- Deal Lead, Wellington Access Ventures
Switzerland, Institutional
ChangeThe views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
In the ever-evolving world of venture capital (VC), change is the only constant. Over recent months, VC markets have taken an interesting turn, and founders are finding themselves facing two key implications:
- Capital raises just got tougher, and
- The growth-at-any-cost era is behind us
To chart a course through this capital-scarce landscape, we propose a new guiding star: growth efficiency. It's time to explore why growth efficiency matters, especially for diverse and underrepresented founders.
Why growth efficiency matters for the next generation of entrepreneurs
Diverse and underrepresented founders often face an uphill battle when seeking access to capital. Shockingly, a mere 1% of venture capital finds its way to Black-founded companies1 and less than 3% goes to female founders.2 This underscores the imperative for diverse and historically overlooked founders to showcase robust growth efficiency metrics.
Enhancing growth efficiency serves a dual purpose. It not only broadens your access to capital but also reins in your burn rate, reducing your reliance on venture assets and bolstering your readiness for the future.
Metrics that matter to the VC world
But what metrics should you focus on to turbocharge your growth efficiency? Amid a sea of options, we highlight two key metrics: growth efficiency and the Magic Number.
Metric #1: Growth efficiency — the gold standard
This metric is the heartbeat of your business's growth efficiency. Ideally, your company should aim for a growth efficiency of 1.0 or higher, signifying that for every dollar invested, you're generating a dollar in revenue. However, this is a target to work toward; your business doesn't need to hit 1.0 overnight.
What matters is demonstrating a positive trend toward higher growth efficiency and explaining the steps you're taking to enhance this metric. VC firms often look closely at this trend line to understand if your improvements stem from cost reductions or more efficient customer acquisition. Mastering this growth efficiency metric helps you communicate that your company is on the right trajectory.
Metric #2: The Magic Number — honing in on sales efficiency
The Magic Number peels back the layers of your go-to-market strategy, highlighting your sales efficiency. A figure above 1.0 signifies a highly efficient sales effort, while anything below 0.5 signals room for improvement. A full grasp of this metric empowers you to pinpoint both strengths and inefficiencies in your sales process and to identify where investments or changes may be warranted.
For instance, a low Magic Number might prompt you to streamline or redirect aspects of your sales strategy, whereas a high Magic Number could justify increased investments in marketing and sales to leverage your sales efficiency.
Bottom line: The age of growth efficiency in venture capital
For those who embarked on entrepreneurial journeys in recent years, growth efficiency might not have been a top priority in the prior regime of unbridled expansion. However, for early-stage diverse and underrepresented founders today, these metrics can be transformative. They not only can distinguish your company but also remain indispensable throughout its life cycle.
Investors in private equity and public markets closely scrutinize how a company's growth efficiency measures up against peers. Context is key; these metrics gain significance when aligned with your company's specific circumstances and growth prospects. You are the foremost authority on your business, so understanding the factors driving any inefficiencies and profiling how your team is steering toward more efficient growth is paramount.
We stand alongside our portfolio companies on this journey. As you navigate the constantly shifting landscape of venture capital, we are here to collaborate and facilitate your effort to unlock your full potential in this new VC era. The rules of the game are rapidly evolving — let's embrace the change.
1Source: TechCrunch, ‘The old guard in venture reigns supreme’. 2 August 2023. | 2Source: Deloitte, “Diversity in Venture Capital – VC Human Capital Survey.” Fourth edition conducted in 2022.
Stay up to date with the latest market insights and our point of view.
Showing
of
Insights Posts
Decoding impact expectations: best practices for impact investors and companies
We share three recommendations each for impact investors and companies to help them better understand and manage each other's expectations.
6
min
Article
2025-10-31
Private equity deep dive
We explore four key private equity questions to help investors better understand how these strategies compare and complement each other in a portfolio. In particular, we highlight the distinct opportunity sets, risk-return characteristics, and portfolio roles of venture capital and buyout strategies.
5
min
Article
2025-09-30
CLO equity insights: Private credit
Explore how the convergence of public and private markets is impacting CLO equity, including the unexpected benefit it has driven in recent years.
5
min
Article
2025-08-31
Human capital management for private companies
We discuss why effective people management is critical for private companies and outline four strategic focus areas that can help companies navigate evolving employee needs, regulatory changes, and investor expectations.
7
min
Article
2025-08-28
Biotech IPOs in 2025: Quantity, quality, and best practices
We explore today's biotech IPO market, highlighting recent market trends, key characteristics for successful biotech IPOs, and best practices to sustain momentum as a public biotechnology company.
4
min
Article
2025-08-31
AI governance for private companies
Explore the critical need for AI governance for private companies, addressing evolving risks, regulations, and best practices for responsible gen AI usage.
8
min
Article
2025-07-30
Understanding private equity performance
We dive deep on best practices for measuring and benchmarking private equity performance. In addition, we outline the J-curve and the impact of fund lifecycle on returns.
Article
2025-07-31
Disappearing unicorns: The importance of capital efficiency in a higher-for-longer rate environment
Members of our late-state growth equity team share their views on the impact of interest rates on venture capital activity — including the ability of companies to reach “unicorns” status.
8
min
Whitepaper
2025-07-31
Beyond the noise: Four key drivers of private credit opportunities
With recent negative headlines around private credit, we think it's crucial to move beyond the noise and explore the asset class's enduring trends like disintermediation, the convergence of public and private markets, and much more.
4
min
Article
2025-06-30
Cybersecurity for private companies
We highlight today's rising cybersecurity risks, explore how they impact private companies, discuss key regulatory considerations, and share best practices for companies facing these threats.
8
min
Article
2025-06-30
Alternative Investment Outlook
This collection provides timely ideas across the spectrum of alternative investments -- including hedge funds, private equity, and private credit.
Article
2025-06-30
URL References
Related Insights