startup metrics 4 pirates (london, march 2011)

47
Pirates GeeknRolla London – March 2011 #GKNR #LeanStartup Dave McClure @DaveMcClure http://www.500startups.com http://500hats.typepad.com http://slideshare.net/dmc500hats AARRR!

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latest & greatest Startup Metrics 4 Pirates, for talk at GeeknRolla conf (London, March 2011). a few updates from SXSW 2011, but mostly the same old shit.

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Page 1: Startup Metrics 4 Pirates (London, March 2011)

Startup Metrics 4 Pirates

GeeknRollaLondon – March 2011

#GKNR #LeanStartup

Dave McClure @DaveMcClurehttp://www.500startups.com http://500hats.typepad.com

http://slideshare.net/dmc500hats

AARRR!

Page 2: Startup Metrics 4 Pirates (London, March 2011)

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

80’s & 90’s:• 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

Page 3: Startup Metrics 4 Pirates (London, March 2011)

500 StartupsSeed 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 FormativeLabs

NetworkedBlogs

Page 4: Startup Metrics 4 Pirates (London, March 2011)

[ This Talk ]

Page 5: Startup Metrics 4 Pirates (London, March 2011)

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

Page 6: Startup Metrics 4 Pirates (London, March 2011)

Disclaimers

• I’m 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.)

Page 7: Startup Metrics 4 Pirates (London, March 2011)

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)

Page 8: Startup Metrics 4 Pirates (London, March 2011)

[ Interesting Shit ]

Page 9: Startup Metrics 4 Pirates (London, March 2011)

Read Geoffrey MillerSex + Evolution + Consumer Mktg = Awesome Sauce

Page 10: Startup Metrics 4 Pirates (London, March 2011)

Other Great Shit.Psychology + Comics

Page 11: Startup Metrics 4 Pirates (London, March 2011)

[The Lean Startup]

Page 12: Startup Metrics 4 Pirates (London, March 2011)

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

Page 13: Startup Metrics 4 Pirates (London, March 2011)

Discover Customers(Steve Blank, SteveBlank.com)

Page 14: Startup Metrics 4 Pirates (London, March 2011)

LEARN BUILD

MEASURE

IDEAS

CODEDATA

Iterate, Dammit.(Eric Ries, StartupLessonsLearned.com)

Page 15: Startup Metrics 4 Pirates (London, March 2011)

Product/Market Fit b4 “Launch”(Sean Ellis, Startup-Marketing.com)

Startup-Marketing.com

Page 16: Startup Metrics 4 Pirates (London, March 2011)

[Startup Metrics 4 Pirates]

Page 17: Startup Metrics 4 Pirates (London, March 2011)

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)

Page 18: Startup Metrics 4 Pirates (London, March 2011)

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.

Page 19: Startup Metrics 4 Pirates (London, March 2011)

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 you’re in a hurry, Google “Startup Metrics” & watch 5m video)

Page 20: Startup Metrics 4 Pirates (London, March 2011)

AARRR!: 5-Step Startup Metrics Model

Website.com

Revenue $$$

Biz DevAds, Lead Gen,

Subscriptions, ECommerce

ACQUISITION

SEOSEM

Apps & Widgets

Affiliates

Email

PR Biz Dev

Campaigns, Contests

Direct, Tel, TV

Social Networks

Blogs

Domains

Retention

Emails & Alerts

System Events & Time-based Features

Blogs, RSS, News Feeds

Page 21: Startup Metrics 4 Pirates (London, March 2011)

One Step at a Time.

