What metrics are evaluated during due diligence on a prospective portfolio company?

Sweater's Investment Team conducts a robust and thorough due diligence process on every company the Sweater Cashmere Fund invests in. Which metrics they evaluate is in some part dependent on which industry the company operates in.

Metrics evaluated for all prospective portfolio companies

As part of the standard due diligence process, Sweater's Investment Team analyzes every company across the following categories:

  • Market: Total addressable market (TAM), exit analysis, competitive landscape, product-market fit 
  • Team: Founder experience, key hires
  • Go-To-Market Strategy: Customer acquisition strategy (channels, costs, efficiency), product roadmap
  • Financials: Company historicals and projections, underlying assumptions and market validation
  • Risks: Market/acquisition/team risks and mitigating factors

Industry-by-industry metrics

Going deeper into the due diligence process, the metrics assessed for each company will vary according to their industry. Following are examples of metrics that may be examined for a few industries that fit the Sweater Cashmere Fund's investment thesis. This list is not meant to be exhaustive as additional metrics may be included in diligence based on a company's individual business model and operations.

Key metrics for B2B:

  • ARR/MRR (annual/monthly recurring revenue)
  • Growth rate
  • Cash burn
  • Cohort analysis (retention and churn)
  • Gross margin
  • Payback period
  • CAC (customer acquisition cost)
  • LTV (lifetime value)
  • LTV:CAC ratio
  • ACV (average contract value)
  • Customer conversion rates
  • Sales cycle

Key metrics for Consumer Tech:

  • GMV (gross merchandise value)
  • Net revenue
  • Growth rate
  • Cash burn
  • MAU/DAU (monthly/daily active users)
  • Cohort analysis (retention and churn)
  • Gross margin
  • CAC (customer acquisition cost)
  • LTV (lifetime value)
  • LTV:CAC ratio
  • Customer conversion rates

Some key metrics for Consumer Products:

  • Net revenue
  • Growth rate
  • Cash burn
  • Cohort analysis (retention and churn)
  • Gross margin
  • CAC (customer acquisition cost)
  • LTV (lifetime value)
  • LTV:CAC ratio
  • AOV (average order value)
  • Distribution (retail vs. wholesale vs. online)
  • Velocity