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

    Website.com

  • 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

    WildfireCraveTelloAwayFindMyGengoRecurlyMogotixEcoMomZencoderCrocodocSayHiredRevNeticsAppBistroFoodspottingMedialetsRapportiveTransFSSiteJabberEstatelyFlowTownOneFortyTwilioPostlingPlancastWePayOtherInboxViikiiZoziGraphiclyNetworkedBlogs

  • [ 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)sean@12in6.comBlog: 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

    Website.com

  • 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 Distributi