimes easier said than done. To better understand these challenges and how to adapt, we spoke with Kyle Barnett and Adam Simari, KPI Operations Managers at Aumni, on what VC firms should consider when refining their approach.

Q. What are the most common challenges faced during the KPI metric collection and extraction process?

Adam‍

Starting with collection challenges:

• Maintaining an up-to-date contact list: Portfolio company contacts frequently change due to departures, new hires, and shifting points of contact (POCs).
  
• Timing: There’s a delicate balance regarding timing – starting too early means companies haven’t closed their books, but waiting too long risks missing internal deadlines.
  
• Response rates: Firms must find the right approach between gathering enough data and not overburdening portfolio companies. Seamless forms and occasional reminders tend to improve response rates.
  
• Data accuracy: Portfolio companies may round, abbreviate, or overstate certain values for convenience or simplification, leading to discrepancies between reported and actual data.

Extraction challenges:

• Document consistency: Some documents provide the required data in a clear format, while others contain sparse, complicated, or irrelevant information. Poor preparation or limited quantifiable metrics are common issues, especially among earlier-stage companies.
• Document format: Extraction becomes more difficult when data is provided in screenshots, .eml files, or text formats instead of structured documents like PDFs, Excel, or Word files.
• Document type: Extracting data from board decks and investor updates is more complex and time-consuming than structured financials or operating models.
• Document length: The longer the document, the more time it takes to process and extract meaningful data.

Kyle‍

One of the biggest challenges customers face when collecting and extracting data is ensuring the completeness of their datasets. For example, if a firm requests 10 metrics but the provided data from the portfolio company only supports 5, you might say they can only act on 50% of the desired insights.

For data extraction, the quality of documents received plays a major role in what Aumni can extract. Ultimately, we will only extract data that exists inside of the source document. While we work to fill gaps, such as aggregating monthly data into quarterly values, we stay within inference limits that customers agree to and are comfortable with.

Q. What quarterly and annual metrics do firms commonly track? Have these KPIs changed over time?

Kyle‍

The most commonly tracked KPIs include:

• Revenue
• Annual Recurring Revenue (ARR)
• Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
• Cash on Hand
• Net Burn Rate
• Runway
• Full-Time Headcount
• Customer Count

Over time, we’ve noticed firms becoming more selective about the KPIs they collect. Initially, some firms cast too wide a net, requesting excessive data points from founders. This approach often has unintended consequences as it increases the burden on founders and lowers response rates. Many firms opt to streamline their requests to focus on the KPIs that they report to the firm on and believe can be actioned by founders and leadership staff at the company.

Adam‍

Most firms track a similar core combination of metrics that are applicable to almost every portfolio company and important to every investor (Revenue, Cash, Burn, Runway, EBITDA, Headcount, etc).

Some firms like to add an additional layer of detail and include metrics such as OpEx, Customer Count, Gross Margin, CAC, etc.

A very small cohort likes to add another customized portion, asking for industry-specific metrics such as SaaS Magic Number, Rule of 40, Health Plan Contracts, or Tradespend.

Requested metrics change as customers seek to track more types of metrics as they expand their portfolio and Aumni expands its offering.

Q. Do customers ask for projections? Do they request budgets as well?

Kyle

Yes, most customers request projections, and some firms seek budget metrics as well. Fortunately, Aumni's platform roadmap accommodates this.

Adam

Yes to both. Projections more often than budget - most companies in early stages don’t often have more than one forecast. As they continue to grow, they might move to a more robust forecasting system and have multiple forecasts.

Q. How many years of projections do firms typically ask for?

Kyle

For collection customers, we recommend only one future quarter or year of projections to be entered into the form. For extraction customers, our team can extract up to one year’s worth of projection data from financial statements, board decks, and investor updates.‍

Adam‍

Most firms request 1-2 years of projections at most. Rarely do they ask for longer-term forecasts, as those tend to fall under Long-Range Plans (LRPs), which are more high-level and based on historical trends rather than detailed projections.‍

Q. Do firms ask qualitative questions? If so, what kind?

Kyle

Yes, firms often seek qualitative insights alongside numerical KPIs. Some of the most common questions include:

• Have you received any new non-dilutive funding this quarter?
• Are there any company-specific KPIs or impact metrics you’d like to report?
• Are you planning to raise capital or debt in the next quarter?
• Do you have a north star metric to report?
• Do you have additional context or details to share with investors?
• Do you know your current valuation or valuation cap?
• Have you raised capital or debt in the last quarter?
• What is your total amount of non-dilutive funding?

These questions provide valuable qualitative context that helps assess a company’s health beyond just the raw numbers. In particular, qualitative questions can be most helpful to provide performance context for early-stage companies that have minimal quantitative performance metrics available. 

‍Adam‍

Almost every firm asks at least 1-2 qualitative questions, but they often customize these based on their needs. Some firms prefer broader strategic questions, while others focus on specific industry concerns.‍

Q. How often do firms receive investor updates? Do they need to request them?

Kyle‍

Typically, investors receive investor updates at a minimum if they don’t have Information Rights. These investor updates come in many shapes and sizes but typically report on monthly or quarterly data and are brief. Depending on your investor status, you’ll also receive attachments of their latest financial statements. For pre-seed/seed stage companies, investors are also proactive in asking for a more ‘abbreviated’ investor update where they look to ask for cash on hand, burn, and any revenue.

Adam‍

Most firms receive quarterly investor updates, while a large portion also request monthly updates. If a firm is not on the investor mailing list, they can still request updates at any time during the collection period.‍

Q. In what ways do valuations and KPIs intersect in the collection process?

Adam

The core metrics and documents necessary for valuation processes usually align with the above asks from customers on the KPI side. We can ‘kill two birds with one stone’ by requesting a robust set of metrics and documents, providing all the information needed to perform valuations and ensure audit defensibility.

‍Aumni takes this one step further by extracting, collecting and ingesting these data points and docs so the investor doesn’t have to. They have all the digested data and docs at their fingertips to plug into an internal model or package and send to a third party service provider.

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More on Aumni’s KPI solutions

Discover how Aumni can help automate KPI collection and extraction to complete reporting, portfolio management, and company performance workflows.

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