Feb 3, 20232 min read

The Real Importance of a short Time To Value For Start-Ups is Reducing Risk.

The Time to Value (TTV) equation is a metric used to measure the amount of time it takes for a startup to generate revenue from its customers. This metric is critical for startups because it helps them understand how long it takes to recoup their investment and become profitable.

A short TTV is desirable for startups because it indicates that they can start generating revenue quickly, increasing their chances of long-term success and is, therefore, less risky.

What is Time To Value?

The TTV equation is calculated by dividing the startup's total investment by its monthly recurring revenue. This gives startups an estimate of how many months it will take to reach their break-even point or when their revenue equals their expenses.

The TTV equation is essential for startups because it helps them set realistic expectations for their revenue and determine if their business model is viable.

What are some Good TTV Examples

Three great and well-known examples of startups with incredible TTV:

Slack: Slack is a team communication platform that generated revenue

within a few months of its launch. This was due to its ease of use and integration with other tools, making it an attractive solution for businesses.

Square: Square is a payment processing company that was able to generate revenue within a few months of its launch. This was due to its innovative approach to payment processing, which made it easier for small businesses to accept payments.

Shopify: Shopify is an e-commerce platform that generated revenue within a few months of its launch. This was due to its user-friendly interface and ability to integrate with various payment processors, making it an attractive solution for online retailers.

Three well-known examples of startups with terrible TTV:

Theranos: Theranos was a healthcare startup that promised to revolutionize blood testing. The company could not generate significant revenue despite massive investment because its technology needed to work as promised.

Juicero: Juicero was a juice machine startup that could not generate significant revenue due to its product's high cost and limited target market.

Google Glass: Google Glass was a wearable device designed to display information in front of the user's eye. Despite significant investment, the company could not generate substantial revenue because of privacy concerns and its limited target market.

Final Thoughts

The TTV equation is a crucial metric for startups because it helps them understand how long it takes to generate revenue and become profitable. A short TTV can indicate a successful business model. In contrast, a long TTV can suggest that the startup may need to revise its strategy and is therefore at risk of failing..

About the Author

Adam Ryan is a Professor of Practice (Adjunct Professor) at Monash University and is a principal at Watkins Bay. Adam has over twenty years of start-up experience in Australia and the USA. An expert in Company Structuring for Innovation, Strategy, Mergers & Acquisitions, and Capital for early and growth-stage businesses.