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User Acquisition: Strategy and What Venture Capitalists Look For

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A short primer for startups on how to grow users and customers while managing traction and growth to satisfy prospective and current investors.

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User Acquisition: Strategy and What Venture Capitalists Look For

  1. 1. User Acquisition: Strategy and What VC’s Look For January 12, 2015 1www.digishopgirl.com // www.brandfoundryvc.com
  2. 2. Katya Constantine: DigishopGirl • 12 years of online marketing experience • Background in email and cross- channel marketing • Led digital marketing efforts for brands including Expedia and Amazon • Active industry blogger 2 Katya Constantine www.digishopgirl.com // www.brandfoundryvc.com
  3. 3. Sumeet Shah: Brand Foundry • 6 years of experience in startups and private equity • Handles sourcing, executing, and monitoring new opportunities • Ran new business strategies at Gist Digital (development studio) • Handled business development and project work at Gotham Consulting Partners (private equity consulting) 3 Sumeet Shah www.digishopgirl.com // www.brandfoundryvc.com
  4. 4. Why Are We Here? • How to come up with strategy to acquire users o Your mix of channels will vary dramatically depending on your industry, budget and scaling goals • You want to raise VC money o Understand how VC’s look at user acquisition o How will VC’s perspective affect your strategy www.digishopgirl.com // www.brandfoundryvc.com 4
  5. 5. Agenda OBJECTIVE: Build and strengthen a roadmap for success to a) ensure traction for your startup and b) answer key questions from potential and current venture investors. • The basics o Customer acquisition funnel o Your first 1,000 users • Channels an Metrics o What matters most to venture capital firms o What metrics are important for growth • The process o How to achieve key metrics for traction o Useful ways to showcase key milestones to potential (and current) venture investors • The future o How to ensure consistent traction within long-term growth roadmap 5www.digishopgirl.com // www.brandfoundryvc.com
  6. 6. Main Channels by Funnel Stage www.digishopgirl.com // www.brandfoundryvc.com 6 Awareness Consideration Conversion Service Loyalty 1. Content/Viral 2. Contests 3. PR 4. Affiliate/Partners 1. Email 2. Paid Search 3. Social Ads 1. Retargeting 2. Email 3. Analytics 4. Landing Page 1. Social Listening 2. Reviews 3. Mobile 1. Email 2. Content Mrkting 3. B2B-Content Marketing Analytics
  7. 7. Your 1st User • Lets say, I want to acquire 1 user • Eureka! I should post something on my Facebook • Boom! I got 5 users • So far, So Good… www.digishopgirl.com // www.brandfoundryvc.com 7
  8. 8. Users – 5; Cost - $0 www.digishopgirl.com // www.brandfoundryvc.com 8 Awareness Consideration Conversion Service Loyalty 1. Content/Viral 2. Contests 3. PR 4. Affiliate/Partners 1. Email 2. Paid Search 3. Social Ads 1. Retargeting 2. Email 3. Analytics 4. Landing Page 1. Social Listening 2. Reviews 3. Mobile 1. Email 2. Content Mrkting 3. B2B-Content Marketing Analytics Social Media is Awesome!!
  9. 9. www.digishopgirl.com // www.brandfoundryvc.com 9
  10. 10. Your 1st 100 Users • I think I’ve run out of real friends  • I need to spend some money o Paid Search o Social Ads • Good news… I can get some users on Google and FB • Bad news… I am spending $100 to get a customer www.digishopgirl.com // www.brandfoundryvc.com 10
  11. 11. Users – 100; Cost - $100 per user www.digishopgirl.com // www.brandfoundryvc.com 11 Awareness Consideration Conversion Service Loyalty 1. Content/Viral 2. Contests 3. PR 4. Affiliate/Partners 1. Email 2. Paid Search 3. Social Ads 1. Retargeting 2. Email 3. Analytics 4. Landing Page 1. Social Listening 2. Reviews 3. Mobile 1. Email 2. Content Mrkting 3. B2B-Content Marketing Analytics So expensive!
