Startup Metrics for Pirates (Nov 2012)

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slides for my talk on Startup Metr

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  • Startup Metrics 4 Pirates Tel Aviv, Israel Nov 2012 - #AARRRDave McClure @DaveMcClure http://500.co http://500hats.typepad.com http://slideshare.net/dmc500hats
  • WARNING:
  • WARNING!!! this deck is guaranteed to offend,provide tragically incorrect advice, and perhaps get you arrested. Deal with it.
  • Dave McClure Developer, Entrepreneur, Marketer, Investor, GEEK!00s & 10s: Investor: Founders Fund, Facebook fbFund, 500 Startups Companies: Mint.com, SlideShare, Twilio, WildFire, SendGrid Marketing: PayPal, Simply Hired, Mint.com, OReilly Media Speaker: Lean Startup, Web 2.0, Stanford/Facebook80s & 90s: Entrepreneur: Founder/CEO Aslan Computing (acqd) Developer: Windows / SQL DB consultant (Intel, MSFT) Engineer: Johns Hopkins88, BS Eng / Applied Math
  • 500 StartupsSeed Fund & Accelerator (~400 companies, 20+ 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 $$$) PMF = F(Customer, Solution, Alternatives) AUX = F(Customer, Design/UX, Metrics) ACQ = F(Customer, Campaign, Vol, Cost, Conv) WIN! = F(Customer, Usage, Dist, Revenue)
  • Platforms 2.0Search, Social, Mobile
  • Whats a Platform?Successful Platformshave 3 Things: Features Features1) Features2) Users3) Money Growth Profit Awesome .. Profitable Users Users .. Growth Money Money
  • Distribution PlatformsCustomer Reach: 100M+ Search: Google (SEO/SEM) Social: Facebook, Twitter, Zynga, LinkedIn Mobile: Apple (iPhone, iPad), Android Media: YouTube (Video), Blogs, Photos Comm: Email, Chat, SMS, Voice
  • DO Marketing! (Its Not Evil) Marketing is Both Qualitative + Quantitative Qualitative: Create Emotion, Drive Action Quantitative: Measure Results of Action Design (UX) & Distribution (MKTG) Matter Volume (#), Cost ($), Conversion (%)
  • [ Interesting Shit. ]
  • Read Geoffrey MillerSex + Evolution + Consumer Mktg = Awesome Sauce
  • More Great Shit. Psychology + Comics
  • [The Lean Startup][Startup Metrics 4 Pirates]
  • Just Gimme the GOOD Metrics. Users, Pages, Clicks, Emails, $$$...? 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+ secthegood 200,000 visitors who clicked on a link or buttonstuff. 20,000 registered users w/ email address 2,000 passionate fans who refer 5+ users / mo. 1,000 monthly subscribers @ $5/mo
  • 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) IDEAS LEARN BUILD DATA CODE MEASURE
  • Product/Market Fit b4 Launch (Sean Ellis, Startup-Marketing.com)Startup-Marketing.com
  • AARRR!: Startup Metrics Model SEO SEO Campaigns, Campaigns, SEM SEM PR PR Contests Contests Biz Social Social Biz Networks Networks Dev Dev Blogs Blogs Affiliates Affiliates Apps && Apps Direct, Direct, Widgets Widgets Email Email Tel, TV Tel, TV Domains Domains ACQUISITION ACQUISITION Emails & Alerts Emails & AlertsBlogs, RSS,Blogs, RSS, n ntioNews FeedsNews Feeds R et e Ads, Lead Gen, Biz Dev Biz Dev Ads, Lead Gen, System Events & System Events & Subscriptions, Subscriptions, Rev Reve Time-based Features Time-based Features ECommerce ECommerce enue nue $ Website.com $$$ $$
  • 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 AARRR!! AARRR (note: If youre in a hurry, Google Startup Metrics & watch 5m video)
  • One Step at a Time.1. Make a Good Product: Activation & Retention2. Market the Product: Acquisition & Referral3. Make Money: Revenue & ProfitabilityYou probably cant save your Ass and your Faceat the same time so choose carefully. DMC
  • 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)
  • Key Concepts MVP = F(Customer, Problem, Time or $$$) PMF = F(Customer, Solution, Alternatives) AUX = F(Customer, Design/UX, Metrics) ACQ = F(Customer, Campaign, Vol, Cost, Conv) WIN! = F(Customer, Usage, Dist, Revenue)
  • [ Constructing MVP ]
  • Role: Founder / CEOQ: Which Customers? Problems? Metrics? Why?A: Focus on Critical Few Actionable Metrics (
  • Optimize 4 Happiness (both User + Business) $$$ 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 60% $.05 (2+ pages, 10+ sec, 1+ clicks = dont abandon)Activation Happy 1st Visit; Usage/Signup 15% $.25 (clicks/time/pages, email/profile reg, feature usage)Retention Users Come Back; Multiple Visits 5% $1 (1-3x visits/mo; email/feed open rate / CTR) Referral Users Refer Others 1% $5 (cust sat >=8; viral K factor > 1; ) Revenue Users Pay / Generate $$$ 2% $50 (first txn, break-even, target profitability)
  • 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.
