Lean Business StartupsStartups Mission

Rigorously Measure Status, Experiment Towards Goals

Class 3

Startup Navigation

3 Growth Engines

What Makes A Good Metric

Practical Application

How to think of startup navigation…

A startup’s job is to:

• (1) rigorously measure where it is right now, confronting the hard truths that assessment reveals

• (2) devise experiments to learn how to move the real numbers closer to the ideal reflected in the business plan.

Experiment toward the ideal

Problem Fit Market FitMVP

Your Goals

Surveys - Presentations - Sales Pages – Demos – Crowdfunding – Concierge – Launch - Scale

Pivot or Persevere

Problem Fit Market FitMVP

Your Goals

Pivot

Death Valley

Pivot Example

•When numbers are not improving

•Pivot

On-Line

Game

Casino

Sponsors

Player

Instruction

Good Metrics

•Comparable

•Understandable

•Relevant to model goals

•Actionable

•Ratios

What characteristics of Good Metrics do we see in a Nissan 350Z?

General Startup Metrics

• Signups(Activations)/Week

•Customer Lifetime Value (Earnings/Customers)

•Viral Coefficient (Referred Users/User)

•Viral Cycle Time (Months/Referred User)

E-Commerce Startup Metrics

•Conversions/Click

•Average Shopping Cart Size

•Abandonment %

•Customer lifetime value

•Net subscriber gain.

•Mailing List Conversions

Membership Startup Metrics

•Net Member Gain (per month)

•Visits Per Month – Stickiness

•Member Acquisition Cost

•Member Content Creation

•Churn

• Sharing & Virality

•Notification Effectiveness

Cohorts

•Reduce Noise In Measurements

•Users Sharing a Common Experience.

• Track through lifestyle

•Comparable

Cohort Example

• Site users spend the most in their first month

• Site has good growth

• As older users mix with newer, average spending decreases.

• No way to see the cause without splitting user base into monthly cohorts

1 2 3 4Month

Use

r P

urc

has

es

Time >>

Avg

Rev

enu

e/C

ust

om

er

Tuning The Three Engines of Growth

StickyUnique VisitorsPages / VisitVisits / Month

PaidRevenue / MemberPaid Member %Churn

ViralReferrals / MemberReferral Cycle Time

Pick your

#1

Leap of Faith

Draw a

Line in

the Sand

Build and Run

Experiement

Line in the

Sand Met?

Pivot

Never Gonna Happen.

Yes!Next Assumption

Not Quite.Tune withNew Experiment

Lean Cycle

Experiments Review

1. Who did we talk to

2. Discoveries?

3. Value

4. Differently next time

Q&A of Prospective Experiments

Tools / Resources

• Lean Analytics: http://leananalyticsbook.com

$9.60 on Kindle

Homework is Fun!!!

•What to Measure

•Draw Lines in the Sand

• Tally up a Few Metrics

• Envision Next Experiment

•NEXT TIME: Pricing – Modelling Financials - Pitching