Startup Metrics 4 Pirates
Sao Paulo April 2011
Dave McClure @DaveMcClure
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
Seed Fund & Accelerator
(120+ investments @ ~$75K avg)
[ This Talk ]
TopicsBasic 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 ConceptsMVP = F(Customer, Problem, Time or $$$)PMF = F(Customer, Solution, Alternatives)AUX = F(Customer, Design/UX, Metrics)ACQ = F(Customer, Campaign, Vol, Cost, Conv)WIN = F(Customer, Usage, Dist, Revenue)
[ Interesting Stuff ]
Read Geoffrey Miller
Sex + Evolution + Consumer Mktg = Awesome Sauce
More Great Stuff.
Psychology + Comics
[The Lean Startup]
The Lean StartupTalk to Customers; Discover ProblemsProgress Features (Less = More)Fast, Frequent Iteration (+ Feedback Loop)Measure Conversion; Compare 2+ OptionsFocus on Product/Market Fit (dont launch b4)Keep it Simple & Actionable
(Steve Blank, SteveBlank.com)
(Eric Ries, StartupLessonsLearned.com)
Product/Market Fit b4 Launch
(Sean Ellis, Startup-Marketing.com)
[Startup Metrics 4 Pirates]
Startups have problems in 3 key areas:Management: Set Priorities, Define Key MetricsProduct: Build Right Features. Measure, Iterate.Marketing: Distribution, Distribution, Distribution.
(Search, Social, Mobile)
Just Gimme the GOOD Metrics.
Users, Pages, Clicks, Emails, $$$...?
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
Startup Metrics for PiratesAcquisition: 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!: 5-Step Startup Metrics Model
Ads, Lead Gen, Subscriptions, ECommerce
Apps & Widgets
Direct, Tel, TV
Emails & Alerts
System Events & Time-based Features
Blogs, RSS, News Feeds
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
[ 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
Optimize 4 Happiness Define States of User + Business ValuePrioritize (Estimate) Relative Value of Each StateMove Users: Lower Value -> Higher ValueOptimize for User Happiness + Business $$$Achieve High Cust Value + Low ACQ$ @ Scale
(both User + Business)
What is Minimum Viable Product?
MVP = F(Customer, Problem, Time or $$$)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.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.
Something Sucks. Find It. KILL It.
Example Conversion MetricsStageConversion 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
(note: *not* actuals your mileage may vary)
[ 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
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.
[ Testing 4 AUX ]
Why Should Users CARE About Your Product?
Keywords, Images, Call-to-Action
Top 10 - 100 words
Your Brand / Products
Customer Needs / Benefits
Competitors Brand / Products
ResultPositive?Negative?Neutral (= Death)A/B test & Iterate
How 2 Tell if Design is Good?
[ Metrics 4 ACQ ]
Role: Marketing / Sales
Q: What channels? Which users? Why?
A: High Volume (#), Low Cost ($), High Conv (%)Design & Test Multiple Marketing Channels + CampaignsSelect & Focus on Best-Performing Channels & ThemesOptimize for conversion to target CTAs, not just site/landing pageMatch/Drive channel cost to/below revenue potentialLow-Hanging Fruit: BlogsSEO/SEMLanding PagesAutomated Emails
Example Marketing ChannelsPRContestBiz DevDirect MarketingRadio / TV / PrintDedicated SalesTelemarketingEmailSEO / SEMBlogs / BloggersViral / ReferralAffiliate / CPAWidgets / AppsLOLCats ;)
Marketing Plan = Target Customer Acquisition Channels
3 Important Factors = Volume (#), Cost ($), 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? ]
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 ]
Lean Investor Model
Method: Invest in startups using incremental investment, iterative