Startup Metrics 4 Pirates (Brazil, April 2011)

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My Talk "Startup Metrics 4 Pirates" @ Brazil Innovators (Sao Paulo, April 2011).

Text of Startup Metrics 4 Pirates (Brazil, April 2011)

  • Startup Metrics 4 Pirates


    GeeksOnaPlane Brazil
    Sao Paulo April 2011
    #GOAP #LeanStartup

    Dave McClure @DaveMcClure

    http://www.500startups.com

    http://500hats.typepad.com

    http://slideshare.net/dmc500hats

    AARRR!

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  • Dave McClure

    2001-2010:

    Startup Investor: 500 Startups, Founders FundTech Marketing: PayPal, Simply Hired, Mint.comAdvisor, Angel Investor: 100+ StartupsConferences: Warm Gun, Lean Startup, SMASHStanford Lecturer: Facebook, Startup Metrics

    80s & 90s:

    Entrepreneur: Founder/CEO Aslan Computing (acq.)Developer: Windows Apps / SQL DB AdminUser Groups: E-Commerce, Internet, Client-ServerEngineer: Johns Hopkins 88, BS Eng / Applied Math

    GEEK, CODER, ENTREPRENEUR

    Blogger, Marketing,

    Angel/VC Investor

  • 500 Startups
    Seed Fund & Accelerator
    (120+ investments @ ~$75K avg)

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  • [ This Talk ]

  • Topics

    Basic Concepts of Startup Metrics 4 Pirates3 Steps to AARRR: Product, Market, RevenueConstructing MVP: Just ONE Feature?Design (UX) & Distribution (MKTG)Winning: Market, Revenue, Profit?
  • Key Concepts

    MVP = F(Customer, Problem, Time or $$$)PMF = F(Customer, Solution, Alternatives)AUX = F(Customer, Design/UX, Metrics)ACQ = F(Customer, Campaign, Vol, Cost, Conv)WIN = F(Customer, Usage, Dist, Revenue)
  • [ Interesting Stuff ]

  • Read Geoffrey Miller
    Sex + Evolution + Consumer Mktg = Awesome Sauce

  • More Great Stuff.
    Psychology + Comics

  • [The Lean Startup]

  • The Lean Startup

    Talk to Customers; Discover ProblemsProgress Features (Less = More)Fast, Frequent Iteration (+ Feedback Loop)Measure Conversion; Compare 2+ OptionsFocus on Product/Market Fit (dont launch b4)Keep it Simple & Actionable
  • Discover Customers
    (Steve Blank, SteveBlank.com)

  • LEARN

    BUILD

    MEASURE

    IDEAS

    CODE

    DATA

    Iterate, Dammit.
    (Eric Ries, StartupLessonsLearned.com)

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  • Product/Market Fit b4 Launch
    (Sean Ellis, Startup-Marketing.com)

    Startup-Marketing.com

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  • [Startup Metrics 4 Pirates]

  • Startup Challenges

    Startups have problems in 3 key areas:

    Management: Set Priorities, Define Key MetricsProduct: Build Right Features. Measure, Iterate.Marketing: Distribution, Distribution, Distribution.

    (Search, Social, Mobile)

  • Just Gimme the GOOD Metrics.

    Users, Pages, Clicks, Emails, $$$...?

    Q: Which of these is best? How do you know?

    1,000,000 one-time, unregistered unique visitors500,000 visitors who view 2+ pages / stay 10+ sec200,000 visitors who clicked on a link or button20,000 registered users w/ email address2,000 passionate fans who refer 5+ users / mo.1,000 monthly subscribers @ $5/mo

    the good stuff.

    I know, too many bullets

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  • Startup Metrics for Pirates

    Acquisition: users come to site from various channelsActivation: users enjoy 1st visit: "happy experienceRetention: users come back, visit site multiple timesReferral: users like product enough to refer othersRevenue: users conduct some monetization behavior

    (note: If youre in a hurry, Google Startup Metrics & watch 5m video)

    AARRR!

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  • AARRR!: 5-Step Startup Metrics Model

    Website.com

    Revenue $$$

    Biz Dev

    Ads, Lead Gen, Subscriptions, ECommerce

    ACQUISITION

    SEO

    SEM

    Apps & Widgets

    Affiliates

    Email

    PR

    Biz Dev

    Campaigns, Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    Retention

    Emails & Alerts

    System Events & Time-based Features

    Blogs, RSS, News Feeds

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  • One Step at a Time.

    Make a Good Product: Activation & Retention

    Market the Product: Acquisition & Referral

    Make Money: Revenue & Profitability

    You probably cant save your Ass and your Face at the same time choose carefully. DMC

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  • [ Constructing MVP ]

  • Role: Founder / CEO

    Q: Which Customers? Problems? Metrics? Why?

    A: Focus on Critical Few Actionable Metrics

    (if you dont use the metric to make a decision, its not actionable)

    Hypothesize Customer LifecycleTarget ~3-5 Conversion Events (tip: Less = More)Test, Measure, Iterate to Improve

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  • Optimize 4 Happiness
    (both User + Business)

    Define States of User + Business ValuePrioritize (Estimate) Relative Value of Each StateMove Users: Lower Value -> Higher ValueOptimize for User Happiness + Business $$$Achieve High Cust Value + Low ACQ$ @ Scale

    $$$

  • What is Minimum Viable Product?

