Y Combinator Question 29: What Number Do You Track to Show How Well Your Company Is Doing?

This Y Combinator question gets to the heart of your startup’s performance metrics. Startups must have a clear, primary metric that reflects the overall health and progress of the business.

Frederik Van Lierde

May 22, 2024

Y Combinator Question 29: What Number Do You Track to Show How Well Your Company Is Doing?

Part of the series:
Y Combinator: 40 Questions and 40 Answers

This number should encapsulate the core achievements and operational success of your company.

1. Why Y Combinator Asks This Question

Y Combinator is looking to understand which key performance indicator (KPI) you consider most indicative of your company’s success.

This metric often provides a snapshot of the company’s health and trajectory, helping investors quickly gauge progress and potential. The chosen KPI should align with your business goals and provide insight into your strategic priorities and operational efficiency.

2. How to Answer the Question

To answer this question, identify the single most critical metric that your startup tracks regularly and explain why this number is particularly significant.

This might be monthly recurring revenue (MRR), customer acquisition cost (CAC) paired with lifetime value (LTV), user engagement rate, or any other metric that directly reflects the success of your core business operations. Provide context on how this metric influences business decisions and strategic planning.

For example, if your startup is a SaaS platform, you might focus on MRR as your key metric because it directly reflects the scale of recurring revenue, which is critical for the sustainability and growth of your business model.

3. How NOT to Answer the Question

Avoid mentioning a broad range of metrics without specifying which one is the most critical. Don’t focus on vanity metrics that might look impressive but don’t actually contribute to strategic decisions or reflect the company’s true health.

Show that you understand which numbers truly matter and why.

4. An Example, Based on a Tech Startup

Let’s consider a tech startup, EcoEnergy, that develops smart thermostats for residential use. Here’s how they might answer the question:

Key Metric: “Our primary metric for tracking how well our company is doing is the ‘active installations per month’ of our smart thermostats. This number not only measures our sales performance but also indicates our growth in market penetration and customer adoption.”
Why This Metric Matters: “Active installations are crucial for us because each new installation represents not only an immediate sale but also a long-term engagement due to our subscription-based service for energy management analytics. Tracking this helps us understand our market reach and directly correlates with our recurring revenue.”

Y Combinator delves into the core metrics that startups use to gauge their progress, emphasizing the importance of a primary KPI that encapsulates the business’s overall health and operational success.

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