1. Make a Good Product: Activation & Retention2. Market the Product: Acquisition & Referral3. Make Money: Revenue & Profitability

“You probably can’t save your Ass and your Face at the same time… choose carefully.” – DMC

Page 22: Startup Metrics 4 Pirates (London, March 2011)

[ Constructing MVP ]

Page 23: Startup Metrics 4 Pirates (London, March 2011)

Role: Founder / CEOQ: Which Customers? Problems? Metrics? Why?A: Focus on Critical Few Actionable Metrics

(if you don’t use the metric to make a decision, it’s not actionable)

• Hypothesize Customer Lifecycle• Target ~3-5 Conversion Events (tip: Less = More)

• Test, Measure, Iterate to Improve

Page 24: Startup Metrics 4 Pirates (London, March 2011)

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

$$$

Page 25: Startup Metrics 4 Pirates (London, March 2011)

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) 

Page 26: Startup Metrics 4 Pirates (London, March 2011)

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.

Page 27: Startup Metrics 4 Pirates (London, March 2011)

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 = don’t 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

Page 28: Startup Metrics 4 Pirates (London, March 2011)

[ Getting 2 PMF ]

Page 29: Startup Metrics 4 Pirates (London, March 2011)

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

Page 30: Startup Metrics 4 Pirates (London, March 2011)

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 you’re 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

Page 31: Startup Metrics 4 Pirates (London, March 2011)

Better or Different.

Funny!

Shocking !!!Accepted

Not Funny.

Page 32: Startup Metrics 4 Pirates (London, March 2011)

[ Testing 4 AUX ]

Page 33: Startup Metrics 4 Pirates (London, March 2011)

Discover MeaningWhy Should Users Give a SHIT About You?

Kathy Sierra:“CreatingPassionateUsers”

Page 34: Startup Metrics 4 Pirates (London, March 2011)

Discover MeaningKeywords, 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

Page 35: Startup Metrics 4 Pirates (London, March 2011)

How 2 Tell if Design is Good?

Page 36: Startup Metrics 4 Pirates (London, March 2011)

[ Metrics 4 ACQ ]

Page 37: Startup Metrics 4 Pirates (London, March 2011)

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

Page 38: Startup Metrics 4 Pirates (London, March 2011)

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 <20-50% of target ATV, ARPU, CLV

Consider Costs, Scarce Resource Tradeoffs• Actual $ expenses• Marketing time & resources• Product/Engineering time & resources• Cashflow timing of expense vs. revenue, profit

ACQ = F(Customer, Campaign, Vol, Cost, Conv)

Page 39: Startup Metrics 4 Pirates (London, March 2011)

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 ;)

Page 40: Startup Metrics 4 Pirates (London, March 2011)

[ What is WINNING? ]

Page 41: Startup Metrics 4 Pirates (London, March 2011)

#TigerBlood4Startups

#WINNING

Page 42: Startup Metrics 4 Pirates (London, March 2011)

Choose Yer #WINNING Metrics

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

• after MVP functional use, several options:– better Usage – Activation & Retention (AUX)– more Users -- Distribution / Acquisition– mo' Money --- U Wants 2 Get Paid, Yo.

• understand ACQ$ vs REV$, optimize 4 short-term– High(er) volume usually a priority– costs may change as vol increases

Page 43: Startup Metrics 4 Pirates (London, March 2011)

[ The Lean Investor ]

Page 44: Startup Metrics 4 Pirates (London, March 2011)

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: $100-$1M (“Expand Distribution”)• Venture: $1M-$5M (“Maximize Revenue”)

Page 45: Startup Metrics 4 Pirates (London, March 2011)

[ Don’t Pitch Me, Bro. ]Seriously: Don’t. Fucking. Pitch Me.

(and don’t email me either, cuz i won’t read it)

Page 46: Startup Metrics 4 Pirates (London, March 2011)

Don’t Pitch Me, Bro.

• 1st: Read my stuff (blogs, decks, tweets).• 2nd: Get a referral from someone I trust.

– 500 Mentors or 500 Founders– Other Subject Matter Experts– *Not* Your Mom.

• 3rd: Be Concise. Don’t Suck.

Email

Page 47: Startup Metrics 4 Pirates (London, March 2011)

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)

• Don’t 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)