Startup Metrics 4 Pirates (London, March 2011)

Startup Metrics 4 Pirates Geek n Rolla London March 2011 #GKNR #LeanStartup Dave McClure @DaveMcClure http://www.500startups.com http://500hats.typepad.com http://slideshare.net/dmc500hats AARRR !

Dave McClure
2001-2010:
Startup Investor: 500 Startups, Founders Fund
Tech Marketing : PayPal, Simply Hired, Mint.com
Advisor, Angel Investor : 100+ Startups
Conferences : Warm Gun, Lean Startup, SMASH
Stanford Lecturer : Facebook, Startup Metrics
80s & 90s:
Entrepreneur : Founder/CEO Aslan Computing (acq.)
Developer : Windows Apps / SQL DB Admin
User Groups : E-Commerce, Internet, Client-Server
Engineer : Johns Hopkins 88, BS Eng / Applied Math
GEEK, CODER, ENTREPRENEUR Blogger, Marketing, Angel/VC Investor

500 Startups Seed Fund & Accelerator (100+ investments @ ~$75K avg) Wildfire Crave Tello AwayFind Indinero MyGengo Revnetics Mogotix EcoMom Zencoder GazeHawk Crocodoc SayHired Recurly AppBistro Foodspotting Gantto Medialets Rapportive TransFS SiteJabber GinzaMetrics Estately FlowTown OneForty Twilio Postling Plancast ElaCarte WePay Zappli Format Baydin GroupSpaces Rapportive Apsalar Bunndle Udemy Brainient ReadyForZero Graphicly StoryJumper OtherInbox Viikii Zozi One True Fan Formative Labs Networked Blogs

[ This Talk ]

Topics
Basic Concepts of Startup Metrics 4 Pirates
Thoughts on Sequencing AARRR
Thoughts on Constructing MVP
Iterate on Design (UX) & Distribution (MKTG)
Make Marketing [more] Analytical

Disclaimers
Im not really a metrics guy
This is mostly high-concept bullshit
Several Things Are WRONG (give me feedback)
but I promise to be entertaining
(ps sorry about the colors & swearing .)

Key Concepts (3LA)
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 Shit ]

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

Other Great Shit. Psychology + Comics

[The Lean Startup]

The Lean Startup
Talk to Customers ; Discover Problems
Progress Features ( Less = More )
Fast, Frequent Iteration (+ Feedback Loop )
Measure Conversion ; Compare 2+ Options
Focus on Product/Market Fit (dont launch b4)
Keep it Simple & Actionable

Discover Customers (Steve Blank, SteveBlank.com)

Iterate , Dammit. (Eric Ries, StartupLessonsLearned.com) LEARN BUILD MEASURE IDEAS CODE DATA

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

[Startup Metrics 4 Pirates ]

Startup Challenges
Startups 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 )

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 visitors
500,000 visitors who view 2+ pages / stay 10+ sec
200,000 visitors who clicked on a link or button
20,000 registered users w/ email address
2,000 passionate fans who refer 5+ users / mo.
1,000 monthly subscribers @ $5/mo
the good stuff.

Startup Metrics for Pirates
A cquisition: users come to site from various channels
A ctivation: users enjoy 1 st visit: " happy experience
R etention: users come back , visit site multiple times
R eferral: users like product enough to refer others
R evenue: users conduct some monetization behavior
(note: If youre in a hurry, Google Startup Metrics & watch 5m video) AARRR !

AARRR! : 5-Step Startup Metrics Model Website.com R evenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, ECommerce A CQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains R etention 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 Lifecycle
Target ~3-5 Conversion Events (tip: Less = More)
Test, Measure, Iterate to Improve

Optimize 4 Happiness (both User + Business)
Define States of User + Business Value
Prioritize (Estimate) Relative Value of Each State
Move Users: Lower Value -> Higher Value
Optimize for User Happiness + Business $$$
Achieve High Cust Value + Low ACQ$ @ Scale
$$$

What is Minimum Viable Product?
MVP = F(Customer, Problem, Time or $$$)
Focus on the CUSTOMER FIRST
TTYFU : Qualitative Discovery, Quantitative Validation
Get to know habits, problems, desires ( FUN MATTERS )
what causes pain? what causes pleasure?
Define 1-5 TESTABLE Conversion Metrics of Value
Attention/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) Stage Conversion Status Conv. % Est. Value (*not* cost) Acquisition Visitors -> Site/Widget/Landing Page (2+ pages, 10+ sec, 1+ clicks = dont abandon) 60% $.05 Activation Happy 1 st Visit; Usage/Signup (clicks/time/pages, email/profile reg, feature usage) 15% $.25 Retention Users Come Back; Multiple Visits (1-3x visits/mo; email/feed open rate / CTR) 5% $1 Referral Users Refer Others (cust sat >=8; viral K factor > 1; ) 1% $5 Revenue Users Pay / Generate $$$ (first txn, break-even, target profitability) 2% $50

[ 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 Steps
Measure, A/B Test, Iterate FAST (daily/weekly)
Optimize for Conversion Improvement
80% on existing feature optimization
20% on new feature development

What is Product/Market Fit?
PMF = F(Customer, Solution, Alternatives* )
Product / Market Fit occurs when:
Customers like your shit better than other shit
Not static, Not optimal just Local Max 4 F(customers, solution, time)
make sure youre moving in optimal direction 2 local max
Q: 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 Give a SHIT About You? Kathy Sierra: Creating Passionate Users

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
Words
Images
Context
Button/Link
Emotion
Result
Positive?
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 + Campaigns
Select & Focus on Best-Performing Channels & Themes
Optimize for conversion to target CTAs, not just site/landing page
Match/Drive channel cost to/below revenue potential
Low-Hanging Fruit:
Blogs
SEO/SEM
Landing Pages
Automated Emails

M AARRR keting 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 ( CTA s)
[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