Build Measure Learn & Key Metrics

Today

• About tomorrow and next week

• Statusmeeting

• Intro to Build Meaure Learn & Metrics

• YouPic and data driven product development

• Workshop

Tomorrow

• Feedback session @ 3 PM

– You will meet 2 persons giving you feedback and help

– No “pitch” but a conversation, however explaining

your business clear is crucial to get relevant feedback

• So, we are here if anyone wants to try the pitch

etc again – not mandatory

Next week

• Team development on

Wednesday 9-12 AM

• Professional

Facilitator of CEO- &

Management groups.

Authentic questions

both professional and

private are shared in a

reflective space.

The one who iterates the fastest wins1. You don’t perish

2. You own more of your company

3. You outperform competitors

Time to no cash

Execution momentum

Motivation span

Build Measure Learn

There is a due date

It’s a company culture!

Quickly move towards data

Quantitative

Qualitative

Time

The process

• Form a very clear hypothesis (idea)

– Mid size companies with knowledge base have a problem with finding artists for parties?

– Artists (type X) want more small corp gigs?

• Construct the test (build)

– I will call 20 companies like above, ask them about the process today

– I will meet 20 artists type Z to understand how they get gigs today

• Define how to validate (measure)

– I will measure how many of the companies have the problem, how often and how many that actually have searched for a solution

– I will measure how many artists are doing live gigs for companies today, how many that wants to have more gigs, how many that want to invest time in finding them?

2nd iteration

• Only 1/20 in the target groups arrange the parties by themselves (Learn). New:

– Small companies companies with knowledge base have a problem with finding artists for parties?

• All artists wanted more gigs, but only 1/5 marketed themselves today and they were often students and 1-3 ppl in the band

– Small student bands want more gigs to finance their studies?

• Construct the test

– We will call 20 small companies, 10-50 employees…

– We will talk to 20 student bands at the University….

• Measure….

5th? iteration

• The real problem booking artists for gigs are quality assurance (Learn)

– We can create trust by displaying artist with “live graph” from facebook, youtube, etc

– Artist like X have “live graph” today

• We will build an MVP, enter 50 artists manually scrape the web for “live graph” and attract companies… (build)

– Acquire users “ find the best livebands for your party” through ads

• We want 20 companies register and do a first search

How do you increase speed?

• Be specific

• Document (don’t do twice)

• Set goals/dates

• Take shortcuts

• Be a fool (if you ask questions you might be a fool for 5 mins, if you don’t you will be a fool for the rest of your life)

• Go online…..

1. Does your startup have hypothesis or leaps of faith in it?We think people people have a need for a crowdfund solar platform

We think people need translation service for…

We think people need an easy way to book artists

We think service companies need a productivity service

We think production companies need a translation tool

2. Do you have discussions about how to re-design the

product so that people will use it more? Are users engaging with the product?

How many users are dropping off?

Which features are used / unused?

How many referrals are we getting?

Which A/B test was getting higher usage

Separate the big idea questions from

customer driven product development!

Solution vs Optimization

You will “never” stop iterating

Workshop

• Look at your Lean Canvas, what have you

validated or disqualified? – Check!

• What are your next steps, how do you construct

the test?

METRICS (WHY?)

The ultimate goal

If (CAC < LTV(*2+)) then (SCALE)

But we have a lot to do before that….

So why metrics

• Facts instead of opinions (B2C vs B2B)

• Faster build measure learn loop - Prioritize

• A data driven culture

• Good investors

Go offline

MILESTONES

Milestones?

• It’s about proof to validate the business (proof of concept)

• Better communication tool than plans (you need them too, internally)

• ”All” investors require them (team (vision), traction, terms)

• Reflects the maturity - problem/solution fit -> product/market fit

• When fulfilled risk is significantly reduced (market, product, organisation or financial)

Type of milestones?

• Qualitative

– Signed partner agreement

– Working MVP

– Proven technology

– LOI

– Problem validated

– …

• Quantitative

– 1000 sign-ups

– 1000 active users

– 10 paying customers

– 10% churn

– CAC < LTV

What is not a good milestone

or proof of concept?

• An article in Techcrunch (it can be a user acquisition strategy)

• Winning startup prizes

• Investor interest

• Tweets

• Market analysis made

• Segments defined

• Product plan defined

• Sold to a few customer (not necessarily, it’s about the business model)

• …

How to define milestones?

Areas:

• Market (customer)

• Product

• Financial

• Human resources

To think about:

• B2C or B2B

• Segment

• Revenue model type

• Dependencies in the

business model

• Phase

• Tempo

Examples

• Proof that you can work together as a team, usually historical evidence

• Proof that you can build something, i.e. working prototype

• Proof that it’s useful to someone – first users and clients

• Proof that you can talk to investors – every financing round, even small ones

• Proof that you can talk to audiences – 100k users or 1M users or 10M users…

• Proof that the initial team is able to attract talent

• Proof that ecosystem agrees with your ideas – bringing respected industry advisors or partnerships on board

• Proof that there is market – $1M annually

• Proof that you can manage your finances – cash-flow positive operation

• Proof that you can scale – $10M annually

• Proof that the market is big! – $25M annually and beyond

Workshop

• Define your key proofs needed (you think) that

when fulfilled CLEARLY have reduced the

market and product risk at this stage

– Is it 10 interested customers, a MVP that can…

– Is it 1000 sign-ups and…

– Is it 2 paying customers and an indication that there

are 10000 ”look a likes”?

