As a startup founder, how do you know if you're doing the right things for your business? How will investors know if you're on the path to building a successful scalable venture? Come learn about what metrics you should be paying attention to as you launch your startup, and what data investors will be looking for when making an investment decision.

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Startup School:
Metrics that Matter
Andy Moss
NYU Entrepreneurial Institute
Entrepreneur-in-Residence
Director, Blackstone LaunchPad at NYU

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If you don’t know where you’re going,
any road will get you there. – George Harrison

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Agenda
u Why Monitor Metrics?
u Metrics that Matter to Startups
u Metrics that Matter to Investors
u Resources
u Discussion

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Various types of Metrics

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Why Monitor Metrics?
u Benefits
u Allows objective tracking of progress (or lack
thereof)
u Aligns team around identifiable goals
u Enables clarity of making decisions
u Distinguishes signal from noise
u Concerns
u Management may focus of the metric and not real
business
u Beware of “vanity metrics” that have no real value

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ARC Method
Alignment | Results | Communication
u Alignment with…
u Investors
u Employees
u Customers
u Results – identify, track, measure results that
matter…
u Communication - open communication tends to
engender trust. Regular reporting shows realistic
and follow through and creates accountability.

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Metrics that Matter to Startups
Process
u What really affects your business changes over time
u Determining the right metrics and monitoring techniques
that fit your business may take experimentation
u Change/evolve during various stages of life cycle
Motivation
u Help improve business decisions
u On the margin make investors happy

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Metrics at Various Stages

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One Metric that Matters (OMTM)
Ben Yoskovitz, Lean Analytics
A single number that you care the most about at the
current stage of your startup
1. Answers the most important question you have
2. Forces you to draw a line in sand
3. Clearly state goals
4. Focuses the entire company
5. Inspires a culture of experimentation
OMTM will change. It’s not a single number that
matters throughout your startup’s existence

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Does it support the big picture?
All areas of a business should integrate up to
the core goals.
Two most common core goals
1. Solve the customers problem
2. Be a viable business (make a profit,
eventually)

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One Metric that Matters (OMTM)

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What Makes a Good Metric?
1. Rate or ratio is better than an absolute or cumulative value.
“New users per day” is better than “Total users.” Absolute numbers
tend to be vanity metrics
2. Comparative to other time periods, sites, or segments
Key is Cohort Analysis where you track a metric over different groups
of people, typically over different periods of time
3. Simple and easy to understand
Otherwise, people won’t remember it and discuss it
4. “Accounting” metrics – makes predictions more accurate
For board, investors, media, employees. Most of these are wildly
inaccurate and aspirational. People want to see you be reasonable.
5. “Experimental” metrics – will significantly change behavior
Used to optimize the product, pricing, or market

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How to Pick OMTM
1. Type of Business
u Transactional: transaction funnel metrics
u Collaborative: engagement funnel metrics
u SaaS: LTV, CAC, Magic Number
u Media: page views, CTR, Conversion
u Games: Avg Revenue Per User (ARPU), upsell
u Apps: Daily Usage (DAU), Monthly Usage (MAU), Uninstalls
2. Stage of Business
u Seed: more qualitative than quantitative
u If you’re going to be qualitative; have a plan and show people you know how
to transform this into something more quantitative.
u Series A and Beyond: more quantitative than qualitative

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Example: Hospital Readmissions
Hospital Readmissions: If a patient is readmitted to a hospital
within 30 days of being discharged it is typically very costly,
and historically we know the outcomes are much worse.
If you have a digital health company that proposes to impact
this, what are some things you might measure?
• Number of readmissions before using the solution
• Number of readmissions while using the solution
• Cost of readmissions
• Diagnosis of the patient
• Medical complications of the patient
• Measures of usage on the solution itself (length, type, etc.)
• Engagement scores of people who use it
• Patients
• Care providers

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Metrics that Matter to Investors
u “Directional confirmation” of core hypotheses and
risks
u Engagement:
u Unit Economics
u Go to Market Strategy
u Distribution Model
u In hyper-competitive, noisy Seed universe,
Investors want early signs of breakout potential
and excitement
u VCs monitor these to inform next investment
decision
u “Killing It:” Preempt the Series A before anyone else
finds out
u “Good+/-:” Wait and see more cards, positive bias
u “Poor:” Wait to see if something changes, help instigate

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Metrics that Matter to Investors
Invest to show
breakout potential
Invest when have
broken out
Focus on key milestones and
relevant growth metrics
Example Seed
graduates
Relevant Metric
(monthly growth rate)
Crashlytics 47%
Seed A 37%
Seed B 32%
Seed C 38%
Track growth relative to peers
and internal dataset
Example Series
A/B companies
Relevant Metric
(monthly growth rate)
Company A 38%
Company B 82%
Company C 18%
Stackdriver 54%
Market Potential
Team Business Model
IP Position How Disruptive
Financing Network Effects

