KPIs play a different role in startups than mature businesses. In startups, KPIs should focus on measuring progress towards achieving product-market fit rather than traditional metrics like customer acquisition and retention. To develop startup KPIs, companies first identify key success factors that drive product-market fit, then establish one or a few KPIs to measure each success factor. Good startup KPIs are relevant, responsive, easy to understand, and part of a broader analytics effort to inform ongoing product development.

1. Developing KPIs for startups
What makes startups different to mature businesses, and what the implications
are for the role of KPI and the approach to their development

2. KPIs have a different role in mature businesses versus
startups. In a mature business, different teams should
be responsible for different KPIs…
Illustrative
Customer Acquisition Customer Retention Customer Monetisation
Team
team team team
• Optimise spend on each • Understand drivers of • Optimise promotions,
marketing channel churn (price / competitor customer email /
• Optimise spend across promotion / service activation, loyalty
Objective and
marketing channels levels / content) and act schemes
approach on them • Drive down costs,
increase margin
• Number of customers • Rate of repeat purchase / • Customer lifetime value
acquired in time period repeat visits • ARPU
• Cost per acquisition • Basket size
KPIs
• Revenue per sale
• Profit per sale

3. …whereas in a startup, the KPIs should focus on driving
product-market fit, so that the startup gets into a
“virtuous circle” as quickly as possible
+ Product meets customer need +
↑ # customers
Customers ♥ product
↑ customer data
Churn ↓
↑ customer insight
Retention ↑
↑ product development
The larger the userbase, the
more customer data the
startup collects, and the Customers evangelise product
better able they are to Cost of customer If product-market fit is
develop customer insight
and use that to drive
+ acquisition↓ + not achieved, it does
not matter how good
product development. # new customers ↑ the individual
Customer data becomes a departmental teams
key asset are: the startup will not
grow into a viable
commercial entity
KPIs are needed to drive product development decisions i.e. measure progress
towards achieving product-market fit.
This means that startup KPIs focus on user behaviour more than traditional KPIs

4. Designing and implementing KPIs at a startup is a
two stage process
1. Identify the success factors 2. Develop corresponding KPI
Identify the combination of success factors which drive For each success factor, identify the set of metrics that
product-market fit and thus build the virtuous circle: capture to what extent that is happening:
Success factor KPI
Example: Social network ‘Stickiness’ • # of logins per month
• Actions per month
• Stickiness – what proportion of users continue to use the • Minutes logged in per
service once being introduced to it month
• Viral coefficient – how many ‘friends’ does each customer
refer the product to Use the distribution of each metric to identify which are
• Profit per user – how much revenue is made per user, both robust (reliable) and sensitive (move with changes):
relative to the cost per user +
+
+++
+
++
+ + + + ++
Example: Retailer
Settle on ideally one KPI per success factor, or if necessary a
• Customer lifetime value – how much revenue a customer handful.
generates over their lifetime
• Acquisition cost – how much it costs to acquire a new Establish the baseline and measure improvements from
customer there
Identifying the key success
factors for Shopcade is not-
trivial given its unique business
model

5. Good KPIs meet a number of requirements, most of
which are relatively straightforward to deliver
The set of KPIs should be...
Each KPI should be... The set of KPIs shouldbe...
The set of KPIs should
be...
• Relevant: measure something that matters to the • Comprehensive: if something is wrong with the
business success business, it needs to be ‘picked up’ by at least one of the
– Each KPI should be associated with one of the KPIs
identified ‘success factors’ – There needs to be a KPI for each key success factor
identified
• Responsive: when things ‘go wrong’, the KPI value
should change in a noticeable way, fast. Similarly, when • Actionable: it needs to be possible to make product
things ‘go right’, the KPI value should quickly improve: development decisions based on the combination of
– This makes cumulative metrics e.g. total user numbers KPIs. This is not easy and is discussed on the following
dangerous ‘vanity metrics’ slide…
– This makes time-based metrics (number of actions per
month, number of signups per month) attractive
• Easy to understand: minimise ambiguity
– It should be clear what a ‘good’ result is versus a ‘bad’
result
– It should be clear how it is calculated, with no doubt
about the data collection methodology or accuracy of
the measure

6. To ensure KPIs are actionable, they need to be part of a
broader analytics effort at the heart of the formal
product development process
KPIs are at the centre of a broader analytics effort KPIs provide an important ‘rearview’ check on the
that also includes: product development process...
• Talking to customers is necessary to • Cohort analysis and/or split testing to
understand why their behaviours are 3. Formal robustly measure what impact a given
changing, which needs are and are analysis of product development is having on the
1. Qualitative not being met, and to get new ideas impact of KPI
research with for product development product
• Formal review of these results as part
customers developments
• This can take the form of surveys, of the agile development process
on the KPIs
customer interviews (telephone or in
person), focus groups, watching
customers use the service
... and the broader analytics effort should drive
• Deep quantitative analysis helps to product development going forwards
understand how customers are
actually using the product
2. More in- • The product team should use findings
depth • This can be used to identify e.g. where
they are getting stuck, or whether 4. Ongoing from the qualitative research (box 1)
quantitative review of and the in-depth quantitative analysis
analysis they are using the product in a
different way than is intended customer (box 2) to propose, specify and
intelligence to prioritise new product features as part
inform product of the agile planning process
development