The document discusses startup metrics and focuses on the AARRR framework, outlining key concepts like MVP, PMF, and metrics for acquisition, activation, retention, referral, and revenue. It provides examples and recommendations for constructing an MVP, testing for product/market fit, designing marketing campaigns, and choosing metrics to focus on for winning in the market.

1. Startup Metrics
For Pirates
AARRR
!
Wildfire Interactive
Redwood Shores
May 2012 - #AARRR
Dave McClure @DaveMcClure
http://500.co
http://500hats.typepad.com
http://slideshare.net/dmc500hats

2. Dave McClure
Developer, Entrepreneur, Marketer, Investor, GEEK!
00’s & 10’s:
• Investor: Founders Fund, Facebook fbFund, 500 Startups
• Companies: Mint.com, SlideShare, Twilio, WildFire, SendGrid
• Marketing: PayPal, Simply Hired, Mint.com, O’Reilly Media
• Speaker: Lean Startup, Web 2.0, Stanford/Facebook
80’s & 90’s:
• Entrepreneur: Founder/CEO Aslan Computing (acq’d)
• Developer: Windows / SQL DB consultant (Intel, MSFT)
• Engineer: Johns Hopkins‘88, BS Eng / Applied Math

3. 500 Startups
Seed Fund & Accelerator
(300+ companies, 15+ countries)

4. [ This Talk ]

5. Topics
• Basic Concepts of “Startup Metrics 4 Pirates”
• 3 Steps to AARRR: Product, Market, Revenue
• Constructing MVP: Just ONE Feature?
• Design (UX) & Distribution (MKTG)
• Winning: Market, Revenue, Profit?

6. Key Concepts
• 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)

7. Geek Renaissance
• Tech Innovation
• Finance Innovation
• Design Innovation
• Social Innovation
• Global Innovation

8. Platforms 2.0
Search, Social, Mobile

9. What’s a Platform?
Successful Platforms
have 3 Things: Features
1) Features
2) Users
3) Money
Growth Profit
Awesome
.
Profitable
Users .
Growth Money

10. Distribution Platforms
Customer Reach: 100M+
• Search: Google (SEO/SEM)
• Social: Facebook, Twitter, Zynga, LinkedIn
• Mobile: Apple (iPhone, iPad), Android
• Media: YouTube (Video), Blogs, Photos
• Comm: Email, Chat, SMS, Voice

11. DO Marketing!
(It’s Not Evil)
• Marketing is Both Qualitative + Quantitative
• Qualitative: Create Emotion, Drive Action
• Quantitative: Measure Results of Action
• Design (UX) & Distribution (MKTG) Matter
• Volume (#), Cost ($), Conversion (%)

12. [ Interesting Shit. ]

13. Read Geoffrey Miller
Sex + Evolution + Consumer Mktg = Awesome Sauce

14. More Great Shit.
Psychology + Comics

15. [The Lean Startup]
[Startup Metrics 4 Pirates]

16. 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
the
good • 200,000 visitors who clicked on a link or button
stuff.
• 20,000 registered users w/ email address
• 2,000 passionate fans who refer 5+ users / mo.
• 1,000 monthly subscribers @ $5/mo

17. 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

18. Discover Customers
(Steve Blank, SteveBlank.com)

19. Iterate, Dammit.
(Eric Ries, StartupLessonsLearned.com)
IDEAS
LEARN BUILD
DATA
CODE
MEASURE

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

21. AARRR!: 5-Step Startup Metrics Model
SEO Campaigns,
SEM PR Contests Biz
Social
Networks Dev
Blogs Affiliates
Apps & Direct,
Widgets Email Tel, TV
ACQUISITION
Domains
Emails & Alerts
Blogs, RSS,
io n
News Feeds
R e tent
Ads, Lead Gen, Biz Dev
System Events & Subscriptions,
Rev
Time-based Features
ECommerce
enu
Website.com
e$$$

22. 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)

23. One Step at a Time.
1. Make a Good Product: Activation & Retention
2. Market the Product: Acquisition & Referral
3. Make Money: Revenue & Profitability
“You probably can’t save your Ass and your Face
at the same time… so choose carefully.” – DMC