  12. 12. Your 1st 1,000 Users • Ok, so my cost is $100 per user, but is that good or bad? • If you are going to keep spending money, you need an LTV model • It is likely that what you are spending so far to acquire a user is too expensive • How do I acquire more effectively? - Need more tools • Conversion & Analytics www.digishopgirl.com // www.brandfoundryvc.com 12
  13. 13. Users – 1000; Cost - $30 per user www.digishopgirl.com // www.brandfoundryvc.com 13 Awareness Consideration Conversion Service Loyalty 1. Content/Viral 2. Contests 3. PR 4. Affiliate/Partners 1. Email 2. Paid Search 3. Social Ads 1. Retargeting 2. Email 3. Analytics 4. Landing Page 1. Social Listening 2. Reviews 3. Mobile 1. Email 2. Content Mrkting 3. B2B-Content Marketing Analytics Hammer Anvil
  14. 14. The VC Angle: Why It Matters 14 Growth Rates (Revenue/Users) • Price threshold that satisfies both users and product costs • Marketing growth from WOM to social media, SEO, paid search, etc. • Viral-ness of product portfolio amongst potential and current users Innovative, “Sticky” Products • Pure creative, first in market • Strong differentiators • Partnerships with brands/startups • Front-to-back platform connecting product with technology (regardless of how tech-enabled product is) Scale/Traction • Finding the right retail and/or marketing channels • Evangelists, both in investor and user landscapes • Correct use of content to match product portfolio The first 1,000 users is a great way to outline the efficiency and success of your startup. Overall, it’s a showcase of three major areas that venture capital firms are looking for when making early-stage investments. Strong user growth helps to identify scale, growth rates (within revenue and/or user base), and the demand for your startup’s product portfolio. www.digishopgirl.com // www.brandfoundryvc.com
  15. 15. 100,000 Users – Not So Fast • Wow! I just discovered long tail keyword targeting – getting users cheaply is a breeze • Wait, what do you mean only 30 people a day search for a mechanical velociraptor? • What may have worked for you early on, often doesn’t scale as your business grows • Scalable user acquisition = experimentation www.digishopgirl.com // www.brandfoundryvc.com 15
  16. 16. 100,000 Users – ???!!! www.digishopgirl.com // www.brandfoundryvc.com 16 Awareness Consideration Conversion Service Loyalty 1. Content/Viral 2. Contests 3. PR 4. Affiliate/Partners 1. Email 2. Paid Search 3. Social Ads 1. Retargeting 2. Email 3. Analytics 4. Landing Page 1. Social Listening 2. Reviews 3. Mobile 1. Email 2. Content Mrkting 3. B2B-Content Marketing Analytics
  17. 17. Analytics Overview www.digishopgirl.com // www.brandfoundryvc.com 17 Key Areas for Improvement • Data which is relevant and accurate • Dashboard with summary of key metrics: daily and over time • Data analysis by key segments (i.e. location, device, channel) • Performance analysis to determine strongest ads, emails, etc. Showcasing Results • Familiarity with analytical tools and reports • Data visualization • Correct set-up of links and UTM codes Initial Investment • Google Analytics (free) • Leverage reports in existing tools and platforms • Use of more advanced tools: • Tableau • Optimizely • Looker • Raventools or Moz Companies have access to a vast amount of data as a result of their online presence. Detailed data is available regarding a company’s website, email campaigns, social media presence and online advertising. Actionable insights can be discovered by analyzing this data and recognizing trends. It is important to set up the right infrastructure to ensure the right data is accurately captured. Additionally, the correct tools make analyzing and visualizing the data much easier.
  18. 18. Paid Search Overview www.digishopgirl.com // www.brandfoundryvc.com 18 Key Areas for Improvement • A/B Testing – ad creative • Control budgets at the Campaign level • Control creative at the AdGroup level Skills and Competencies • Familiarity with key terms important to your business • Understanding what a conversion is worth • Analytics for determining performance Initial Investment • Platforms: Google Display Network • Bing  once you have a successful program on GDN • Analytics A well-designed paid search program can be very impactful in driving targeted traffic to your site. Paid search can help with driving targeted new users. The bidding, campaign targeting and keyword strategy all greatly impact the success of your paid search channel.
  19. 19. Facebook Advertising Overview www.digishopgirl.com // www.brandfoundryvc.com 19 Key Areas for Improvement • A/B Testing • Time of day/day of week • Audience segmentation • Visually appealing • Mobile vs. desktop Skills and Competencies • Familiarity with audience targeting • Analytics for determining performance Initial Investment • Analytics: conversion tracking, audience list segmentation • Research: customer persona • Additional templates and content • Program analytics For certain types of businesses, Facebook allows for scalable targeted user acquisition. The design, testing and segmentation of campaigns all greatly impact the success of the channel.
