User Acquisition: Strategy and What Venture Capitalists Look For

User Acquisition:Strategy and What VC’s Look For

January 12, 2015

1www.digishopgirl.com // www.brandfoundryvc.com

http://www.digishopgirl.com/

http://www.brandfoundryvc.com

Katya Constantine: DigishopGirl• 12 years of online marketing

experience

• Background in email and cross-channel marketing

• Led digital marketing efforts for brands including Expedia and Amazon

• Active industry blogger

2

Katya Constantine

www.digishopgirl.com // www.brandfoundryvc.com

http://www.digishopgirl.com


Sumeet Shah: Brand Foundry• 6 years of experience in startups

and private equity

• Handles sourcing, executing, and monitoring new opportunities

• Ran new business strategies at Gist Digital (development studio)

• Handled business development and project work at Gotham Consulting Partners (private equity consulting)

3

Sumeet Shah




Why Are We Here?• How to come up with strategy to acquire users

o Your mix of channels will vary dramatically depending on your industry, budget and scaling goals

• You want to raise VC moneyo Understand how VC’s look at user acquisition

o How will VC’s perspective affect your strategy

www.digishopgirl.com // www.brandfoundryvc.com 4



AgendaOBJECTIVE: Build and strengthen a roadmap for success to a) ensure traction for your startup and b) answer key questions from potential and current venture investors.

• The basicso Customer acquisition funnel

o Your first 1,000 users

• Channels an Metricso What matters most to venture capital firms

o What metrics are important for growth

• The processo How to achieve key metrics for traction

o Useful ways to showcase key milestones to potential (and current) venture investors

• The futureo How to ensure consistent traction within long-term growth roadmap

5www.digishopgirl.com // www.brandfoundryvc.com



Main Channels by Funnel Stage


Awareness

Consideration

Conversion

Service

Loyalty

1. Content/Viral2. Contests

3. PR4. Affiliate/Partners

1. Email2. Paid Search

3. Social Ads

1. Retargeting2. Email

3. Analytics4. Landing Page

1. Social Listening2. Reviews

3. Mobile

1. Email2. Content Mrkting

3. B2B-Content Marketing

An

alytics



Your 1st User• Lets say, I want to acquire 1 user

• Eureka! I should post something on my Facebook

• Boom! I got 5 users

• So far, So Good…




Users – 5; Cost - $0


Awareness

Consideration

Conversion

Service

Loyalty




3. Social Ads




3. Mobile



An

alytics

Social Media is Awesome!!






Your 1st 100 Users• I think I’ve run out of real friends

• I need to spend some moneyo Paid Search

o Social Ads

• Good news… I can get some users on Google and FB

• Bad news… I am spending $100 to get a customer




Users – 100; Cost - $100 per user


Awareness

Consideration

Conversion

Service

Loyalty




3. Social Ads




3. Mobile



An

alytics

So expensive!



Your 1st 1,000 Users• Ok, so my cost is $100 per user, but is that good

or bad?

• If you are going to keep spending money, you need an LTV model

• It is likely that what you are spending so far to acquire a user is too expensive

• How do I acquire more effectively? - Need more tools

• Conversion & Analytics




Users – 1000; Cost - $30 per user


Awareness

Consideration

Conversion

Service

Loyalty




3. Social Ads




3. Mobile



An

alyticsHammer

Anvil



The VC Angle: Why It Matters

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Growth Rates (Revenue/Users)• Price threshold that satisfies both

users and product costs• Marketing growth from WOM to

social media, SEO, paid search, etc.• Viral-ness of product portfolio

amongst potential and current users

Innovative, “Sticky” Products• Pure creative, first in market• Strong differentiators• Partnerships with brands/startups• Front-to-back platform connecting

product with technology (regardless of how tech-enabled product is)

Scale/Traction• Finding the right retail and/or

marketing channels• Evangelists, both in investor and

user landscapes• Correct use of content to match

product portfolio

The first 1,000 users is a great way to outline the efficiency and success of your startup. Overall, it’s a showcase of three major areas that venture capital firms are looking for when making early-stage investments.

Strong user growth helps to identify scale, growth rates (within revenue and/or user base), and the demand for your startup’s product portfolio.




100,000 Users – Not So Fast• Wow! I just discovered long tail keyword targeting – getting users cheaply is

a breeze

• Wait, what do you mean only 30 people a day search for a mechanical velociraptor?

• What may have worked for you early on, often doesn’t scale as your business grows

• Scalable user acquisition = experimentation




100,000 Users – ???!!!


Awareness

Consideration

Conversion

Service

Loyalty




3. Social Ads




3. Mobile



An

alytics



Analytics Overview


Key Areas for Improvement• Data which is relevant and

accurate• Dashboard with summary of key

metrics: daily and over time• Data analysis by key segments (i.e.

location, device, channel)• Performance analysis to determine

strongest ads, emails, etc.

