Lifetime Value (LTV)
Definition
LTV is the total gross profit a customer generates over their entire relationship with the company, driven by revenue per customer, gross margin, and retention.
How it comes up in fundraising
Paired with CAC, LTV defines whether growth is worth buying: an LTV-to-CAC ratio of 3 or more is the standard SaaS benchmark.
Frequently asked questions
How do I calculate LTV for an early startup?
With limited history, use average revenue per account, gross margin, and observed churn to estimate; label it clearly as an estimate, since investors will.
Why use gross profit rather than revenue in LTV?
Because only margin funds the business; revenue-based LTV flatters low-margin models.
Round Funded resources
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