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Startup Metrics for Pirates (Sept 2010, Vancouver)

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  • Startup Metrics for Pirates

    Western Canada Entrepreneur BootcampVancouver, CAN - Sept 2010

    Dave McClure @DaveMcClurehttp://www.500startups.com http://500hats.typepad.comhttp://slideshare.net/dmc500hats

    HashTags: #c100 #aarrr #leanstartupAARRR!

  • AARRR!: 5-Step Startup Metrics Model


  • Startup ChallengesStartups have problems in 3 key areas:

    Management: Set Priorities, Define Key Metrics

    Product: Build Right Features. Measure, Iterate.

    Marketing: Distribution, Distribution, Distribution. (Search, Social, Mobile)

  • Startup 2.0: Lean Investor ModelMethod: Invest in startups using incremental investment, iterative development. Start with lots of small experiments, filter out failure, and expand investment upon success.

    Incubator: $0-100K (Product Viability)Seed: $100-$1M (Expand Distribution)Venture: $1M-$5M (Maximize Revenue)

  • [Pardon The Blatant Commercial]

  • Dave McClure2001-2009:Startup Investor: 500 Hats LLC, Founders FundTech Marketing: PayPal, Simply Hired, MintAdvisor, Angel Investor: 60+ StartupsConf. Organizer: Web 2.0, OReilly, StartonomicsStanford Visiting 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 MathGEEK, CODER, ENTREPRENEURBlogger, Startup AdvisorInternet Marketing, SuperAngel/VC Investor

  • 500 Hats Investments (13 deals, 2004-2008, ~$300K)2004-2008: 13 deals, avg $25Kresults: 1 exit @ $170M (9x), +3-7 future wins

  • Founders Fund Investments (43 deals, 2008-2010, ~2.9M)Results:8 raised seed rd $500K+ (+3 more break-even)Results:5 raised next rd $2M+, 1 exit (expect 5+ more)

  • 500 Startups Investments (~40 deals, 2010, ~$3.5M)Q1-Q3 / 2010: 38 deals, avg $100K


  • [ Important Shit ]

  • Web 2.0: Hell Yes, Good Times.

    # Users, Bandwidth = Bigger.Lower Startup Costs = Cheaper.PPC, E-Com $ Growing = Better.

    Collect Usage Metrics in Real-TimeDecisions Based on Measured User Behavior

  • Discover MeaningWhy Should Users Give a SHIT About You?Kathy Sierra:CreatingPassionateUsers

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

  • Other Great Shit. Psychology + Comics

  • Discover MeaningKeywords, Images, Call-to-ActionTop 10 - 100 wordsYour Brand / ProductsCustomer Needs / BenefitsCompetitors Brand / ProductsSemantic EquivalentsMisspellings

    Relevant imagesPeopleProductsProblemsSolutionsCall-to-ActionWordsImagesContextButton/LinkEmotion

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

  • 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.

  • [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

  • Discover Customers(Steve Blank, SteveBlank.com)

  • LEARNBUILDMEASUREIDEASCODEDATAIterate, Dammit.(Eric Ries, StartupLessonsLearned.com)

  • Product/Market Fit b4 Launch(Sean Ellis, Startup-Marketing.com)[email protected]: startup-marketing.com

  • [Startup Metrics 4 Pirates]

  • 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

  • Q: Whats My Business Model?Can be one of the following:Drive Usage (= Activation, Retention)Get Users (= Acquisition, Referral)Make Money (= Revenue*)* ideally profitable revenue

    Note: eventually need to turn Users/Usage -> Money

  • 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 $$$Achieve Low Cost + High Value @ Scale$$$

  • 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


  • Startup ChallengesStartups have problems in 3 key areas:

    Management: Set Priorities, Define Key Metrics

    Product: Build the Right Features. Measure, Iterate.