  20. 20. Email Channel Overview www.digishopgirl.com // www.brandfoundryvc.com 20 Key Areas for Improvement • A/B Testing • Time of day/day of week • Subject line • Audience segmentation • Visually appealing • Readable and click-friendly • Automated drip campaigns • Frequency settings Skills and Competencies • Familiarity with email platform • Some HTML experience • Graphic design • Analytics for determining performance Initial Investment • Email platform (i.e. MailChimp) • Welcome series templates and content • Additional templates and content • Email capture tool for website A well-designed email channel is essential for marketing and communication regardless of your industry. Email marketing is especially impactful when driving consideration and maintaining loyalty. It can also help with conversion during relevant sales/announcements. The design, testing and segmentation of email campaigns all greatly impact the success of the email channel.
  21. 21. Retargeting - Why Why it Matters • Can be the best way to close the deal in today’s online landscape o Multiple touches are key with distracted multi screen users • Provides strong reminder to potential customers who are already aware of your brand • Can build extremely specific campaigns: o Segment audiences based on website browsing habits o Establish timeframe to retarget potential customers o Various platform options: Facebook, website display, Twitter o Easily exclude current customers www.digishopgirl.com // www.brandfoundryvc.com 21
  22. 22. To Whom it Matters • Everyone! • Can be highly effective for start-ups and small businesses • Allows for an approach that is more precise and cost efficient instead of relying on volume or "spray and pray" • Requires a baseline retargeting audience of only ~1,000 users www.digishopgirl.com // www.brandfoundryvc.com 22 Retargeting - Who
  23. 23. To Get Started • Perfect Audience is a great tool to develop your retargeting campaigns • Based on needs, you can adjust: o Ad types and platforms o Weekly budget and bids o Reporting at the campaign and ad level www.digishopgirl.com // www.brandfoundryvc.com 23 Retargeting - How
  24. 24. Wow…That’s a lot of info! • Do I have to use all of it at the same time? • NO… BUT: Your optimal mix is likely to include at least a few of these channels – and change over time www.digishopgirl.com // www.brandfoundryvc.com 24
  25. 25. Multi-Touch Example Email Social www.digishopgirl.com // www.brandfoundryvc.com 25 • Average open rate 25% • 75% of customers don’t see the message • Create your audience: o Extend your email to FB
  26. 26. But What About Paid Channels Free Channels www.digishopgirl.com // www.brandfoundryvc.com 26 • Display • LinkedIn ads • Pinterest ads • Twitter ads • Content Marketing • SEO These are all great, but usually for specific industries and often don’t easily scale
  27. 27. Channels Across Funnel by Industry www.digishopgirl.com // www.brandfoundryvc.com 27 Awareness Consideration Conversion Service Loyalty Online Publisher eCommerce Subscriptions Mobile App Sell to SMB B2B SMB/Local 1. PR 2. Contests 3. Content/ Viral 1. PR 2. Content/ Viral 3. Affiliate 4. Contests 1. PR 2. Content/ Viral 3. Affiliate 4. Contests 1. PR 2. Content/ Viral 3. Contests 4. Affiliate 1. Visual Marketing 2. Content Marketing 1. Visual Marketing 2. Content Marketing 1. 1.Online Presence 2. 2. Content Marketing 3. Contests 1. Email 1. Email 2. Social Ads 3. Display 4. Paid Search 1. Email 2. Social Ads 3. Display 4. Paid Search 5. Landing Pg 1. Email 2. Social Ads 3. Paid Search 4. Display 1. Email 2. Social Ads 3. Paid Search 4. Landing Page 1. Email 2. Paid Search 3. Landing Page 1. Email 2. Paid Search 3. Landing Page 4. Social Ads 1. Analytics 2. Landing Page 3. Retargeting (as needed) 1. Analytics 2. Retargeting 3. Landing Page 4. Social Ads 1. Analytics 2. Retargeting 3. Landing Page 4. Social Ads 1. Analytics 2. Retargeting 3. Landing Page 4. Social Ads 1. Analytics 2. Retargeting 1. Analytics 2. Retargeting 1. Social Presence/ Listening 2. Reviews 1. Social Presence/ Listening 2. Reviews 1. Social Presence/ Listening 1. Reviews (app store) 2. Social Presence/ Listening 1. Reviews 1. Reviews 2. Social Listening 1. Email 1. Email 2. Refer a Friend 3. Loyalty Program 1. Email 2. Refer a Friend 1. Email 2. Refer a Friend 1. Email 1. Email 1. Email
  28. 28. Metrics that Matter www.digishopgirl.com // www.brandfoundryvc.com 28 Impressions CTR CPC CAC LTV Scale Am I reaching anyone at scale Are my ads effective? Does it hold at scale Good INTERMEDIATE metric What is it costing me to acquire? What is a customer worth?
