Cogniphy Prosper Pulse

At Cogniphy Angel Fund, our approach to investing is holistic, blending the quantitative power of metrics with the qualitative insights from intangible factors. Our investment philosophy centers on three key pillars: domain-specific focus, diverse startup stages, and thematic investments. While metrics are indispensable for assessing growth and profitability, we also deeply value the intangible elements that can determine a startup’s ultimate success.

Introduction: The Dual Lens of Metrics and Intangibles

Startups thrive in a landscape marked by rapid change and uncertainty. Unlike established businesses, they have the agility to pivot and innovate. However, identifying the right metrics that reflect true performance and growth potential is crucial. Beyond metrics, the human elements—vision, passion, and adaptability—play a pivotal role.

Our Investment Thesis and Metrics

Our investment thesis at Cogniphy Angel Fund is guided by three core elements:

• Domain-Specific Focus: Investing in emerging tech, healthtech, fintech, retail tech, IoT, drones, cybersecurity, and unorganized sector disruptors.
• Diverse Startup Stages: From MVP/pre-revenue to early stage and growth stage, we support startups across various development phases.
• Thematic Investments: Emphasizing unified customer experience, productivity, efficiency, and innovative supply chain/logistics solutions.

Key Metrics We Value

A. Acquisition Metrics:

• Conversion Rate (CR): The percentage of visitors who take a desired action (e.g., sign up, purchase). High CR indicates a strong product-market fit.
• Click-Through-Rate (CTR): The ratio of clicks to impressions for ads or content, reflecting marketing effectiveness.
• Virality Coefficient (K factor): Measures the organic growth generated by current users. A K factor greater than 1 signals exponential growth.

Our Take: Acquisition metrics reveal the effectiveness of your initial touch points with customers. Strong acquisition metrics suggest a scalable business model.

B. Activation Metrics:

• Activation Rate: The percentage of users who achieve a key milestone, indicating they find value in your product (e.g., making their first purchase).
• Time to Activate: The time it takes for a user to reach the activation event. Faster activation correlates with higher user satisfaction.

Our Take: Activation metrics are about the first impression. They reflect how quickly and effectively you can deliver value to new users.

C. Retention Metrics:

• Customer Retention Rate (CRR): The percentage of customers who continue using your product over time.
• Churn Rate: The percentage of customers who stop using your product. Lower churn suggests higher satisfaction.
• Cohort Activity Heatmap: Tracks engagement levels of different customer groups over time, highlighting trends and improvement areas.

Our Take: Retention metrics are a testament to your product’s lasting value and user satisfaction.

D. Revenue Metrics:

• Monthly Recurring Revenue (MRR): The consistent monthly income from subscriptions.
• Annual Contract Value (ACV): The average yearly revenue per customer.
• Customer Lifetime Value (LTV): The total profit expected from a customer over their lifetime.

Our Take: Revenue metrics indicate the financial health and growth potential of your startup. They are crucial for sustainable growth.

Intangible Factors That Matter

While metrics provide a quantitative view of a startup’s performance, several intangible factors are equally important in our investment decisions:

• Founding Team:
  1. Vision and Passion: A clear vision and passion for the product or service.
  2. Expertise and Experience: The team’s background, skills, and domain knowledge.
  3. Cohesion and Resilience: The ability to work well together and navigate challenges.
• Market Opportunity:
  1. Size and Growth Potential: The potential market size and growth prospects.
  2. Competitive Landscape: Understanding the competition and the startup’s unique value proposition.
• Product Innovation:
  1. Differentiation: How the product stands out from competitors.
  2. User Experience: The quality of the user experience and customer feedback.
• Adaptability:
  1. Agility: The ability to pivot and adapt to market changes.
  2. Learning Mindset: Willingness to learn and improve based on feedback and data.
• Cultural Fit:
  1. Alignment with Values: Shared values and vision between the startup and Cogniphy Angel Fund.
  2. Commitment to Impact: Dedication to making a positive impact beyond financial returns.

Our Take: Intangible factors often determine the long-term success of a startup. A strong team, clear vision, and adaptability are critical components.

Questions We Ask Founders

In addition to metrics and intangible factors, we ask specific questions to understand the potential of a startup:

• Is There a Great Management Team?
  • We look for teams with the right skills, drive, and temperament to grow the business.
• Is the Market Opportunity Big?
  • We seek businesses with the potential to scale significantly.
• What Positive Early Traction Has the Company Achieved?
  • Early traction indicates product-market fit and growth potential.
• Are the Founders Passionate and Determined?
  • Passionate and determined founders are more likely to overcome challenges.
• Do the Founders Understand the Financials and Key Metrics of Their Business?
  • Founders need to have a strong grasp of their business’s financials and key metrics.
• Has the Entrepreneur Been Referred to Us by a Trusted Colleague?
  • Warm introductions from trusted colleagues are valued.
• Is the Initial Investor Pitch Deck Professional and Interesting?
  • A compelling pitch deck is crucial for capturing our interest.
• What Are the Potential Risks to the Business?
  • We need to understand the risks and how they are being mitigated.
• Why Is the Company’s Product Great?
  • The product must be unique and valuable.
• How Will our Investment Capital Be Used and What Progress Will Be Made With That Capital?
  • We want to know how our investment will be utilized and the expected outcomes.
• Is the Expected Valuation for the Company Realistic?
  • Valuation expectations must be reasonable.
• Does the Company Have Differentiated Technology?
  • Differentiated technology is often a key success factor.
• What Is the Company’s Intellectual Property?
  • Intellectual property can be a significant asset.
• Are the Company’s Financial Projections Realistic and Interesting?
  • Projections need to be believable and based on reasonable assumptions.
• Is Your Legal Formation Clean and in Compliance with Applicable Laws?
  • Legal compliance is essential.

Conclusion: The Cogniphy Perspective

In the ever-evolving landscape of startups, metrics play a pivotal role in guiding decision-making and driving growth. At Cogniphy Angel Fund, we believe that understanding and optimizing these metrics is crucial for achieving product-market fit, improving customer retention, and ensuring long-term profitability. However, we also recognize the importance of intangible factors such as team dynamics, market opportunity, and cultural fit. By focusing on both quantitative metrics and qualitative insights, startups can navigate challenges and achieve lasting success.

Join the Conversation

• Share Your Thoughts: How do you use metrics and intangible factors in your startup?
• Connect with Us: Follow Cogniphy Angel Fund for more insights and updates at https://linktr.ee/cogniphy

Together, let’s build data-driven, sustainable businesses that deliver real value to customers and stakeholders alike.

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