24. 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)

25. Key Concepts
• 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)

26. [ Constructing MVP ]

27. Role: Founder / CEO
Q: 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

28. 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

29. What is Minimum Viable Product?
MVP = F(Customer, Problem, Time or $$$)
• Focus on CUSTOMER
– 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)

30. Example Conversion Metrics
(note: *not* actuals… your mileage may vary)
Stage Conversion Status Conv. Est. Value
% (*not* cost)
Acquisition Visitors -> Site/Widget/Landing Page 60% $.05
(2+ pages, 10+ sec, 1+ clicks = don’t abandon)
Activation “Happy” 1st Visit; Usage/Signup 15% $.25
(clicks/time/pages, email/profile reg, feature usage)
Retention Users Come Back; Multiple Visits 5% $1
(1-3x visits/mo; email/feed open rate / CTR)
Referral Users Refer Others 1% $5
(cust sat >=8; viral K factor > 1; )
Revenue Users Pay / Generate $$$ 2% $50
(first txn, break-even, target profitability)

31. 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.

32. [ Getting 2 PMF ]

33. Role: Product / Eng / Design
Q: 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

34. What is Product/Market Fit?
PMF = F(Customer, Solution, Alternatives*)
• Product / Market Fit occurs when:
– Customers like your stuff better than other options
– 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

35. Better or Different.
Funny!
Shocking
Accepted
!!!
Not Funny.

36. [ Testing 4 AUX ]

37. Discover Meaning
Why Should Users CARE About Your Product?
Kathy Sierra:
“Creating
Passionate
Users”

38. Discover Meaning
Keywords, Images, Call-to-Action
Top 10 - 100 words Call-to-Action
• Your Brand / Products • Words
• Customer Needs / Benefits • Images
• Competitor’s Brand / Products • Context
• Semantic Equivalents • Button/Link
• Misspellings • Emotion
Relevant images Result
• People • Positive?
• Products • Negative?
• Problems • Neutral (= Death)
• Solutions • A/B test & Iterate

39. How 2 Tell if Design/UX is Good?

40. [ Metrics 4 ACQ ]

41. 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

42. Example Marketing Channels
• PR • Email
• Contest • SEO / SEM
• Biz Dev • Blogs / Bloggers
• Direct Marketing • Viral / Referral
• Radio / TV / Print • Affiliate / CPA
• Dedicated Sales • Widgets / Apps
• Telemarketing • LOLCats ;)

43. MAARRRketing Plan
ACQ = F(Customer, Campaign, Vol, Cost, Conv)
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

44. [ What is WINNING? ]

45. Choose #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

46. [ The Lean Investor ]

47. 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”)

48. Investment #1: Incubate
(“Product”)
• Structure
– 1-3 founders
– $25K-$100K investment
– Incubator environment: multiple peers, mentors/advisors
• Build Functional Prototype / “Minimum Viable Product” (MVP):
– Concept->Alpha, ~3-6 months
– Develop Minimal Critical Feature Set => Get to “It Works”
– Instrument Basic Dashboard, Conversion Metrics
– Test Cust. Adoption (10-1000 users) / Cust. Satisfaction (Scale: 1-10)
• Demonstrate Concept, Reduce Product Risk, Test Functional Use
• Develop Metrics & Filter for Follow-on Investment

49. Investment #2: Seed
• Structure
(“Market”)
– 2-5 person team
– $100K-$1M investment
– Syndicate of Angel Investors / Small VC Funds
• Improve Product, Expand Market, Test Revenue:
– Alpha->Beta, ~6-12 months
– Customer Sat ≥ 6 => Get to “Doesn’t Suck”
– Setup A/B Testing Framework, Optimize Conversion
– Test Marketing Campaigns, Cust Acqstn Channels
• Prove Solution/Benefit, Assess Market Size
• Test Channel Cost, Revenue Opportunity
• Determine Org Structure, Key Hires