    MVP = F(Customer, Problem, Time or $$$)

    Focus on CUSTOMERQualitative Discovery, Quantitative ValidationGet to know habits, problems, desires (FUN MATTERS)what causes pain? what causes pleasure? Define 1-5 TESTABLE Conversion Metrics of ValueAttention/Usage (session time, clicks)Customer Data (email, connect, profile)

    Revenue (direct or indirect)

    Retention (visits over time, cohort behavior)

    Referral (users evangelize to other users)

    Note: Paid Solutions drive FOCUS (& pay rent)
  • KILL A FEATURE.
    Something Sucks. Find It. KILL It.

    STOP ADDING FEATURES.Find the ONE THING that users LOVE.How to figure out? TAKE. SHIT. AWAY.When they SCREAM, youve FOUND it.Then Bring it Back Only Better.Tip: KILL a Feature Every Week.
  • Example Conversion Metrics
    (note: *not* actuals your mileage may vary)

    StageConversion StatusConv. %Est. Value(*not* cost)AcquisitionVisitors -> Site/Widget/Landing Page(2+ pages, 10+ sec, 1+ clicks = dont abandon)60%$.05ActivationHappy 1st Visit; Usage/Signup(clicks/time/pages, email/profile reg, feature usage)15%$.25RetentionUsers Come Back; Multiple Visits(1-3x visits/mo; email/feed open rate / CTR)5%$1ReferralUsers Refer Others(cust sat >=8; viral K factor > 1; )1%$5RevenueUsers Pay / Generate $$$(first txn, break-even, target profitability)2%$50

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  • [ Getting 2 PMF ]

  • Role: Product / Eng / Design

    Q: What Features to Build? Why? When are you Done?

    A: Easy-to-Find, Fun/Useful, Unique Features that

    Increase Conversion (stop iterating when increase decelerates)

    Wireframes = Conversion StepsMeasure, A/B Test, Iterate FAST (daily/weekly)Optimize for Conversion Improvement80% on existing feature optimization20% on new feature development

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  • What is Product/Market Fit?

    PMF = F(Customer, Solution, Alternatives*)

    Product / Market Fit occurs when:Customers like your stuff better than other shitNot static, Not optimal just Local Max 4 F(customers, solution, time)make sure youre moving in optimal direction 2 local maxQ: what competitive solutions are available? that your customers know about?how are you diff/same? in ways that people care about? (will pay for)KILL a FEATURE regularly (or rotate 1% tests)Q: what is MOST $ cust pay 4 LEAST func MVP relative 2 BEST alt?NICHE 2 WIN: RE-define cust + DIFFerentiated features
  • Better or Different.

    Funny!

    Shocking !!!

    Accepted

    Not Funny.

  • [ Testing 4 AUX ]

  • Discover Meaning
    Why Should Users CARE About Your Product?

    Kathy Sierra:

    Creating

    Passionate

    Users

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  • Discover Meaning
    Keywords, Images, Call-to-Action

    Top 10 - 100 words

    Your Brand / Products

    Customer Needs / Benefits

    Competitors Brand / Products

    Semantic Equivalents

    Misspellings

    Relevant images

    People

    Products

    Problems

    Solutions

    Call-to-Action

    WordsImagesContextButton/LinkEmotion

    Result

    Positive?Negative?Neutral (= Death)A/B test & Iterate

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  • How 2 Tell if Design is Good?

  • [ Metrics 4 ACQ ]

  • Role: Marketing / Sales

    Q: What channels? Which users? Why?

    A: High Volume (#), Low Cost ($), High Conv (%)

    Design & Test Multiple Marketing Channels + CampaignsSelect & Focus on Best-Performing Channels & ThemesOptimize for conversion to target CTAs, not just site/landing pageMatch/Drive channel cost to/below revenue potentialLow-Hanging Fruit: BlogsSEO/SEMLanding PagesAutomated Emails

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  • Example Marketing Channels

    PRContestBiz DevDirect MarketingRadio / TV / PrintDedicated SalesTelemarketingEmailSEO / SEMBlogs / BloggersViral / ReferralAffiliate / CPAWidgets / AppsLOLCats ;)

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  • MAARRRketing Plan

    Marketing Plan = Target Customer Acquisition Channels

    3 Important Factors = Volume (#), Cost ($), Conversion (%)

    Measure conversion to target customer actions

    Test audience segments, campaign themes, Call-To-Action (CTAs)

    [Gradually] Match Channel Costs => Revenue Potential

    Increase Vol. & Conversion, Decrease Cost, Optimize for Revenue Potential

    Avg Txn Value (ATV), Ann Rev Per User (ARPU), Cust Lifetime Value (CLV)

    Design channels that (eventually) cost

  • [ What is WINNING? ]

  • #TigerBlood4Startups

    #WINNING

  • Choose Yer #WINNING Metrics

    WIN = F(Customer, Usage, Dist, Revenue)

    after MVP functional use, several options:better Usage Activation & Retention (AUX)more Users -- Distribution / Acquisitionmo' Money --- U Wants 2 Get Paid, Yo.understand ACQ$ vs REV$, optimize 4 short-termHigh(er) volume usually a prioritycosts may changeas vol increases
  • [ The Lean Investor ]

  • Startup 2.0:
    Lean Investor Model

    Method: Invest in startups using incremental investment, iterative