Leading Indicators Startup Founders Actually Track

TL;DR: Leading indicators are the early metrics that move before revenue does — conversion ratios, activation, usage frequency, and referral rate. Based on 200+ founder interviews on the PMF Show, the most predictive early-stage indicator is conversation-to-conversion rate, where above 50% signals real pull. Pick one leading indicator tied to your core value moment and track it weekly.

After interviewing 200+ founders on the PMF Show, the pattern on leading indicators for a startup is consistent: revenue is a lagging indicator that tells you what happened one to two quarters ago. The founders who scaled fastest were watching something else entirely — a conversion ratio, an activation rate, a referral count, a usage frequency — and those numbers moved months before ARR did. This article covers the six leading indicators founders named specifically, with the numbers attached.

What are leading indicators for a startup?

A leading indicator is any measurable behavior that reliably precedes revenue. According to Jason Van Gaal, co-founder of root, there are roughly six standard ones worth measuring, and the least-used of them is the most informative early on.

"I think there's six standard ones that you can measure. One I would say that is interesting is we look at very early indicators is conversation to conversion ratio. So like that's something that generally is not typically measured but especially useful in a B2B business where there's a sales process." — Jason Van Gaal, root

His threshold for excitement is concrete:

"You have five conversations and four of them become customers and you've only had 10 conversations and you have eight customers. I'm very excited." — Jason Van Gaal, root

That's an 80% conversion rate on a base of ten conversations. As discussed on the PMF Show, the working benchmark for early B2B is roughly 50% demo-to-close. The reason it leads is arithmetic: at 50%+, every incremental conversation adds revenue, so pipeline volume becomes the only variable. Below 50%, adding pipeline just adds cost.

Key stat: 50% demo-to-close is the practical threshold; root gets excited at 80% on a base of ten conversations.

What's the best leading indicator before a startup has revenue?

For network and platform businesses, it's the size and growth rate of the user base — even when those users pay almost nothing. Blake Hall, founder and CEO of ID.me, told his investors explicitly that he was optimizing for adoption over price.

"The North Star metric for me, since we're a network-focused business, was always about the user base though. So what I was tracking, and I actually told our investors, I care enough that they're paying enough money for it to matter, but the early nodes are actually driving adoption and helping us drive greater utility. So I want them to pay less because they're providing value to us in a different way." — Blake Hall, ID.me

The doubling sequence Hall tracked from 2013 onward: 1 to 2 million users, 2 to 4, 4 to 8, 8 to 16, 16 to 32 — a clean annual double for five straight years. Revenue lagged badly through that period; ID.me stalled in low single-digit millions in 2013–2014 while penetrating the public sector.

The payoff arrived a decade later. ID.me now has 130 million users, over $150M in ARR, growth above 30% year over year, and gross margins pushing through 80%. In 2021 alone the company signed up over 40 million Americans.

Key stat: ID.me's user base doubled annually for five years — 1M to 32M — while revenue stayed flat in the single-digit millions.

Should a startup track one leading indicator or several?

One at a time, and expect it to change. Jannick Malling, co-founder and co-CEO of Public, described a north star that evolved as the business matured.

"The North Star metric changed a little bit. In the beginning, it was users, right? How many accounts were signing up? And obviously, there was a bunch of secondary metrics that were very bold about engagement and retention and stuff. But to tell you the truth, those have always been stellar. So we realized, okay, we can just grow the number of accounts, we're going to do good." — Jannick Malling, Public

Then the business changed shape and so did the metric:

"Then I think it transitioned a little bit to be more asset-based. So that first deposit metric became really important for us... There was like one specific 18-month period where I think it went up 25 or 30x." — Jannick Malling, Public

The lesson embedded in that story is subtle. Public dropped engagement and retention as focus metrics not because they stopped mattering but because they were already excellent — measuring them further produced no decisions. A leading indicator earns its place only when it's the current constraint.

Key stat: Public grew its first-deposit metric 25–30x over a single 18-month period after switching north stars.

Can NPS work as a leading indicator for a startup?

For consumer products, yes — and at least one founder made it the primary metric over retention and daily actives. Koen Droste, CEO of Polarsteps, explained why retention was actually a misleading indicator for a travel app.

"No, we didn't. Even that was secondary, partly because of the dynamics of our app, because if you're a travel app, people might churn for a year and then they come back. So, if you're just live for a few months, you don't know if people churned or if they are going to come back on the next trip." — Koen Droste, Polarsteps

Instead the team anchored on Net Promoter Score, which started around 40:

"We always got back to if we can fix a Net Promoter Score and if people are really going to start recommending our app to their friends, then we will be successful as a company." — Koen Droste, Polarsteps

Polarsteps tracked sign-ups and daily active users as secondary, plus content creation — the number of "steps," their equivalent of a status update — as a proxy for genuine engagement. The principle generalizes: when your natural usage cycle is longer than your measurement window, substitute a sentiment or creation metric for a retention metric.

Key stat: Polarsteps built around an NPS starting near 40, treating retention and DAU as secondary because of a yearly usage cycle.

Which leading indicators predict retention and expansion?