Showcasing Results• Familiarity with analytical tools

and reports• Data visualization• Correct set-up of links and UTM

codes

Initial Investment• Google Analytics (free)• Leverage reports in existing tools

and platforms• Use of more advanced tools:

• Tableau• Optimizely• Looker• Raventools or Moz

Companies have access to a vast amount of data as a result of their online presence. Detailed data is available regarding a company’s website, email campaigns, social media presence and online advertising. Actionable insights can be discovered by analyzing this data and recognizing trends.

It is important to set up the right infrastructure to ensure the right data is accurately captured. Additionally, the correct tools make analyzing and visualizing the data much easier.



Paid Search Overview


Key Areas for Improvement• A/B Testing – ad creative• Control budgets at the Campaign

level• Control creative at the AdGroup

level

Skills and Competencies• Familiarity with key terms

important to your business• Understanding what a conversion

is worth• Analytics for determining

performance

Initial Investment• Platforms: Google Display

Network • Bing once you have a successful

program on GDN • Analytics

A well-designed paid search program can be very impactful in driving targeted traffic to your site. Paid search can help with driving targeted new users.

The bidding, campaign targeting and keyword strategy all greatly impact the success of your paid search channel.



Facebook Advertising Overview


Key Areas for Improvement• A/B Testing• Time of day/day of week• Audience segmentation• Visually appealing • Mobile vs. desktop

Skills and Competencies• Familiarity with audience targeting • Analytics for determining

performance

Initial Investment• Analytics: conversion tracking,

audience list segmentation• Research: customer persona• Additional templates and content• Program analytics

For certain types of businesses, Facebook allows for scalable targeted user acquisition.

The design, testing and segmentation of campaigns all greatly impact the success of the channel.



Email Channel Overview


Key Areas for Improvement• A/B Testing• Time of day/day of week• Subject line• Audience segmentation• Visually appealing • Readable and click-friendly• Automated drip campaigns• Frequency settings

Skills and Competencies• Familiarity with email platform• Some HTML experience• Graphic design• Analytics for determining

performance

Initial Investment• Email platform (i.e. MailChimp)• Welcome series templates and

content• Additional templates and content• Email capture tool for website

A well-designed email channel is essential for marketing and communication regardless of your industry. Email marketing is especially impactful when driving consideration and maintaining loyalty. It can also help with conversion during relevant sales/announcements.

The design, testing and segmentation of email campaigns all greatly impact the success of the email channel.



Retargeting - Why

Why it Matters

• Can be the best way to close the deal in today’s online landscape

o Multiple touches are key with distracted multi screen users

• Provides strong reminder to potential customers who are already aware of your brand

• Can build extremely specific campaigns:

o Segment audiences based on website browsing habits

o Establish timeframe to retarget potential customers

o Various platform options: Facebook, website display, Twitter

o Easily exclude current customers




To Whom it Matters

• Everyone!

• Can be highly effective for start-ups and small businesses

• Allows for an approach that is more precise and cost efficient instead of relying on volume or "spray and pray"

• Requires a baseline retargeting audience of only ~1,000 users


Retargeting - Who



To Get Started

• Perfect Audience is a great tool to develop your retargeting campaigns

• Based on needs, you can adjust:

o Ad types and platforms

o Weekly budget and bids

o Reporting at the campaign and ad level


Retargeting - How



Wow…That’s a lot of info!• Do I have to use all of it at the same time?

• NO… BUT:

Your optimal mix is likely to include at least a few of these channels – and change over time




Multi-Touch Example

Email Social


• Average open rate 25%

• 75% of customers don’t see the message

• Create your audience:o Extend your email to FB



But What AboutPaid Channels Free Channels


• Display

• LinkedIn ads

• Pinterest ads

• Twitter ads

• Content Marketing

• SEO

These are all great, but usually for specific industries and often don’t easily scale



Channels Across Funnel by Industry


Awareness

Consideration

Conversion

Service

Loyalty

Online Publisher

eCommerce Subscriptions Mobile App Sell to SMB B2B SMB/Local

1. PR2. Contests3. Content/

Viral

1. PR2. Content/

Viral3. Affiliate4. Contests

1. PR2. Content/

Viral3. Affiliate4. Contests

1. PR2. Content/

Viral3. Contests4. Affiliate

1. Visual Marketing

2. Content Marketing

1. Visual Marketing

2. Content Marketing

1. 1.Online Presence

2. 2. Content Marketing

3. Contests

1. Email 1. Email2. Social Ads3. Display4. Paid Search

1. Email2. Social Ads3. Display4. Paid Search5. Landing Pg

1. Email2. Social Ads3. Paid Search4. Display

1. Email2. Social Ads3. Paid Search4. Landing

Page

1. Email2. Paid Search3. Landing

Page

1. Email2. Paid Search3. Landing

Page4. Social Ads

1. Analytics2. Landing

Page3. Retargeting

(as needed)

1. Analytics2. Retargeting3. Landing

Page4. Social Ads


Page4. Social Ads


Page4. Social Ads

1. Analytics2. Retargeting

1. Analytics2. Retargeting

1. Social Presence/ Listening

2. Reviews

1. SocialPresence/ Listening

2. Reviews

1. SocialPresence/ Listening

1. Reviews(app store)

2. Social Presence/ Listening

1. Reviews 1. Reviews2. Social

Listening

1. Email 1. Email2. Refer a

Friend3. Loyalty

Program

1. Email2. Refer a

Friend

1. Email2. Refer a

Friend

1. Email 1. Email 1. Email



Metrics that Matter


Impressions

CTR

CPC

CAC

LTV

Scale

Am I reaching anyone at scale

Are my ads effective?

