What is Cash Conversion Score?

Allan and Lauren sit down with Dave Kellogg, Executive in Residence at Balderton Capital, to dig into one of the most important — and misunderstood — efficiency metrics in SaaS: Cash Conversion Score.

What is Cash Conversion Score?

Cash Conversion Score measures how efficiently a company converts invested capital into recurring revenue. It gives investors and operators a single number to assess whether growth is being achieved at a reasonable cost.

In this episode, Dave breaks down the differences between three related but distinct concepts:

• Cash Conversion Score — the ratio of ARR to total capital raised
• Capital consumption — the raw amount of cash burned to reach a given revenue level
• Growth Efficiency Index — a measure of how much new ARR is generated per dollar spent

Understanding where each metric fits helps you tell a cleaner story to investors and internal stakeholders alike.

Why Cash Conversion Score matters for funding

Dave is direct: investors will look at your capital consumption efficiency. It may not be the first question in a funding conversation, but it will come up — and you need to be ready with more than a number.

"You should look at your overall capital consumption efficiency because people are going to look at it. It's not the first thing they're going to ask about, but as with any metric, the number matters, but the story matters more."

A strong Cash Conversion Score signals disciplined growth. A weak one demands explanation. Either way, knowing your score — and the context behind it — puts you in a stronger position.

The 'leaky bucket' problem

Dave also connects Cash Conversion Score to what he calls "leaky bucket" metrics: the retention and churn figures that quietly undermine growth efficiency. If you're acquiring customers faster than you're losing them but still burning through capital, the leak is often hiding in your unit economics.

The metrics that reveal the full picture include:

• Cash Conversion Score — capital-to-ARR efficiency
• Retention — the baseline health of your revenue base
• Churn — where the bucket leaks
• Customer Acquisition Cost — the price of each new customer
• ARR — the revenue foundation everything else is measured against
• CAC Payback Period — how long it takes to recoup acquisition spend

Go deeper on metrics

Want to explore any of the SaaS metrics from this episode? MetricHQ is a free, independent resource with definitions, benchmarks, and context for hundreds of business metrics and KPIs.