Startup Metrics for Pirates (Brazil, Nov 2011)

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slides from my talk on Startup Metrics at Startup Weekend Sao Paulo, Brazil (Nov 2011)

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  • Startup Metrics For Pirates Startup Weekend Sao Paulo November 2011 - #SWSP 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 : 200+ Startups
      • Conferences : Warm Gun, Lean Startup, SMASH
      • Stanford Lecturer : Facebook, Startup Metrics
      • 80 s & 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 (230+ companies, 10+ countries )
  • [ This Talk ]
  • Topics
    • Basic Concepts of Startup Metrics 4 Pirates
    • 3 Steps to AARRR: Product, Market, Revenue
    • Constructing MVP: Just ONE Feature?
    • Design (UX) & Distribution (MKTG)
    • Winning : Market, Revenue, Profit?
  • Key Concepts
    • MVP = F( Customer , Problem, Time or $$$)
    • PMF = F( Customer , Solution, Alternatives)
    • AUX = F( Customer , Design/UX, Metrics)
    • ACQ = F( Customer , Campaign, Vol, Cost, Conv)
    • WIN = F( Customer , Usage, Dist, Revenue)
  • Geek Renaissance
    • Tech Innovation
    • Finance Innovation
    • Design Innovation
    • Social Innovation
    • Global Innovation
  • Platforms 2.0 Search, Social, Mobile
  • Whats a Platform? Successful Platforms have 3 Things: 1) Features 2) Users 3) Money Users . . Money Features Growth Profit Profitable Growth Awesome
  • Distribution Platforms
      • Customer Reach: 100M+
        • Search : Google (SEO/SEM)
        • Social : Facebook, Twitter, Zynga, LinkedIn
        • Mobile : Apple (iPhone, iPad), Android
        • Media : YouTube (Video), Blogs, Photos
        • Comm : Email, Chat, SMS, Voice
  • DO Marketing! (Its Not Evil )
    • Marketing is Both Qualitative + Quantitative
    • Qualitative: Create Emotion, Drive Action
    • Quantitative: Measure Results of Action
    • Design (UX) & Distribution (MKTG) Matter
    • Volume (#), Cost ($), Conversion (%)
  • [ Interesting Shit. ]
  • Read Geoffrey Miller Sex + Evolution + Consumer Mktg = Awesome Sauce
  • More Great Shit. Psychology + Comics
  • [The Lean Startup] [Startup Metrics 4 Pirates ]
  • Just Gimme the GOOD Metrics. Users, Pages, Clicks, Emails, $$$...?
    • Q: Which of these is best? How do you know?
      • 1,000,000 one-time, unregistered unique 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.
  • 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 (don t 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
  • AARRR! : 5-Step Startup Metrics Model Website.com R evenue $$$ Biz Dev Ads, Lead Gen, Subscriptions, ECommerce A CQUISITION SEO SEM Apps & Widgets Affiliates Email PR Biz Dev Campaigns, Contests Direct, Tel, TV Social Networks Blogs Domains R etention Emails & Alerts System Events & Time-based Features Blogs, RSS, News Feeds
  • Startup Metrics for Pirates
    • A cquisition: users come to site from various channels
    • A ctivation: users enjoy 1 st visit: " happy experience
    • R etention: users come back , visit site multiple times
    • R eferral: users like product enough to refer others
    • R evenue: users conduct some monetization behavior
    (note: If you re in a hurry, Google Startup Metrics & watch 5m video) AARRR !
  • One Step at a Time.
      • Make a Good Product : Activation & Retention
      • Market the Product : Acquisition & Referral
      • Make Money : Revenue & Profitability
    You probably cant save your Ass and your Face at the same time choose carefully . DMC
  • Startup Challenges
    • Startups have problems in 3 key areas:
      • Management : Set Priorities, Define Key Metrics
      • Product : Build Right Features. Measure, Iterate.
      • Marketing : Distribution, Distribution, Distribution.
      • ( Search , Social , Mobile )
  • Key Concepts
    • MVP = F( Customer , Problem, Time or $$$)
    • PMF = F( Customer , Solution, Alternatives)
    • AUX = F( Customer , Design/UX, Metrics)
    • ACQ = F( Customer , Campaign, Vol, Cost, Conv)
    • WIN = F( Customer , Usage, Dist, Revenue)
  • [ Constructing MVP ]
  • Role: Founder / CEO
    • Q: Which Customers? Problems? Metrics? Why ?
    • A: Focus on Critical Few Actionable Metrics
      • (if you don t 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 $$$)
    • Focus on CUSTOMER
      • Qualitative Discovery, Quantitative Validation
    • Get to know habits, problems, desires ( FUN MATTERS )
      • what causes pain? what causes pleasure?
    • Define 1-5 TESTABLE Conversion Metrics of Value
      • Attention/Usage (session time, clicks)
      • Customer Data (email, connect, profile)
      • Revenue (direct or indirect)
      • Retention (visits over time, cohort behavior)
      • Referral (users evangelize to other users)
    • Note: Paid Solutions drive FOCUS (& pay rent)
  • Example Conversion Metrics (note: *not* actuals your mileage may vary) Stage Conversion Status Conv. % Est. Value (*not* cost) Acquisition Visitors -> Site/Widget/Landing Page (2+ pages, 10+ sec, 1+ clicks = dont abandon) 60% $.05 Activation Happy 1 st Visit; Usage/Signup (clicks/time/pages, email/profile reg, feature usage) 15% $.25 Retention Users Come Back; Multiple Visits (1-3x visits/mo; email/feed open rate / CTR) 5% $1 Referral Users Refer Others (cust sat >=8; viral K factor > 1; ) 1% $5 Revenue Users Pay / Generate $$$ (first txn, break-even, target profitability) 2% $50
  • 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 , you ve FOUND it.
    • Then Bring it Back Only Better.
    • Tip: KILL a Feature Every Week .
  • [ 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 stuff better than other options
      • 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 CARE About Your Product? Kathy Sierra: Creating Passionate Users
  • Discover Meaning Keywords, Images, Call-to-Action
    • Top 10 - 100 words
      • Your Brand / Products
      • Customer Needs / Benefits
      • Competitor s 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/UX is Good ?
  • [ Metrics 4 ACQ ]
  • Role: Marketing / Sales
    • Q: What channels? Which users? Why?
    • A: High Volume (#), Low Cost ($), High Conv (%)
    • Design & Test Multiple Marketing Channels + Campaigns
    • Select & Focus on Best-Performing Channels & Themes
    • Optimize for conversion to target CTAs, not just site/landing page
    • Match/Drive channel cost to/below revenue potential
    • Low-Hanging Fruit:
      • Blogs
      • SEO/SEM
      • Landing Pages
      • Automated Emails
  • Example Marketing Channels
    • PR
    • Contest
    • Biz Dev
    • Direct Marketing
    • Radio / TV / Print
    • Dedicated Sales
    • Telemarketing
    • Email
    • SEO / SEM
    • Blogs / Bloggers
    • Viral / Referral
    • Affiliate / CPA
    • Widgets / Apps
    • LOLCats ;)
  • M AARRR keting Plan
    • Marketing Plan = Target Customer Acquisition Channels
      • 3 Important Factors = Volume (#), Cost ($), 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