    Marketing: Distribution, Distribution, Distribution. (Search, Social, Mobile)

  • Role: Founder / CEOQ: Which 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

  • Role: Product / Eng / DesignQ: 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

  • Example Conversion Dashboard(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

  • Role: Marketing / SalesQ: 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 potential

    Low-Hanging Fruit: BlogsSEO/SEMLanding PagesAutomated Emails

  • Example Marketing ChannelsPRContestBiz DevDirect MarketingRadio / TV / PrintDedicated SalesTelemarketingEmailSEO / SEMBlogs / BloggersViral / ReferralAffiliate / CPAWidgets / AppsLOLCats ;)

  • MAARRRketing PlanMarketing Plan = Target Customer Acquisition Channels3 Important Factors = Volume (#), Cost ($), Conversion (%)Measure conversion to target customer actionsTest audience segments, campaign themes, Call-To-Action (CTAs)

    [Gradually] Match Channel Costs => Revenue Potential Increase Vol. & Conversion, Decrease Cost, Optimize for Revenue PotentialAvg Txn Value (ATV), Ann Rev Per User (ARPU), Cust Lifetime Value (CLV)Design channels that (eventually) cost

  • One Step at a Time.Make a Good Product: Activation & RetentionMarket the Product: Acquisition & ReferralMake Money: Revenue & ProfitabilityYou probably cant save your Ass and your Face at the same time choose carefully. DMC

  • [ The Lean Investor ]

  • Startup 2.0: Lean Investor ModelMethod: Invest in startups using incremental investment, iterative development. Start with lots of small experiments, filter out failure, and expand investment upon success.

    Incubator: $0-100K (Product Viability)Seed: $100-$1M (Expand Distribution)Venture: $1M-$5M (Maximize Revenue)

  • Investment #1: Incubate(Product)Structure1-3 founders$25K-$100K investmentIncubator environment: multiple peers, mentors/advisors

    Build Functional Prototype / Minimum Viable Product (MVP):Concept->Alpha, ~3-6 monthsDevelop Minimal Critical Feature Set => Get to It WorksInstrument Basic Dashboard, Conversion MetricsTest Cust. Adoption (10-1000 users) / Cust. Satisfaction (Scale: 1-10)

    Demonstrate Concept, Reduce Product Risk, Test Functional UseDevelop Metrics & Filter for Follow-on Investment

  • Investment #2: Seed(Market)Structure2-5 person team$100K-$1M investmentSyndicate of Angel Investors / Small VC Funds

    Improve Product, Expand Market, Test Revenue:Alpha->Beta, ~6-12 monthsCustomer Sat 6 => Get to Doesnt SuckSetup A/B Testing Framework, Optimize ConversionTest Marketing Campaigns, Cust Acqstn Channels

    Prove Solution/Benefit, Assess Market SizeTest Channel Cost, Revenue OpportunityDetermine Org Structure, Key Hires

  • Investment #3: Venture(Revenue)Structure5-10 person team$1M-$5M investmentVC Investors

    Make Money, Get to Sustainability:Beta->Production, 12-18 monthsCustomer Sat 8 => It Rocks, Ill Tell My FriendsMktgPlan => Predictable Channels / Campaigns + BudgetScalability & Infrastructure, Customer Service & OperationsConnect with Distribution Partners

    Prove/Expand Market, Operationalize BusinessFuture Milestones: Profitable/Sustainable, Exit Options

  • [ Dont Pitch Me, Bro. ]Seriously: Dont. Fucking. Pitch Me.(and dont email me either, cuz i wont read it)

  • Dont Pitch Me, Bro.1st: Read my stuff (blogs, decks, tweets).2nd: Get a referral from someone I trust.Fellow InvestorsPortfolio Companies*Not* Your Mom.3rd: Be Concise. Dont Suck.Email

  • Links & ResourcesAdditional References: Influence: The Psychology of Persuasion Robert Cialdini (book) The Mating Mind Geoffrey Miller (book) Putting the Fun in Functional Amy Jo Kim (etech 2006 preso) Futuristic Play Andrew Chen (blog) Dont Make Me Think Steve Krug (book) Designing for the Social Web Joshua Porter (book, website) Startup Lessons Learned Eric Ries (blog) Customer Development Methodology Steve Blank (presentation, blog) Startup-Marketing.com Sean Ellis (blog) KISSmetrics.com Hiten Shah / Neil Patel (website) How To Pitch a VC Dave McClure (slides, NSFW) Understanding Comics Scott McCloud (book)

