KPI
Also known as Key Performance Indicator, Key Performance Indicators
A KPI (key performance indicator) is a quantifiable measure tied to a specific business objective, used to track progress toward that objective over time. KPIs are a structured subset of metrics: every KPI is a metric, but most metrics are not KPIs.
In depth
A KPI is a metric with three things attached: an objective, a target, and an owner. Strip any of those and what remains is a metric, not a KPI. The distinction matters because companies frequently mistake dashboards full of metrics for performance management. The dashboard tracks what is happening. The KPI commits to what should happen and to who is responsible if it does not.
KPIs sit at two levels. Company KPIs tie to board objectives: ARR, net burn, cash, headline retention. Team KPIs cascade from those: sales pipeline coverage from ARR, CAC payback from net burn, NPS from retention. Cascading is what prevents KPIs from drifting into theater. Every team KPI should mathematically or causally roll up to a company KPI.
Why it matters
In a venture portfolio, KPI quality is a leading indicator of governance maturity. Founders who run on a tight set of well-defined KPIs make faster, more honest decisions than founders who run on intuition and spreadsheets with thirty rows. LPs and IC members read KPI dashboards as proxies for management discipline. The CFA Institute's KPI survey of analysts and portfolio managers reports that consistent, narrowly scoped KPI disclosure improves the perceived quality of corporate reporting.
Worked example
A Series B SaaS company defines its company KPIs and the team-level KPIs they cascade into:
| Company KPI | Owner | Team KPI (cascade) |
|---|---|---|
| ARR | CRO | Pipeline coverage, win rate |
| Net dollar retention | CCO | Logo retention, expansion ARR |
| Net burn | CFO | Headcount cost, vendor spend |
| Gross margin | COO | COGS per customer, support load |
Pipeline coverage rule: 3x quarterly ARR target
Quarterly ARR target = $4M new ARR
Required open pipeline = $4M × 3 = $12M
If pipeline coverage drops below 3x, the CRO has a defined KPI breach and a 30-day plan obligation to the CEO. The KPI is doing what a metric cannot: triggering action.
Frequently asked
What is the difference between a KPI and a metric?
A metric is any quantified observation. A KPI is a metric explicitly linked to a strategic objective, tracked on a defined cadence, with a target and an owner. Page views is a metric. Monthly active users with a quarterly target tied to retention is a KPI.
How many KPIs should a startup track?
Five to ten at the company level, scaling down to two or three per team. The CFA Institute's KPI survey found that investors and analysts rate KPI disclosures as more useful when companies report a narrow, consistent set tied to strategy, rather than a long undifferentiated list. Signal-to-noise degrades quickly past roughly ten headline KPIs.
What are good KPI examples for a SaaS company?
ARR, net dollar retention, gross retention, CAC payback, magic number, and net burn are the standard six. They cover growth, retention, efficiency, and cash. Adding more usually adds noise. Subtracting any of the six usually leaves a blind spot.
What makes a KPI well-designed?
Four properties: directly tied to a stated objective, measurable from existing data, sensitive to management action, and stable enough to track quarter over quarter. KPIs that fail any one of these become vanity numbers within two reporting cycles.