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