Onboarding activation. It sits directly upstream of net revenue retention, and it is where most B2B products quietly fail. Mark Hughes, co-founder of Solidroad, treated activation as a physical process rather than a product metric.

"Onboarding activation, there could be small bottlenecks in the product you don't realize." — Mark Hughes, Solidroad

To find them, Solidroad went to customers in person. With Podium, based in Utah, the team had been messaging and getting ignored — so they showed up.

"We just doorstepped... they brought us into their office, we parked ourselves in one of their meeting rooms for three days and met with every single person who's using the tool. When we saw how impactful that was on usage and building relationships, we'd scale that." — Mark Hughes, Solidroad

The lagging result of that leading indicator: Solidroad reported 186% net revenue retention. Activation drove usage, usage drove expansion, expansion showed up as NRR twelve months later.

Key stat: Solidroad's focus on onboarding activation produced 186% net revenue retention.

What leading indicators matter once a startup is spending on acquisition?

Payback period, LTV:CAC, and — a metric most founders miss — year-over-year media cost inflation. Dean Brauer, co-founder of GoHenry, explained why the third one belongs on the dashboard.

"The interesting thing was also just thinking about year on year, once you have the marketing spend to look at your year on year spend and the CPM cost increase, that needs to be like fed back to the team to understand the baseline conversion rate improvements you need to gain just due to the cost of your marketing increasing." — Dean Brauer, GoHenry

His example is worth internalizing: if platform CPMs rise 12% year over year, your conversion rate must improve 12% year over year just to stand still.

"So if your Facebook spend is gonna increase, if Facebook's costs are gonna increase 12% year on year, right, just to pull a number out, your conversion rate needs to improve 12% year on year. That's where you're starting from next year." — Dean Brauer, GoHenry

GoHenry's payback ran a few months, in line with consumer SaaS norms. But the leading indicator was not payback itself — it was the delta between conversion improvement and media cost inflation.

Key stat: A 12% annual CPM increase requires a 12% conversion-rate improvement just to hold unit economics flat.

Key Takeaways: The Leading Indicators That Predicted Growth

1. Conversation-to-conversion is the earliest quantitative signal. root treats it as one of six standard indicators and gets excited above roughly 50%, with 80% on ten conversations as a strong read. 2. Track adoption before monetization in network businesses. Blake Hall deliberately priced ID.me low so early nodes would drive utility; the user base doubled annually from 1M to 32M. 3. Your north star should be your current constraint. Public dropped engagement and retention as focus metrics precisely because they were already excellent, and moved to first deposit — which grew 25–30x in 18 months. 4. Match the metric to your usage cycle. Polarsteps used NPS instead of retention because travel usage runs on a yearly cycle that short measurement windows can't capture. 5. Onboarding activation is the upstream driver of NRR. Solidroad's in-person activation work preceded 186% net revenue retention. 6. Referral rate is a leading indicator, not a vanity metric. Customers recommending your product unprompted precede the revenue those recommendations create by one to two quarters. 7. Watch media cost inflation, not just CAC. A 12% CPM increase requires a 12% conversion-rate gain just to break even on unit economics. 8. Revenue is a lagging indicator. Every founder on this list was watching something else move first — and each of those things moved months before ARR did.

FAQ: Common Questions About Leading Indicators for Startups

Q: What are leading indicators for a startup?

A: Leading indicators are early metrics that move before revenue — conversion ratios, activation rate, usage frequency, referral rate, and NPS. They're useful because they let you correct course one to two quarters before revenue would reveal a problem.

Q: What's the difference between a leading and a lagging indicator?

A: A leading indicator predicts future performance; a lagging indicator confirms past performance. ARR, churn, and profitability are lagging. Demo-to-close rate, onboarding activation, and referral rate are leading.

Q: How many leading indicators should an early-stage startup track?

A: One primary indicator at a time, with two or three secondary. Public tracked account sign-ups first, then switched to first deposit when that became the constraint — and grew it 25–30x in 18 months.

Q: What's a good demo-to-close rate for an early startup?

A: Roughly 50% is the working threshold discussed on the PMF Show. Above that, adding pipeline reliably adds revenue. Below it, you're likely paying to acquire conversations that won't convert.

Q: Can NPS be a leading indicator?

A: Yes, especially for consumer products with long usage cycles. Polarsteps made NPS its primary metric — starting near 40 — because a travel app's natural churn window is longer than any short measurement period.

Sources: Listen to the Full Founder Stories

• Jason Van Gaal, root — on the six standard leading indicators and why conversation-to-conversion is the most underused.
• Blake Hall, ID.me — on optimizing for adoption over price, doubling users from 1M to 32M, and reaching $150M+ ARR at 30%+ growth.
• Jannick Malling, Public — on shifting the north star from account sign-ups to first deposit and growing it 25–30x in 18 months.
• Koen Droste, Polarsteps — on using NPS instead of retention because of a yearly travel usage cycle.
• Mark Hughes, Solidroad — on onboarding activation as the driver behind 186% net revenue retention.
• Dean Brauer, GoHenry — on payback period, LTV:CAC, and why CPM inflation belongs on your dashboard.

Last updated: August 2026