Tech Capital Partners Blog

I really enjoyed Dave McClure and Hiten Shah’s Startup Metrics presentation at this year’s Web 2.0 Expo a few weeks ago. What really struck a cord with me was Dave’s 5-Step Startup Metrics Model.

We get to see a good number of web-based companies who, when they come to the section of their slide deck that deals with revenue or business model, say “At this point, we’re focused on building the community.” which sometimes means “We really just want to focus on building the technology side of the business.” or “Once we have a really big community, it will be easy to make money, we’ll just add advertising.”

My biggest issue with companies in the “focusing on building the community stage” is that many of these companies have no plans for actually building the community. We seem to be back to “if we build cool technology, they will come.” which is absolutely true if a site has a significant viral growth factor but why not build the site with this in mind… Use metrics to think about how you can build your business and then measure your efforts. The beauty of web-based businesses is you can see in almost real-time the impact of decisions you are making.

Dave’s model breaks startup metrics down into five categories (for more insight, strategies and tools for identifying and tracking metrics in each of these categories, I’ve included Dave’s presentation below):

1. Acquisition: Where are users coming from? Which channels are best-performing? Which generate the largest-volume? Which are the lowest-cost?

2. Activation: How are users engaging? What are your activation goals?

3. Retention: How do users come back? What are your retention goals?

4. Referral: How do users refer others? What are your referral goals? What’s your viral growth factor?

5. Revenue: How do you make money?

He also suggests that companies focus on Critical (key to the success of your business) Few (less = more) Actionable (if you don’t use the metric to make a decision, it’s not actionable) metrics. And, to make sure the company stays on top of its key metrics, each key metric should be delegated to someone to OWN.

How are you using metrics to make decisions at your company?

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