Howard Morgan, the Managing Partner of First Round Capital has a simple and practical view on evaluating Internet-based businesses:

If you have a business that’s based around the internet, basically only two numbers we need to know: What’s the cost to acquire a customer? What’s the lifetime customer value? If the lifetime customer value is higher the than cost to acquire, you’ve got a business. If it isn’t, you don’t.

All business owners – and not only those building Internet-based businesses – should follow this advice. Here’s Howard Morgan’s short video on this subject.

Do you agree?