In a recent pitch, an entrepreneur told us that his software client was being downloaded by 10,000 new users a week. The number was an interesting one but it led to many more questions that the entrepreneur was unable to answer at that moment (e.g., how many users become paying customers?, what's the attrition rate?, etc.). To his credit, the entrepreneur had tracked all that data and gave us access to it at a later date, but at that time it left a number of unanswered questions about adoption, sales, market, etc., as well as the rigor of that entrepreneur's analysis.
Statistics can be incredibly powerful and venture capitalists love them. We often invest in emerging markets or technologies. As a result, we can only predict the speed of adoption of a new technology or the ways in which a new market will develop. While we certainly can look to historical trends and past patterns of adoption in related markets, the most powerful tool we use in predicting the future of a particular product or technology is its past performance. If it took a company a year to attract its first thousand customers, six months to attract its second, and three months to attract its third, the trend is an interesting one, even if it doesn't assure that the next thousand customers will sign up in a month and a half. And that trend alone may be sufficient information to convince a venture investor that your opportunity is an interesting one.
But have no doubt that statistical analysis is a slippery slope. For every statistic there are a hundred interpretations and a thousand more statistics that may be helpful to sort out which interpretation is the correct one. And each venture capitalist with whom you meet will likely focus on a slightly different aspect of that statistical analysis. So the best thing you can do is track every statistic that you believe is crucial to the understanding of your business, know those statistics cold, and be prepared to explain why it is you believe that those are the key metrics for tracking your progress. The better you understand those statistics, how they impact your business model, and how they've changed over time, the more persuasive you will be when pitching your company.