50. Investment #3: Venture
(“Revenue”)
• Structure
– 5-10 person team
– $1M-$5M investment
– VC Investors
• Make Money, Get to Sustainability:
– Beta->Production, 12-18 months
– Customer Sat ≥ 8 => “It Rocks, I’ll Tell My Friends”
– MktgPlan => Predictable Channels / Campaigns + Budget
– Scalability & Infrastructure, Customer Service & Operations
– Connect with Distribution Partners
• Prove/Expand Market, Operationalize Business
• Future Milestones: Profitable/Sustainable, Exit Options

51. Links & Resources
Additional 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)

52. Appendix

53. Startup Metrics
Activation

54. Activation
SEO Campaigns,
SEM PR Contests Biz
Social
Networks Dev
Blogs Affiliates Activation Criteria:
Apps & Direct,
Widgets Email Tel, TV • 10-30+ seconds
Domains • 2-3+ page views
• 3-5+ clicks
• 1 key feature usage
do LOTS of landing page
& A/B tests –
make lots of dumb
guesses & iterate FAST
Website.com

55. Activation
What do users do on their first visit?
Example Activation Goals
• Click on something!
• Account sign up / Emails
• Referrals / Tell a friend
• Widgets / Embeds
• Low Bounce Rate
Activation Tips
• Less is more
• Focus on user experience / usability
• Provide incentives & call to actions
• Test and iterate continuously

56. Activation
What do users do on their first visit?
Key Metrics to Track
 Pages per visit
 Time on site
 Conversions

57. Activation
Tools
Crazy Egg (Visual Click Mapping)
http://crazyegg.com
Google Website Optimizer (A/B & Multivariate Testing)
http://google.com/websiteoptimizer
Marketo.com (B2B Lead Generation Management)
http://marketo.com
Resources
Experimentation and Testing: A Primer
kaushik.net/avinash/2006/05/experimentation-and-testing-a-primer.html
Landing Page Design Toolbox: 100 Tips & Tools
http://tinyurl.com/326co6
Landing Page Tutorials & Case Studies
http://www.copyblogger.com/landing-pages/
101 Easy Easy to use Google Website Optimizer
http://conversion-rate-experts.com/articles/101-google-website-optimizer-tips/

58. Startup Metrics
Retention

59. Retention
SEO Campaigns,
Automated emails: SEM PR Contests Biz
Social
Networks Dev
• lifecycle emails @ +3, +7, +30d Blogs Affiliates
Apps & Direct,
• status / “best of” weekly/monthly Widgets Email Tel, TV
• “something happened” emails Domains
BUT:
• make it easy to unsubscribe
Emails & Alerts
Blogs, RSS,
News Feeds
Tip on emails:
• > 80% or more on SUBJECT LINE
System Events &
• < 20% or less on BODY TEXT Time-based Features
Website.com

60. Retention
How do users come back? How often?
Cohort Analysis:
• Distrib of Visits over Time
• Rate of Decay
• Effective Customer Lifecycle
Retention Methods
 Automated Emails
* Track open rate / CTR / Quantity
 RSS / News Feeds
* Track % viewed / CTR / Quantity
 Widgets / Embeds
* Track impressions / CTR / Quantity

61. Retention
How do users come back? How often?
Example Retention Goals
• 1 - 3+ visits per month
• 20% open rate / 2% CTR
• High deliverability / Low spam rating
• Long customer life cycle / Low decay
• Identify fanatics and cheerleaders
Retention Tips
• Email is simple and it works
• BUT make unsubscribe easy
• 80% subject line / 20% body text
• ACTUALLY 99% subject line / 1% body text
• Fanatics = virality + affiliate channel (bloggers?)

62. Retention
How do users come back? How often?
Key Metrics to Track
 Source
 Quantity
 Conversions
 Visitor Loyalty
 Session Length

63. Retention
Tools
Campaign Monitor / MailChimp (email newsletter software)
campaignmonitor.com / mailchimp.com
TriggerMail (site-centric email management)
triggermail.net
Litmus (email and website design testing - clients / browsers)
litmusapp.com
Resources
30 free HTML email templates
campaignmonitor.com/resources/templates.aspx
Best Practices in Writing Email Subject Lines
mailchimp.com/resources/best-practices-in-writing-email-subject-
lines.phtml
Learning Viral: Viral Emails of Tagged.com
okdork.com/2008/04/10/learning-viral-studying-taggedcom/

