Start-up Metrics
What are Metrics?
• A type of measurement used to quantifiably gauge performance.
• Any business data that is collected and analysed periodically.
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Metrics in Business
• In business, metrics include:o Return of Investment (ROI)o Sales revenueso Expenditureso Customer loyalty and retentiono Operating productivity etc.
• Used to help make strategic business decisions.
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The Problem
• Metrics used in large business are not useful or effective at gauging start-up performance.
• This is because start-ups require different information, at more frequent intervals to make rapid changes if needed.
• The context in which the information is used is also different.
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Start-ups vs large Companies
• These problems exist because there are significant differences between what a Start-up is and what a large company is.
• Specifically objectives and priorities.
• Therefore the required information to make strategic decisions is completely different.
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Focus of Start-ups
• Start-ups are still figuring out a business model to adopt.
• Capabilities o Management/Staff Talento Execution Capabilities
• Revenueso New customer growth/customer retentiono Price optimisation
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Focus of Large Companies
• Operating marginso Development/Production Efficiencyo Logistic Efficiencieso Customer Interaction Efficiency
• Asset Efficiencyo Inventory Efficiencyo Receivable and Payables Efficiency
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Start-up Metrics vs Accounting
• Start-up metrics provide information that is generally provided by accounting departments of large companies.
• These metrics also simultaneously represent company performance.
• The metrics then gradually change as the start up transitions into a large company.
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Another problem.
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• You can collect data about anything.
• There are a large number of tools that can be utilised to gather tremendous amounts of data about your company.
• Essentially, the problem is information overload.
What makes a useful metric?
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• Firstly, one that answers an important question. metrics are most often paired with questions for this reason.
• One that enables clear goal creation and progress feedback.
• One that focuses the entire company.
What makes a useful metric?
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• One that is a ratio instead of a cumulative value (time inclusive). New users per year instead of total users.
• Provides a percentage value of change periodically. Revenue increased 2% compared to this time last month.
• One that is easy to understand.
Important Metrics for Start-ups
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• Metrics that represent:o Distributiono Engagemento Revenue
Distribution
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• New users added last month, last six month growth rate: How are well are we growing the user base?
• Total user base, last six month growth rate: How important is our monthly growth compared to our total user base?
• Cost of customer acquisition, lifetime value, pay back period: Can we grow faster through paid acquisition? Are we acquiring customers profitably? How much can we afford to spend on new customers? How is this changing over time?
Engagement
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• Active users, growth rate: Are we getting better at giving our customers what they want/need?
• % of users using top 3 key features in a given month: Are our product initiatives the right ones?
Revenue
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• Revenue , Last six month revenue growth: Are we growing our revenue?
• Conversion to paid rate in that month/by cohort: How many users converted to paid? Are we improving our ability to convert customers to paid?
• Average spend per paying customer vs solo account: What is the impact of the account management team?
• Last month churn rate, Last six month churn rate: How well do we retain our customers?
• Burn rate: When are we profitable? When do we run out of cash? When do we need to raise?
Useful Links
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• http://blog.kissmetrics.com/single-startup-metric/
• http://tomtunguz.com/your-startups-10-most-important-metrics
• http://www.forbes.com/sites/dailymuse/2013/04/18/3-metrics-that-really-matter-for-your-start-up/
• http://www.jagannemani.com/2011/11/29/why-innovation-metrics-need-to-be-different-from-other-business-metrics/
• http://www.slideshare.net/andreasklinger/metrics-for-early-stage-startups
• http://www.slideshare.net/sblank/why-accountants-dont-run-startups-041410?from_search=16
Ways to Finance your Start-up
Before we begin…Starting a business is a big commitment, not just financial:- your time - your energy - your team
So, have an exit in mind before you start: - how long am I in this for? - why am I doing this? - what level of risk am I comfortable with?
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The Start-up Funding Path...
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Non-equity Financing1) Crowdfunding
2) Bootstrapping
3) Loan (Debt)
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1) CrowdfundingIndividuals provide monetary support to start-ups who put
their ideas online.
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2) Bootstrapping- Moore’s law - Psychological kick (effective money spending)- Business decision freedom - Easy exit options
- Cashflows are a must…
- Investment constraint (opportunities missed)
- Time restraint
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3) Loan (Debt)- family & friends
- bank
- KIVA, etc.
- limited funds
- banks need predictability and knowledge
- Bankruptcy
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Equity Financing 1) Seed funds
2) Seed incubators
3) Angel investors
4) Venture Capitalists…………………………………………………………………….5) Pre-IPO/buyout
6) Private Equity © IDEA Network 2013
1) Seed Funds- grant-funding- university seed funds- friends and family- angel investors - (venture capital)
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2) Seed Incubators - seed funding + mentorship- 3 months program - launch event- usually $20K for you to launch your prototype, validate
and gain traction
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3) Angel Investors - HNW individuals- successful entrepreneurs and technologists- work individually and invest their own money
4) Venture Capitalists- can exist in every stage of the start-up cycle (seed, early
stage, growth) - professionally managed team- invests for 3-5 yrs into a start-up- experience, contacts*crucial during exit/sell stage*
- stuck in a business for 3+ years - less control over business- VCs have an exit timeline
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Question Time
Thank You
• This Week: o Jobs Movie at Southbank Cineplex starting 12:30pm
on Sunday. o Registration for UQU Entrepreneurial Competition will
open.
• Next Week: o 09-211 Professor Tim Kastelle, 6pm, Monday 2nd
September. Lean Startup and Business Models