  • [ Getting 2 PMF ]
  • 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 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! ShockingAccepted !!! Not Funny.
  • [ Testing 4 AUX ]
  • Discover Meaning Why Should Users CARE About Your Product?Kathy Sierra:CreatingPassionateUsers
  • Discover Meaning Keywords, Images, Call-to-ActionTop 10 - 100 words Call-to-Action Your Brand / Products Words Customer Needs / Benefits Images Competitors Brand / Products Context Semantic Equivalents Button/Link Misspellings EmotionRelevant images Result People Positive? Products Negative? Problems Neutral (= Death) Solutions A/B test & Iterate
  • How 2 Tell if Design/UX is Good?
  • [ Metrics 4 ACQ ]
  • Role: Marketing / SalesQ: What channels? Which users? Why?A: High Volume (#), Low Cost ($), High Conv (%) Design & Test Multiple Marketing Channels + Campaigns Select & Focus on Best-Performing Channels & Themes Optimize for conversion to target CTAs, not just site/landing page Match/Drive channel cost to/below revenue potential Low-Hanging Fruit: Blogs SEO/SEM Landing Pages Automated Emails
  • Example Marketing Channels PR Email Contest SEO / SEM Biz Dev Blogs / Bloggers Direct Marketing Viral / Referral Radio / TV / Print Affiliate / CPA Dedicated Sales Widgets / Apps Telemarketing LOLCats ;)
  • MAARRRketing Plan ACQ = F(Customer, Campaign, Vol, Cost, Conv)Marketing Plan = Target Customer Acquisition Channels 3 Important Factors = Volume (#), Cost ($), Conversion (%) Measure conversion to target customer actions Test audience segments, campaign themes, Call-To-Action (CTAs)[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 Alpha, ~3-6 months Develop Minimal Critical Feature Set => Get to It Works Instrument Basic Dashboard, Conversion Metrics Test Cust. Adoption (10-1000 users) / Cust. Satisfaction (Scale: 1-10) Demonstrate Concept, Reduce Product Risk, Test Functional Use Develop Metrics & Filter for Follow-on Investment
  • Investment #2: Seed Structure (Market) 2-5 person team $100K-$2M investment Syndicate of Angel Investors / Small VC Funds Improve Product, Expand Market, Test Revenue: Alpha->Beta, ~6-12 months Customer Sat 6 => Get to Doesnt Suck Setup A/B Testing Framework, Optimize Conversion Test Marketing Campaigns, Cust Acqstn Channels Prove Solution/Benefit, Assess Market Size Test Channel Cost, Revenue Opportunity Determine Org Structure, Key Hires
  • Investment #3: Venture (Revenue) Structure 5-10 person team $1M-$5M investment VC Investors Make Money, Get to Sustainability: Beta->Production, 12-18 months Customer Sat 8 => It Rocks, Ill Tell My Friends MktgPlan => Predictable Channels / Campaigns + Budget Scalability & Infrastructure, Customer Service & Operations Connect with Distribution Partners Prove/Expand Market, Operationalize Business Future Milestones: Profitable/Sustainable, Exit Options
  • NOTE: Dont Pitch Me, Bro.Seriously: Dont. F**king. Pitch Me. (and dont email me either, cuz i wont read it)
  • 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)