How to Measure the Metrics that Determine Real Progress

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In 2004, with only 150,000 registered users and very little revenue, Facebook raised $500,000 and less than a year later raised another $12.7 million. It was not the most popular social network nor was it even the most popular college social network. So what metrics were early indicators of it's future success?

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How to Measure the Metrics that Determine Real Progress

  1. 1. How to Measure the Metrics that Determine Real Progress by Trevor Owens leanstartupmachineSunday, October 2, 2011
  2. 2. About Me 5 failed startups (vanity metric) Web design agency Imported electric scooters from China Now working on Lean Startup Machine P/M fit in 6 months leanstartupmachineSunday, October 2, 2011
  3. 3. Lean Startup Machine Metrics-Driven Startup Competition Our winner is the team with the most validated learning Penultimate Goal: remove all subjectivity Ultimate Goal: predict future success leanstartupmachineSunday, October 2, 2011
  4. 4. WHY DO STARTUPS FAIL?Sunday, October 2, 2011
  5. 5. Lean Startups Big Idea #1 The vast majority of startups fail NOT because they couldnʼt build a product, but because no one wanted the product. One of Steve Blankʼs (many) Big Ideas from The Four Steps to the Epiphany Thanks to Brant Cooper & Patrick Vlaskovits for this contentSunday, October 2, 2011
  6. 6. WHY DO STARTUPS SUCCEED?Sunday, October 2, 2011
  7. 7. Lean Startups Big Idea #2 “The vast majority of successful [startups] abandoned their initial plans and learned what would and would not work in the market.” -Clayton Christensen, The Innovatorʼs Dilemma Thanks to Brant Cooper & Patrick Vlaskovits for this contentSunday, October 2, 2011
  8. 8. Agenda Introductions Vanity vs. Good Metrics Funnel & Cohort Metrics Welcome to Innovation Accounting Qualitative vs. Quantitative Metrics leanstartupmachineSunday, October 2, 2011
  9. 9. Introduce the Person Next to YouSunday, October 2, 2011
  10. 10. Why do you want to learn about metrics?Sunday, October 2, 2011
  11. 11. Vanity Metrics Google Analytics There will always be something up and to the right Anything you read on TechCrunch They make your competitors feel bad and they don’t tell you anything about the company leanstartupmachineSunday, October 2, 2011
  12. 12. Vanity Metrics pt. 2 From TechCrunch: “mDialog Raises $5 Million from BlackBerry Partners” “GroupMe Is Now Sending One Million Texts Every Day” “Google Plus hit 10M users in 2 weeks” leanstartupmachineSunday, October 2, 2011
  13. 13. What Metrics Matter? Facebook Example 150,000 users, little revenue Many superior competitors What would indicate their future success? leanstartupmachineSunday, October 2, 2011
  14. 14. What Metrics Matter? pt. 2 Facebook Example 75% of users visit one or more times per day Within one month of launching on a new campus, can acquire 90% of the student body leanstartupmachineSunday, October 2, 2011
  15. 15. What Metrics Matter? pt. 3 Value Hypothesis How do we know we’re adding more value to our customers lives? Growth Hypothesis Through what engine will we acquire new customers? leanstartupmachineSunday, October 2, 2011
  16. 16. What Metrics Matter? pt. 4 Good Metrics (Three A’s) Are Actionable Can be Audited Are Accessible leanstartupmachineSunday, October 2, 2011
  17. 17. Assignment 1 Groups of 4 (10 minutes) Research metrics on: Google Plus Groupon Twitter Explain which are vanity and which are predictive leanstartupmachineSunday, October 2, 2011
  18. 18. Tools Funnel Metrics - AARRR Acquisition - user visits Activation - user registers Retention - user comes back Referral - friend of user signs up Revenue - user pays for something leanstartupmachineSunday, October 2, 2011
  19. 19. Tools pt. 2 Split Testing Which performs better, A or B? Wrong Uses Red button or blue button? Right Uses Do users need to try the product before paying for it? leanstartupmachineSunday, October 2, 2011
  20. 20. Tools pt. 3 Cohort Analysis Buckets users into the month or week they joined NEVER look at users in aggregate Fact: New users are more engaged leanstartupmachineSunday, October 2, 2011
  21. 21. Tools pt. 4 Funnel Metrics - AARRR Acquisition Activation Retention Referral Revenue leanstartupmachineSunday, October 2, 2011
  22. 22. Assignment 2 Groups of 4 (10 minutes) Give an example of using split- testing or cohort analysis to get actionable metrics on: Acquisition, Activation Retention, Referral, Revenue leanstartupmachineSunday, October 2, 2011
  23. 23. Innovation Accounting: Tying It Together The ultimate measure of progress in any startup is rate of validated learning. Innovation Accounting determines whether your experiments are productive or not. 1. Set the baseline MVP 2.Optimize the MVP 3.Pivot or Persevere leanstartupmachineSunday, October 2, 2011
  24. 24. Baseline MVP What’s an MVP? An experiment that starts with a falsifiable hypothesis Your first MVP may not be a product Concierge MVPs Kick Ass leanstartupmachineSunday, October 2, 2011
  25. 25. Optimization Qualitative Metrics Data expressed in people, words, & feelings around actions Small, detailed data set Quantitative Metrics Data expressed around actions Large data set leanstartupmachineSunday, October 2, 2011
  26. 26. Pivot or Persevere What is a pivot? Change in strategy based on learning from market feedback When do you pivot? When each additional experiment leads to less progress leanstartupmachineSunday, October 2, 2011
  27. 27. Votizen Case StudySunday, October 2, 2011
  28. 28. Top 10 Ways Entrepreneurs Pivot a Lean Startup (Forbes)Sunday, October 2, 2011
  29. 29. When’s It Enough? Product Market Fit At least 40% of users saying they would be “very disappointed” without your product. Arbitrary, but defined after comparing results across nearly 100 startups. Those that struggle for traction are always under 40%. leanstartupmachineSunday, October 2, 2011
  30. 30. Thank You Recommended Software Unbounce KISS Metrics Survey.io Wufoo LinkShiftr leanstartupmachineSunday, October 2, 2011

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