  29. 29. The VC Angle: Milestones & Keeping Us Posted 29 For Potential Investors… • Monthly newsletters with “traction bites” (key milestones that focus on user growth, revenue growth, revenue pipelines [current and potential], and partnerships) • Use language that strongly outlines the relationships you’ve built For Showing Awesomeness… • We care about showing off. Seriously. (Because it satisfies our LPs and helps bolster reputation) • Happy LPs = happy VCs = more investment capital available! • Differentiators matter. Key data points will go into our personal investor newsletters. For Current Investors… • Special newsletters outlining production updates, partnership linkages, and calls for hires and media assistance • GOOGLE GROUPS IS YOUR FRIEND. PLEASE USE IT. • Direct lines are also your friend Team and Roadmap are the two biggest pieces that venture capital firms care deeply about with early-stage investments. Each of the two has multiple sub-sectors, but collectively we care about startups hitting the right milestones. Many matter to potential investors but there are key ones that must be seen for current investors. Moreover, those key milestones can be framed in ways to whet the appetites of potential ones. www.digishopgirl.com // www.brandfoundryvc.com
  30. 30. The VC Angle: Looking at the Future/Exit… 30 Business Metrics (Strategic) • Assets. Strategic investors/buyers will look for key synergies that your startup will have with their businesses. They can swallow debt. • Team Traction. This is different from venture as it refers to a focus on strength at the top. • BRAND. Again, goes with growth! The End of the Road… • IPO/Secondary Market. The strong traction over the holding period encourages investors to get involved with team’s next venture. • Strategic Sale. This is trickier as it depends on what’s next for each core member of the team. Business Metrics (Venture) • Financials. It’s not so much about profitability here (varies by sector) but more about relative hockey- stick growth on various levels. • Team Traction. Cohesive teams + strong hires with experience = excited new investors! • BRAND. Goes with growth! As you as startups hit the annual milestones, most venture capital firms have an average holding period of 5 years. We have to look at the future, whether it’s selling shares in the secondary market, going through the IPO, or finding a strategic buyer. The difference here versus before is that the milestones that both venture and strategic (e.g., large corporate) investors look at can differ. It also comes back to why user growth traction matters. www.digishopgirl.com // www.brandfoundryvc.com
  31. 31. How Do I Get My LTV? www.digishopgirl.com // www.brandfoundryvc.com 31
  32. 32. Loyalty • How do I attain/optimize my LTV? • Retaining an existing user is much cheaper than acquiring a new one • Value of the 1st purchase is usually just a small fraction of LTV www.digishopgirl.com // www.brandfoundryvc.com 32
  33. 33. Here are some useful resources for you all to peruse: 1. Steve Schlafman: Raising Seed Capital - http://bit.ly/RaisingSeedCapital 2. Des Traynor: Getting user feedback on your product - http://bit.ly/UserFeed 3. Buffer: The investor presentation that earned $500k - http://bit.ly/BufferPrez 4. Ben Horowitz: When to sell your company - http://bit.ly/HoroSell 5. A Founder’s Notebook: Basically all of it - http://bit.ly/FoundersNotebook 6. Ecommerce CAC - http://www.forentrepreneurs.com/ecommerce-cac/ 7. Optimizing the Cost of Customer Acquisition: Modeling Metrics to Drive Startup Success - http://soundbytes2.com/2014/03/26/optimizing-the-cost-of-customer- acquisition-modeling-metrics-to-drive-startup-success/ 8. LTV/CAC - http://kellblog.com/2014/07/30/the-ultimate-saas-metric-ltv-cac/ 9. The Complete Quantitative Guide To Judging Your Startup - http://techcrunch.com/2014/01/31/the-complete-quantitative-guide-to- judging-your-startup/ 33 Resource Library www.digishopgirl.com // www.brandfoundryvc.com
  34. 34. Thank you all for joining us! If you have any suggestions on what has worked for you, please let us know! If you have any questions, feel free to e-mail us: katya@digishopgirl.com sumeet@brandfoundryvc.com 34 Q&A www.digishopgirl.com // www.brandfoundryvc.com

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