Startup Metrics for Pirates (Nov 2015, Platzi)

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  • Startup Metrics for Pirates

    @DaveMcClure Founding Partner, 500 Startups

    http://500.co http://500hats.com

    http://slideshare.net/dmc500hats

    AARRR!

    http://500.cohttp://500hats.comhttp://500hats.comhttp://slideshare.net/dmc500hats

  • Dave McClureFounding Partner & Troublemaker, 500 Startups

    00s & 10s: VC: Founders Fund, Facebook fbFund, 500 Startups Angel: Mashery, Mint.com, SlideShare, Twilio Marketing: PayPal, Simply Hired, Mint.com, OReilly

    80s & 90s: Entrepreneur: Aslan Computing (acqd by Servinet/Panurgy) Developer: Windows / SQL DB consultant (Intel, MSFT) Engineer: Johns Hopkins88, BS Eng / Applied Math

  • What is 500? $200M under management 100+ people / 30 investing partners / 18 Countries 2500+ Founders / 250+ Mentors

    1300+ Portfolio Cos / 50+ Countries Wildfire (acq GOOG, $350M) MakerBot (acq SSYS, $400M) Viki (acq Rakuten, $200M) Simple (acq BBVA, $117M) Credit Karma (~$3.5B) GrabTaxi ($1B+) Twilio ($1B+) Ipsy SendGrid VivaReal Udemy Zozi The RealReal Virool BarkBox Tradesy

    500 Startups Global Seed Fund & Startup Accelerator

  • [ 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 = Users, Revenue, Profit?

  • Lean Startup: Simpler, Faster, Cheaper, Smarter

    1. Startup Costs = Lower. 2. # Users, Bandwidth = More. 3. Transaction $$$ = Better.

    Building Product => Cheaper, Faster, Better Getting Customers => Easier, More Measurable

    Iterative Product & Marketing Decisions based on Measured User Behavior

  • Platforms 2.0 Search, Social, Mobile,

    Video, Messaging

  • Changes in Tech Startups LESS Capital required to build product, get to market

    Dramatically reduced $$$ on servers, software, bandwidth Crowdfunding, KickStarter, Angel List, Funders Club, etc Cheap access to online platforms for 100M+ consumers, smallbiz, etc

    MORE Customers via ONLINE platforms (100M+ users) Search (Google, Baidu) Social (Facebook, Twitter, LinkedIn) Mobile (Apple, Android) ECom (Amazon, Alibaba, eBay/PayPal) Media (YouTube, Pinterest, Instagram) Comm (Email, IM/Chat, Voice, SMS, etc)

    LOTS of little bets: Accelerators, Angels, Angel List, Small Exits Y Combinator, TechStars, 500 Startups Funding + Co-working + Mentoring -> Design, Data, Distribution Fast, Cheap Fail, network effects, quantitative + iterative investments

  • 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 (%)

  • [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.

  • Lean Startup -> Startup Metrics Talk to Customers; Discover Problems Progress Features (Less = More) Fast, Frequent Iteration (+ Feedback Loop) Focus on Product/Market Fit Measure Conversion (compare 2+ alternatives) Track Metrics that are Simple & Actionable

  • Discover Customers (Steve Blank, SteveBlank.com)

  • LEARN BUILD

    MEASURE

    IDEAS

    CODEDATA

    Iterate.(Eric Ries, TheLeanStartup.com)

  • AARRR!: Startup Metrics Model

    Website.comRevenu

    e $$$

    Biz DevAds, Lead Gen, Subscriptions, ECommerce

    ACQ

    UIS

    ITIO

    N

    SEOSEM

    Apps & Widgets

    Affiliates

    Email

    PR Biz DevCampaigns,

    Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    Retention

    Emails & Alerts

    System Events & Time-based Features

    Blogs, RSS, News Feeds

  • 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!

    (note: If youre in a hurry, Google Startup Metrics & watch 5m video)

  • One Step at a Time.