• 20 mins

Part 2 – Key metrics

So what about key metrics

• Key metrics are something you continuouslyfollow

• Can be used to prove that a milestone is fulfilled

• Will help you create focus (limited resources)

• A proper defined metric will help you understandyour business

• If you are online, start measure before MVP launched

Example: AARRR – Startup metrics for pirates

• Acquisition: users come to site from various channels

• Activation: users enjoy 1st visit: "happy” experience

• Retention: users come back, visit site multiple times

• Referral: users like product enough to refer others

• Revenue: users conduct some monetization behavior

Website.com

Biz DevAds, Lead Gen, Subscriptions, ECommerce

Homepage / Landing Page

Product Features

ACQUISITION

SEOSEM

Apps & Widgets

Affiliates

Email

PR Biz Dev

Campaigns, Contests

Direct, Tel, TV

Social Networks

Blogs

Domains

Emails & Alerts

System Events & Time-based Features

Blogs, RSS, News Feeds

Emails & widgets

Affiliates, Contests

Viral Loops

BE CAREFUL WITH VANITY METRICS

31

When you know

• CAC (Customer Acquisition Cost)

• and

• LTV (Lifetime Value)

• = How much to spend to grow X times

It’s the best time to get Venture Capital…

Workshop

• How does your funnel look like?

• What are the key metrics in that funnel?

• How can you measure them?

• 20 min

Fund raising options1. Be scrappy and boostrap – get to MVP and first validation without funding

– Shows that you understand how to build initial value in your company

– MVP with early proof points are worth significantly more than just an idea

– This is how repeat entrepreneurs do, although may not be possible for everyone

– Some contributions from Almi etc is possible

2. Customers

– Will pay you for a product even if it’s not completely ready, if it’s a must have

3. Family, Friends & Fools

– Severe risk of misunderstandings and backlash in relationships

4. Crowdfunding

– Depending on the idea type

– Fundedby.me, Kickstarter, InvestedIn, GoFundMe, Sponsume, Crowdcube…

5. Join an incubator or accelerator

– Easier access to soft funding (VGR/Almi/Innovationsbron)

– In some cases also seed capital.

6. Business Angels

– Local angels in western Sweden are few, but they exist

– There are a few networks of angels who co-invest

– Angellist ?

7. Venture Capitalists

– You will need major proof points for Swedish/European VCs

– In the US, network and track-record more important

What drives value?1. Team – Completeness and track record

2. Product – Is it a Must Have or does it offer sustainable user delight?

3. Market – Proof Points, Traction, PMF and size of market

4. If you need the money or not –

If you’re cash flow positive and you don’t have to raise capital, youre strong!

5. Number of investors interested in your company in this round –

Always try to attract several investors in a round to play out terms & valuation

6. Lead investor & other syndicate partners –

A strong lead will attract other investors for you

Differerent types of investors- Business Angels

- Invest 50K - 5 MSEK

- Either hands-off or very hands-on

- Piggybacking on others or Front seat investors

- Seed Funds

- 500K – 5 MSEK

- Hands-on involvement

- Less proof points needed (at a cost)

- VC Funds

- 5 MSEK – 100 MSEK

- Proof points mandatory

- Manages investments against clock

- Will wipe your ownership out if you don’t succeed

- The good ones have a strong syndication and exit networks

Two Journeys - #1• Less experiences entrepreneur, no own cash and a team with

recruiting need from day 1

Owners % SEK

Founders 80 2M

Investors 20 0.5M

Owners % SEK

Founders 70 6.5M

Investors 30 1.5M

Owners % SEK

Founders 55 7M

Investors 45 3M

Owners % SEK

Founders 40 8M

Investors 60 12M

Team

MVP

Timeline

MVP

Validation

Seed A-Round

24-48 Months

2nd Seed

MVP

Validation

Users

growing

3rd Seed

Proven

Traction

Working

Bus Model

Two Journeys - #2• Seasoned entrepreneur, bootstrap with own cash and a team with a

mix of business experience, product development and coding

Owners % SEK

Founders 100 0

Investors 0 0

Owners % SEK

Founders 85 17M

Investors 15 3M

Owners % SEK

Founders 70 28M

Investors 30 12M

Owners % SEK

Founders 55 55M

Investors 45 45M

Bootstrap

MVP

Validation

Users

growingTimeline

Proven

Traction

Working

Bus Model

Category

“Leader”

Revenue

Growth

Scaling

Model

Proven

Angel/Seed A-Round B-Round

18-36 Months

VC clock starts

Q?

39

Understand the different requirements and

consequences

P/S-fit

P/M-fit

MVP

Growth

Verifieringsbidrag

Customer

”Utlysningar”

A-rounds

Big VC’s

Pre-seed

Incubators

Family office

Angels

Almi

Seed

Angels

Small VC’s