  • Appendix

  • Startup MetricsActivation

  • Website.comActivation Criteria: 10-30+ seconds 2-3+ page views 3-5+ clicks 1 key feature usagedo LOTS of landing page & A/B tests make lots of dumb guesses & iterate FASTActivation

  • ActivationWhat do users do on their first visit?Example Activation GoalsClick on something!Account sign up / EmailsReferrals / Tell a friendWidgets / EmbedsLow Bounce Rate

    Activation TipsLess is moreFocus on user experience / usabilityProvide incentives & call to actionsTest and iterate continuously

  • ActivationWhat do users do on their first visit?Key Metrics to TrackPages per visitTime on siteConversions

  • ActivationToolsCrazy Egg (Visual Click Mapping)http://crazyegg.com Google Website Optimizer (A/B & Multivariate Testing)http://google.com/websiteoptimizer Marketo.com (B2B Lead Generation Management)http://marketo.com

    ResourcesExperimentation and Testing: A Primerkaushik.net/avinash/2006/05/experimentation-and-testing-a-primer.htmlLanding Page Design Toolbox: 100 Tips & Toolshttp://tinyurl.com/326co6 Landing Page Tutorials & Case Studieshttp://www.copyblogger.com/landing-pages/ 101 Easy Easy to use Google Website Optimizerhttp://conversion-rate-experts.com/articles/101-google-website-optimizer-tips/

  • Startup MetricsRetention

  • Website.comAutomated emails: lifecycle emails @ +3, +7, +30d status / best of weekly/monthly something happened emails BUT: make it easy to unsubscribeTip on emails: > 80% or more on SUBJECT LINE < 20% or less on BODY TEXTRetention

  • Cohort Analysis:Distrib of Visits over TimeRate of DecayEffective Customer Lifecycle

    Retention MethodsAutomated Emails* Track open rate / CTR / QuantityRSS / News Feeds* Track % viewed / CTR / QuantityWidgets / Embeds* Track impressions / CTR / QuantityRetentionHow do users come back? How often?

  • Example Retention Goals1 - 3+ visits per month20% open rate / 2% CTRHigh deliverability / Low spam ratingLong customer life cycle / Low decayIdentify fanatics and cheerleaders

    Retention TipsEmail is simple and it worksBUT make unsubscribe easy80% subject line / 20% body textACTUALLY 99% subject line / 1% body textFanatics = virality + affiliate channel (bloggers?)Retention How do users come back? How often?

  • RetentionHow do users come back? How often?Key Metrics to TrackSourceQuantityConversionsVisitor LoyaltySession Length

  • RetentionToolsCampaign Monitor / MailChimp (email newsletter software)campaignmonitor.com / mailchimp.comTriggerMail (site-centric email management)triggermail.netLitmus (email and website design testing - clients / browsers)litmusapp.com

    Resources30 free HTML email templatescampaignmonitor.com/resources/templates.aspxBest Practices in Writing Email Subject Linesmailchimp.com/resources/best-practices-in-writing-email-subject-lines.phtmlLearning Viral: Viral Emails of Tagged.comokdork.com/2008/04/10/learning-viral-studying-taggedcom/

  • Startup MetricsAcquisition

  • Website.comMarketing Channels: largest-volume (#) lowest-cost ($) best-performing (%) Acquisition

  • AcquisitionWhere are users coming from?Acquisition MethodsSEO / SEMBlogsEmailSocial Media & Social NetworksDomains

  • AcquisitionKeyword VocabularyTop 10 - 100 wordsYour Brand / ProductsCustomer Needs / BenefitsCompetitors Brand / ProductsSemantic EquivalentsMisspellings