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Metrics that Matter to Investors

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Metrics that Matter to Investors
Sep-11 Dec-11 Mar-12 Jun-12 Sep-12

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Resources
u CAC & LTV – David Skok
u The Magic Number – Will Price
u AARRR!!! -- Dave McClure

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CAC & LTV
u The common interpretation of CAC and LTV ratio:
< 3.0 step back and look at your marketing spend
> 3.0 your business is healthy
u One arrow, but coarse indication of “good business”
u Other reasons to monitor it though – looking ahead:
uBuilding for profits considered more important than
delivering today
uTraditional models penalize SaaS companies for near term
growth
uArgues for companies to drive LTV higher (i.e. increase price
and lower churn) while containing CAC and to strive for adding
customers as quickly as practical.

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CAC & LTV

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The Magic Number
u Provides insight into the effectiveness of previous
quarter Sales and Marketing spend on MRR growth
u To calculate:
QRev[X] = Quarterly Recurring Revenue (QRR) for period X
QRev[X-1] = QRR for period preceding X
ExpSM[X-1] = Sales & Marketing Expense for period preceding
X
Magic Number = (QRev[X] – Qrev[X-1])*4/ExpSM[X-1]

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The Magic Number
u Example:
u James indicates the following in interpreting the
MN:
< 0.75 step back and look at your business
> 0.75 start stepping on the gas because your business is
primed
to leverage spend into growth.
> 1.5 call him immediately
Q1 Q2 Q3
Revenue ($K) 1,000 1,200 1,500
S&M Exp ($K) 800 900
Magic Number 1.00 1.33

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AARRR – Get, Keep, Grow…
• Acquisition: users come to the site from various channels
• Activation: users enjoy 1st visit: "happy" user experience
• Retention: users come back, visit site multiple times
• Referral: users like product enough to refer others
• Revenue: users conduct some monetization behavior
AARRR!

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AARRR

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AARRR
1. ACQUISITION
SEO
SEM
Apps &
Widgets
Affiliates
Email
PR
Biz
Dev
Campaigns,
Contests
Direct, Tel,
TV
Social
Networks
Blogs
Domains
Website.com
Emails &
widgets
Campaigns,
Contests
Biz Dev
Ads, Lead Gen,
Subscriptions, etc
Homepage / Landing
Page
Product
Features
Emails &
Alerts
Blogs, Content
System Events & Time-
based Features
Customer Lifecycle / Conversion Behavior

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AARRR Executed

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AARRR
Category User Status Conv % Est.
Value
Acquisition Visit Site
(or landing page, or external widget)
100% $.01
Acquisition Doesn't Abandon
(views 2+ pages, stays 10+ sec, 2+
clicks)
70% $.05
Activation Happy 1st
Visit
(views X pages, stays Y sec, Z clicks)
30% $.25
Activation Email/Blog/RSS/Widget Signup
(anything that could lead to repeat visit)
5% $1
Activation Acct Signup
(includes profile data)
2% $3
Retention Email Open / RSS view -> Clickthru 3% $2
Retention Repeat Visitor
(3+ visits in first 30 days)
2% $5
Referral Refer 1+ users who visit site 2% $3
Referral Refer 1+ users who activate 1% $10
Revenue User generates minimum revenue 2% $5
Revenue User generates break-even revenue 1% $25

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Example:
Cognuse & Venture Catalyst
A tablet based system for educating and empowering patients and
families, coordinating care, and improving outcomes in Intensive Care
Units and beyond.
u How do we work with this company to maximize their odds of
success and do this in practice?
u What we focus on with Cognuse:
u Partnerships with academic centers: finding good partners really matters, a
lot.
u Jointly doing the research to prove the tech works!
u These are jointly created and shared metrics that track
results and provide concrete evidence
u Trade show participation, where customers who are already primed for this
are convening.
u Referral and incentive programs. If they are early partners or customers,
make it worthwhile to them, and turn them into promoters. Incentivize them..

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Example:
Cognuse & Venture Catalyst
I can’t do everything at once….
• Keep a prioritized list of things you
• Know you need to do at some point and when you
think you’ll need to do it.
• Want to do at some point and at what point it might
make more sense to do it.
Make metrics that collect data and try to find ways to
efficiently collect it. It’s ok to be a little inefficient at
first, just write out what it would take to be more
efficient and hold onto that for later.

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Summary

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Discussion??