Pre-PMF startup? Chasing ARR might hurt you

When it comes to reporting revenue to investors, early-stage founders often feel trapped in a game of numbers. You’re tasked with driving ARR, hitting user acquisition goals, or building revenue forecasts on little data for the next big pitch or board meeting. And while these revenue metrics undeniably matter, there’s a subtle but crucial difference between setting numeric targets and truly understanding what the market is ready to give you.

For founders at the start of their startup journey, it’s easy to set targets of “acquire 1,000 users in 12 months” or “get to $1M ARR next year” . You might even have investors nudging you in that direction. But here’s the catch: these numbers are often less about market demand, and more about our own internal expectations. No amount of metric chasing or growth goals will hit the mark if they’re not deeply aligned with real market needs.

Not only that, but to find PMF, you will often have to sacrifice short-term revenue. This is something that a lot of founders - including myself - struggle to come to grips with.

So, how should early-stage founders approach revenue reporting when what really matters is understanding the market you’re trying to serve?
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Revenue reporting is a learning tool, not a scorecard

Early on, revenue metrics should be more about insight than achievement. Investors may be asking for big numbers, but the reality is, revenue data (especially for a pre product-market fit company) often tells a much subtler story. This is where many founders miss the point. Revenue isn’t just a score; it’s a signal. And revenue reporting is a chance to bring transparency to that signal for both you and your investors.

What insights to focus on:

1. Look at product signals: What’s the response from your first paying customers? How many repeat users are you seeing, and how long are they sticking around? Instead of focusing solely on ARR growth, look at revenue trends that indicate the market’s appetite for your product.
2. Keep iterating: If a feature directly drives upgrades or renewals, highlight this in your revenue report. Show how each iteration brings you closer to PMF and connects to any upticks in revenue. Each change based on customer insights and each positive response is worth more than a quick revenue boost.
3. Spot recurring themes: Watch for patterns in who is buying and why, and document these learnings. Does one industry segment seem to engage more actively or generate more revenue? Use these signals to define and focus your sales efforts in specific niches that align with your early product strengths.
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Quantify your learnings

Most board members know early-stage growth is rarely smooth. Instead of using revenue reporting solely to highlight wins, bring the learnings front and center. This shows investors and board members the momentum and your understanding of the market.

Include qualitative KPIs to your reporting

Add more value to board discussions by including qualitative metrics that indicate your learning rate:

• Customer interviews: Track the number of interviews or discovery sessions you’re conducting and share the key takeaways.
• Product improvements: Show how customer insights have led to product improvements. Even if these don’t yet translate into massive ARR increases, these metrics can demonstrate your commitment to refining product-market fit.
• Response rate: Show how quickly customer feedback is acted on. This shows investors you’re not just iterating blindly but quickly responding to real, validated market signals.

This data will help you give more flavour to revenue metrics, which most likely are not that impressive at this point.
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How revenue reporting can influence decision-making

For many founders, early-stage revenue goals become a distraction. While ARR or user acquisition metrics provide short-term direction, an effective decision-making framework will steer the company even when numbers dip or market dynamics shift.

Here’s a better framework:

1. Prioritize learnings over sales: Make market or user feedback a core metric. Track how feedback correlates with your revenue growth rather than using revenue as the sole success indicator. This will guide your decisions far better than arbitrary ARR targets.
2. Become more specific on how you define your north star: Instead of saying, “we need $1M ARR,” identify the specific customer profile that’s most likely to reach that $1M target. Then, optimize for understanding that audience.
3. Keep focused on qualitative revenue signals: For early-stage companies, doubling down on the “why” behind each sale is vital. When reporting revenue, contextualize it by explaining how each sale or renewal represents a concrete demand signal from the market. For example, Decipad started including customer stories (e.g. a customer quote) from our early adopters in our monthly investor updates.

Turning revenue reports into your startup story

Investors and board members appreciate founders who share a long-term vision, and revenue reporting is part of that vision. Rather than presenting revenue as a fixed milestone, position it as a step along a growth journey with clear, consistent ties to customer needs. This transparency builds trust, even if ARR isn’t where everyone initially hoped it would be.

When you set up a narrative, it’s easier to frame setbacks as valuable feedback, recalibrate investor expectations, and show how your team is honing in on sustainable growth. This approach shows investors that you’re not just chasing numbers.

Learnings over revenue

For early-stage founders, revenue reporting should be less about meeting predefined numbers and more about understanding how those numbers reflect product-market alignment.

Every revenue report becomes a checkpoint in your journey, aligning the business more closely with real customer needs and market demand.

So, as you approach your next board meeting or investor pitch, remember this:

ARR may be the number you report, but learning is the number you’re actually growing.

By embedding this narrative into your revenue discussions, you empower your team and stakeholders to appreciate the ongoing process of experimentation and iteration, rather than just focusing on the destination. This is far more valuable in these early stages than a raw ARR projection.