    1. Make a Good Product: Activation & Retention 2. Market the Product: Acquisition & Referral 3. Make Money: Revenue & Profitability

  • 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)

  • [ Constructing MVP ]

  • Role: Founder / CEO

    Q: Which Customers? Problems? Metrics? 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 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?

    Ship the simplest, fastest solution that solves the problem; better or cheaper or faster than the available competition.

    Define 1-5 TESTABLE Conversion Metrics of Value Attention/Usage (session time, clicks) Customer Profle Data (email, connect, profile) - Revenue (direct or indirect) - Retention (visits over time, cohort behavior) - Referral (users evangelize to other users)

  • 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 1st 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 / 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 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)

  • [ Testing 4 AUX ]

  • Discover MeaningWhy Should Users CARE About Your Product?

    Kathy Sierra: Creating Passionate Users

  • Discover MeaningKeywords, 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 To Tell if Design/UX is Good?

    AUX = F(Customer, Design/UX, Metrics)

    If Users Use Your Product Then Its GOOD. Define Metrics, Measurability for Design / UX Focus on Psychology of User Relative to Competitive Alternatives (that your customers know about) Keep Testing 4 Awesomeness

    RAMP Mktg & $$$ AFTER its clear your MVP is: Functional = useful for >1 customers Awesome (enough, see above) Differentiated = better than other stuff availabile

  • [ 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 Seek out channels with positive unit economics, scalability 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

  • Distribution PlatformsCustomer Reach: 100M-1B+

    Search: Google, Baidu, Yahoo/Bing, Yandex

    Social: Facebook, Twitter, LinkedIn, TenCent/QQ, WeChat

    Mobile: Apple (iOS), Android

    Media: Video (YouTube), Photos (Instagram, Pinterest), Blogs

    Comm: SMS, IM (WeChat, WhatsApp), Skype, Phone/Voice, etc

  • MAARRRketing 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 (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

  • [ What is WINNING? ]

  • Choose #WINNING Metrics

    WIN = F(Customer, Usage, Dist, Revenue)

    after MVP functional use, several options: better Usage Activation & Retention (AUX) more Users -- Distribution / Acquisition more Money --- Monetization more Profit Margin

    understand ACQ$ vs REV$, optimize 4 short-term higher volume usually a priority costs may change as volume increases

  • [ The Lean Investor ]

  • Startup 2.0: Lean Investor Model

    Method: 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: $100K-$2M (Expand Distribution) Venture: $1M-$10M (Maximize Revenue)

  • Investment #1: Incubate (Product)

    Structure 1-3 founders $0-$100K investment Incubator environment: multiple peers, mentors/advisors

    Build Functional Prototype / Minimum Viable Product (MVP): Concept->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(Market) Structure

    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 5-25 person team $1M-$10M 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

  • Q&A?

    Questions?

    Answers: $1 Correct Answers: $10 Stupid Look on my face: FREE!

  • Appendix

    (note the following slides are a bit old and i havent updated them in quite a while sorry ;)

  • Startup Metrics

    Activation

  • Website.com

    Activation Criteria:

    10-30+ seconds

    2-3+ page views

    3-5+ clicks

    1 key feature usage

    do LOTS of landing page & A/B tests

    make lots of dumb guesses & iterate FAST

    SEOSEM

    Apps & Widgets

    Affiliates

    Email

    PR Biz DevCampaigns,

    Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    Activation

  • ActivationWhat do users do on their first visit?

    Example Activation Goals Click on something! Account sign up / Emails Referrals / Tell a friend Widgets / Embeds Low Bounce Rate

    Activation Tips Less is more Focus on user experience / usability Provide incentives & call to actions Test and iterate continuously

  • ActivationWhat do users do on their first visit?