64. Startup Metrics
Acquisition

65. Acquisition
SEO Campaigns,
SEM PR Contests Biz
Social
Networks Dev
Blogs Affiliates
Apps & Direct,
Widgets Email Tel, TV
Domains
Marketing Channels:
• largest-volume (#)
• lowest-cost ($)
• best-performing (%)
Website.com

66. Acquisition
Where are users coming from?
Acquisition Methods
 SEO / SEM
 Blogs
 Email
 Social Media &
Social Networks
 Domains

67. Acquisition
Keyword Vocabulary
Top 10 - 100 words
• Your Brand / Products
• Customer Needs / Benefits
• Competitor’s Brand / Products
• Semantic Equivalents
• Misspellings
Things to analyze
• Sources
• Volume
• Cost
• Conversion

68. Acquisition
Where are users coming from?
Key Metrics to Track Example
 Quantity (#)
 Cost ($)
 Conversions (%)

69. Acquisition
Tools
Google Analytics (web analytics)
google.com/analytics
Google Keyword Tool (keyword research tool)
adwords.google.com/select/KeywordToolExternal
SEO Book Tools (SEO related tools)
tools.seobook.com
Resources
SEO Book Blog
seobook.com/blog
The Social Media Manual: Read Before You Play
searchengineland.com/071120-144401.php
Strategies to ruthlessly acquire users
andrewchen.typepad.com/andrew_chens_blog/2007/04/10_obvious_stra.
html

70. Startup Metrics
Referral

71. Referral
SEO Campaigns,
SEM PR Contests Biz
Social
Networks Dev
Blogs Affiliates
Apps & Direct,
Widgets Email Tel, TV
Acquisition
Domains
Emails & Alerts
Blogs, RSS,
n
News Feeds ntio
Rete
Focus on driving referrals
System Events &
Time-based Features
*after* users have a
“happy” experience;
avg score >= 8 out of 10
Website.com

72. Referral
How do users refer others?
Referral Methods
 Send to Friend:
Email / IM
 Social Media
 Widgets / Embeds
 Affiliates

73. Referral
Viral Growth Factor
Viral Growth Factor = X * Y * Z
X = % of users who invite other people
Y = average # of people that they invited
Z = % of users who accepted an invitation
A viral growth factor > 1 means an exponential organic user acquisition.

74. Referral
Tools
Gigya (social media distribution & tracking tool)
gigya.com
ShareThis / AddThis (sharing buttons)
sharethis.com / addthis.com
GetMyContacts (PHP contacts importing & invitation software)
getmycontacts.com
Resources
Seven Ways to GO VIRAL
lsvp.wordpress.com/2007/03/02/seven-ways-to-go-viral/
What’s your viral loop? Understanding the engine of adoption
andrewchen.typepad.com/andrew_chens_blog/2007/07/whats-your-
vira.html
Metrics: Where Users Come From
slideshare.net/guest2968b8/rockyou-snap-summit-32508

75. Startup Metrics
Revenue

76. Revenue
SEO Campaigns,
SEM PR Contests Biz
Social
Networks Dev
Blogs Affiliates
Apps & Direct,
Widgets Email Tel, TV
Acquisition
Domains
Emails & Alerts
Blogs, RSS,
io n
News Feeds
R ete n t
Ads, Lead Gen, Biz Dev
System Events & Subscriptions,
Rev
Time-based Features
ECommerce
enu
This is the part *you* Website.com
e$$$
still have to figure out…
(we don’t know jack
about your business)

77. Revenue
How do you make money?
Revenue Tips
• Don’t Rely on AdSense (only)
• Start Free => 2% “Freemium”
• Subscription / Recurring transactions
• Qualify your customers -> Lead generation (arbitrage)
• Sell something! (physical or virtual)

78. Revenue
Resources & Tools
Revenue Metrics (Andrew Chen)
http://tinyurl.com/47r63a
How to Create a Profitable “Freemium” Startup (Andrew Chen)
http://tinyurl.com/8z9ygk
2008 Affiliate Marketing Review (Scott Jangro)
http://tinyurl.com/86wak4