i)How does churn relate to the VC's magic number metric? Why are VCs concerned about the

magic number and not focused on customer lifetime value and the LTV/CAC ratio? How do

these metrics differ?

Following are the two ways CLV/LTV and CAC can relate

CLV = (m * L) - CACORCLV = (m/CR) - CAC

m = contribution margin generated from a customer in a year

L= expected purchasing life of a customer

CAC = upfront cost of acquiring a customer

Magic Number = (Change in revenues between this quarter and the prior quarter) * 4

Marketing expenditures in the prior quarter

VC's usually like to see a magic number of .75 and above preferably more than 1.