Does it hold at scale

Good INTERMEDIATE metric

What is it costing me to acquire?

What is a customer worth?



The VC Angle: Milestones & Keeping Us Posted

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For Potential Investors…• Monthly newsletters with “traction

bites” (key milestones that focus on user growth, revenue growth, revenue pipelines [current and potential], and partnerships)

• Use language that strongly outlines the relationships you’ve built

For Showing Awesomeness…• We care about showing off.

Seriously. (Because it satisfies our LPs and helps bolster reputation)

• Happy LPs = happy VCs = more investment capital available!

• Differentiators matter. Key data points will go into our personal investor newsletters.

For Current Investors…• Special newsletters outlining

production updates, partnership linkages, and calls for hires and media assistance

• GOOGLE GROUPS IS YOUR FRIEND. PLEASE USE IT.

• Direct lines are also your friend

Team and Roadmap are the two biggest pieces that venture capital firms care deeply about with early-stage investments. Each of the two has multiple sub-sectors, but collectively we care about startups hitting the right milestones.

Many matter to potential investors but there are key ones that must be seen for current investors. Moreover, those key milestones can be framed in ways to whet the appetites of potential ones.




The VC Angle: Looking at the Future/Exit…

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Business Metrics (Strategic)• Assets. Strategic investors/buyers

will look for key synergies that your startup will have with their businesses. They can swallow debt.

• Team Traction. This is different from venture as it refers to a focus on strength at the top.

• BRAND. Again, goes with growth!

The End of the Road…• IPO/Secondary Market. The strong

traction over the holding period encourages investors to get involved with team’s next venture.

• Strategic Sale. This is trickier as it depends on what’s next for each core member of the team.

Business Metrics (Venture)• Financials. It’s not so much about

profitability here (varies by sector) but more about relative hockey-stick growth on various levels.

• Team Traction. Cohesive teams + strong hires with experience = excited new investors!

• BRAND. Goes with growth!

As you as startups hit the annual milestones, most venture capital firms have an average holding period of 5 years. We have to look at the future, whether it’s selling shares in the secondary market, going through the IPO, or finding a strategic buyer.

The difference here versus before is that the milestones that both venture and strategic (e.g., large corporate) investors look at can differ. It also comes back to why user growth traction matters.




How Do I Get My LTV?




Loyalty• How do I attain/optimize my LTV?

• Retaining an existing user is much cheaper than acquiring a new one

• Value of the 1st purchase is usually just a small fraction of LTV




Here are some useful resources for you all to peruse:

1. Steve Schlafman: Raising Seed Capital - http://bit.ly/RaisingSeedCapital

2. Des Traynor: Getting user feedback on your product - http://bit.ly/UserFeed

3. Buffer: The investor presentation that earned $500k - http://bit.ly/BufferPrez

4. Ben Horowitz: When to sell your company - http://bit.ly/HoroSell

5. A Founder’s Notebook: Basically all of it - http://bit.ly/FoundersNotebook

6. Ecommerce CAC - http://www.forentrepreneurs.com/ecommerce-cac/

7. Optimizing the Cost of Customer Acquisition: Modeling Metrics to Drive StartupSuccess - http://soundbytes2.com/2014/03/26/optimizing-the-cost-of-customer-acquisition-modeling-metrics-to-drive-startup-success/

8. LTV/CAC - http://kellblog.com/2014/07/30/the-ultimate-saas-metric-ltv-cac/

9. The Complete Quantitative Guide To Judging Your Startup -http://techcrunch.com/2014/01/31/the-complete-quantitative-guide-to-judging-your-startup/

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Resource Library


http://bit.ly/RaisingSeedCapital

http://bit.ly/UserFeed

http://bit.ly/BufferPrez

http://bit.ly/HoroSell

http://bit.ly/FoundersNotebook

http://www.forentrepreneurs.com/ecommerce-cac/

http://soundbytes2.com/2014/03/26/optimizing-the-cost-of-customer-acquisition-modeling-metrics-to-drive-startup-success/

http://kellblog.com/2014/07/30/the-ultimate-saas-metric-ltv-cac/

http://techcrunch.com/2014/01/31/the-complete-quantitative-guide-to-judging-your-startup/



Thank you all for joining us!

If you have any suggestions on what has worked for you,

please let us know!

If you have any questions, feel free to e-mail us:

[email protected]

[email protected]

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Q&A


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