    Key Metrics to Track Pages per visit Time on site Conversions

  • ActivationTools

    Crazy Egg (Visual Click Mapping) http://crazyegg.com Google Website Optimizer (A/B & Multivariate Testing) http://google.com/websiteoptimizer Marketo.com (B2B Lead Generation Management) http://marketo.com

    Resources Experimentation and Testing: A Primer kaushik.net/avinash/2006/05/experimentation-and-testing-a-primer.html Landing Page Design Toolbox: 100 Tips & Tools http://tinyurl.com/326co6 Landing Page Tutorials & Case Studies http://www.copyblogger.com/landing-pages/ 101 Easy Easy to use Google Website Optimizer http://conversion-rate-experts.com/articles/101-google-website-optimizer-tips/

    http://crazyegg.comhttp://google.com/websiteoptimizerhttp://marketo.comhttp://www.kaushik.net/avinash/2006/05/experimentation-and-testing-a-primer.htmlhttp://tinyurl.com/326co6http://www.copyblogger.com/landing-pages/http://conversion-rate-experts.com/articles/101-google-website-optimizer-tips/

  • Startup Metrics

    Retention

  • Website.com

    SEOSEM

    Apps & Widgets

    Affiliates

    Email

    PR Biz DevCampaigns,

    Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    Emails & Alerts

    System Events & Time-based

    Features

    Blogs, RSS, News Feeds

    Automated emails:

    lifecycle emails @ +3, +7, +30d

    status / best of weekly/monthly

    something happened emails

    BUT: make it easy to unsubscribe

    Tip on emails:

    > 80% or more on SUBJECT LINE

    < 20% or less on BODY TEXT

    Retention

  • Cohort Analysis: Distrib of Visits over Time Rate of Decay Effective Customer Lifecycle

    Retention Methods Automated Emails

    * Track open rate / CTR / Quantity RSS / News Feeds

    * Track % viewed / CTR / Quantity Widgets / Embeds

    * Track impressions / CTR / Quantity

    RetentionHow do users come back? How often?

  • Example Retention Goals 1 - 3+ visits per month 20% open rate / 2% CTR High deliverability / Low spam rating Long customer life cycle / Low decay Identify fanatics and cheerleaders

    Retention Tips Email is simple and it works BUT make unsubscribe easy 80% subject line / 20% body text ACTUALLY 99% subject line / 1% body text Fanatics = virality + affiliate channel (bloggers?)

    RetentionHow do users come back? How often?

  • RetentionHow do users come back? How often?

    Key Metrics to Track Source Quantity Conversions Visitor Loyalty Session Length

  • RetentionTools

    Campaign Monitor / MailChimp (email newsletter software) campaignmonitor.com / mailchimp.com TriggerMail (site-centric email management) triggermail.net Litmus (email and website design testing - clients / browsers) litmusapp.com

    Resources 30 free HTML email templates campaignmonitor.com/resources/templates.aspx Best Practices in Writing Email Subject Lines mailchimp.com/resources/best-practices-in-writing-email-subject-

    lines.phtml Learning Viral: Viral Emails of Tagged.com okdork.com/2008/04/10/learning-viral-studying-taggedcom/

  • Startup Metrics

    Acquisition

  • Website.com

    Marketing Channels: largest-volume (#) lowest-cost ($) best-performing (%)

    AcquisitionSEO

    SEM

    Apps & Widgets

    Affiliates

    Email

    PR Biz DevCampaigns,

    Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

  • AcquisitionWhere are users coming from?

    Acquisition Methods SEO / SEM Blogs Email Social Media &

    Social Networks Domains

  • AcquisitionKeyword Vocabulary

    Top 10 - 100 words Your Brand / Products Customer Needs / Benefits Competitors Brand / Products Semantic Equivalents Misspellings

    Things to analyze Sources Volume Cost Conversion

  • AcquisitionWhere are users coming from?

    Key Metrics to Track Quantity (#) Cost ($) Conversions (%)

    Example

  • AcquisitionTools

    Google Analytics (web analytics) google.com/analytics Google Keyword Tool (keyword research tool) adwords.google.com/select/KeywordToolExternal SEO Book Tools (SEO related tools) tools.seobook.com

    Resources SEO Book Blog seobook.com/blog The Social Media Manual: Read Before You Play searchengineland.com/071120-144401.php Strategies to ruthlessly acquire users andrewchen.typepad.com/andrew_chens_blog/

    2007/04/10_obvious_stra.html

  • Startup Metrics

    Referral

  • Website.com

    Acq

    uisi

    tion

    SEOSEM

    Apps & Widgets

    Affiliates

    Email

    PR Biz DevCampaigns,

    Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    Retention

    Emails & Alerts

    System Events & Time-based Features

    Blogs, RSS, News Feeds

    Focus on driving referrals *after* users have a happy experience; avg score >= 8 out of 10

    Referral

  • ReferralHow do users refer others?