    Things to analyzeSourcesVolumeCostConversion

  • AcquisitionWhere are users coming from?Key Metrics to TrackQuantity (#)Cost ($)Conversions (%)Example

  • AcquisitionToolsGoogle Analytics (web analytics)google.com/analyticsGoogle Keyword Tool (keyword research tool)adwords.google.com/select/KeywordToolExternalSEO Book Tools (SEO related tools)tools.seobook.com

    ResourcesSEO Book Blogseobook.com/blogThe Social Media Manual: Read Before You Playsearchengineland.com/071120-144401.phpStrategies to ruthlessly acquire usersandrewchen.typepad.com/andrew_chens_blog/2007/04/10_obvious_stra.html

  • Startup MetricsReferral

  • Website.comFocus on driving referrals*after* users have ahappy experience; avg score >= 8 out of 10Referral

  • ReferralHow do users refer others?Referral MethodsSend to Friend: Email / IMSocial MediaWidgets / EmbedsAffiliates

  • ReferralViral Growth FactorViral Growth Factor = X * Y * ZX = % of users who invite other peopleY = average # of people that they invitedZ = % of users who accepted an invitationA viral growth factor > 1 means an exponential organic user acquisition.

  • ReferralToolsGigya (social media distribution & tracking tool)gigya.comShareThis / AddThis (sharing buttons)sharethis.com / addthis.comGetMyContacts (PHP contacts importing & invitation software)getmycontacts.com

    ResourcesSeven Ways to GO VIRALlsvp.wordpress.com/2007/03/02/seven-ways-to-go-viral/Whats your viral loop? Understanding the engine of adoptionandrewchen.typepad.com/andrew_chens_blog/2007/07/whats-your-vira.htmlMetrics: Where Users Come Fromslideshare.net/guest2968b8/rockyou-snap-summit-32508

  • Startup MetricsRevenue

  • Website.comRevenueThis is the part *you* still have to figure out (we dont know jack about your business)

  • RevenueHow do you make money?Revenue TipsDont Rely on AdSense (only)Start Free => 2% FreemiumSubscription / Recurring transactionsQualify your customers -> Lead generation (arbitrage)Sell something! (physical or virtual)

  • RevenueResources & ToolsRevenue Metrics (Andrew Chen)http://tinyurl.com/47r63aHow to Create a Profitable Freemium Startup (Andrew Chen)http://tinyurl.com/8z9ygk 2008 Affiliate Marketing Review (Scott Jangro)http://tinyurl.com/86wak4

  • Types of MeasurementQualitative: Usability Testing / Session MonitoringWatch users, guess problems & solutions from small # of users

    Quantitative: Traffic Analysis / User EngagementTrack users, usage, conv %'s for empirical sample # of users

    Comparative: A/B, Multivariate TestingCompare what users do in one scenario vs anotherMeasure which copy/graphics/UI are most effective

    Competitive: Monitoring & Tracking CompetitorsTrack competitor activity & compare against yours (if possible)Compare channels, keyword traffic, demographics, user sat, etc.

    **********BUILT TO LEARN

    This is the core feedback loop that powers startups. Their goal is not to optimize the time it takes to do any one of these steps. There are many specific practices that can power lean startups, and well cover a few in this presentation. But more important than any specific practice is this core idea: startups should be built to learn.*I know, too many bullets ********************************************Qualitative: SurveyMonkey (surveys), CrazyEgg (heatmap), TechSmith Morae / UserVue (ux recording), RobotReplay, TapeFailure. Quantitative: Google Analytics (free), MyBlogLog, ClickTracks, Index Tools, Visual Sciences / Webside Story, Omniture, WebTrends, etc. Comparative: Google Website Optimizer, SiteSpect, Optimost, Offermatica, Vertster, Kefta. Competitive: Quantcast, Compete.com, Alexa, Hitwise, Comscore, Nielsens. see more info at: http://webanalyticsassociation.com/ (WAA) http://kaushik.net/ (Avinash Kaushik) http://grokdotcom.com/ (Eisenbergs) http://www.emetrics.org/ (Jim Sterne)

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