    Referral Methods Send to Friend:

    Email / IM Social Media Widgets / Embeds Affiliates

  • ReferralViral Growth Factor

    Viral Growth Factor = X * Y * Z X = % of users who invite other people Y = average # of people that they invited Z = % of users who accepted an invitation

    A viral growth factor > 1 means an exponential organic user acquisition.

  • ReferralTools

    Gigya (social media distribution & tracking tool) gigya.com ShareThis / AddThis (sharing buttons) sharethis.com / addthis.com GetMyContacts (PHP contacts importing & invitation software) getmycontacts.com

    Resources Seven Ways to GO VIRAL lsvp.wordpress.com/2007/03/02/seven-ways-to-go-viral/ Whats your viral loop? Understanding the engine of adoption andrewchen.typepad.com/andrew_chens_blog/2007/07/whats-your-

    vira.html Metrics: Where Users Come From slideshare.net/guest2968b8/rockyou-snap-summit-32508

  • Startup Metrics

    Revenue

  • Website.comRevenu

    e $$$

    Biz DevAds, Lead Gen, Subscriptions, ECommerce

    Acq

    uisi

    tion

    SEOSEM

    Apps & Widgets

    Affiliates

    Email

    PR Biz DevCampaigns,

    Contests

    Direct, Tel, TV

    Social Networks

    Blogs

    Domains

    Retention

    Emails & Alerts

    System Events & Time-based Features

    Blogs, RSS, News Feeds

    Revenue

    This is the part *you* still have to figure out

  • RevenueHow do you make money?

    Revenue Tips Dont Rely on AdSense (only) Start Free => 2% Freemium Subscription / Recurring transactions Qualify your customers -> Lead generation (arbitrage) Sell something! (physical or virtual)

  • RevenueResources & Tools

    Revenue Metrics (Andrew Chen) http://tinyurl.com/47r63a How to Create a Profitable Freemium Startup (Andrew Chen) http://tinyurl.com/8z9ygk 2008 Affiliate Marketing Review (Scott Jangro) http://tinyurl.com/86wak4

    http://tinyurl.com/47r63ahttp://tinyurl.com/8z9ygkhttp://tinyurl.com/86wak4

  • Links & Resources

    Additional 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)

    Understanding Comics Scott McCloud (book)

    http://www.amazon.com/Influence-Psychology-Persuasion-Robert-Cialdini/dp/0688128165http://www.amazon.com/Mating-Mind-Sexual-Choice-Evolution/dp/038549517Xhttp://www.slideshare.net/amyjokim/putting-the-fun-in-functionahttp://andrewchenblog.com/http://www.amazon.com/Common-Approach-Usability-Circle-Com-Library/dp/0789723107http://www.amazon.com/Common-Approach-Usability-Circle-Com-Library/dp/0789723107http://www.amazon.com/Common-Approach-Usability-Circle-Com-Library/dp/0789723107http://www.amazon.com/Common-Approach-Usability-Circle-Com-Library/dp/0789723107http://www.amazon.com/Common-Approach-Usability-Circle-Com-Library/dp/0789723107http://www.amazon.com/Common-Approach-Usability-Circle-Com-Library/dp/0789723107http://bokardo.com/archives/designing-for-the-social-web-the-book/http://startuplessonslearned.com/http://www.slideshare.net/venturehacks/customer-development-methodology-presentation/http://steveblank.com/http://startup-marketing.com/http://www.amazon.com/gp/product/006097625X/http://www.amazon.com/gp/product/006097625X/