Skip to main content

Metrics for the Early Stage Startups

My friend, David Vandegrift (Associate at Pritzker Group Venture Capital), just co-wrote a couple articles on SaaS metrics that he and his VC colleagues pay close attention to – Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV).

They highlight the importance of CAC and LTV, specifically, as VCs are looking for sustainable businesses that have shown good handles on burn rate and revenue economics. Gone are the days of “easy millions” for startups with just traction. VCs are wary of bubbles and downturns, and thus, are watching for investments that can weather storms.

CAC and LTV are great metrics to have good handles on, but can be difficult for early stage companies, as noted by the authors. Specifically, lifetimes of customers can be quite short while CAC can be hard to measure as companies iterate their acquisition strategies.

One metric I assess that is less focused on economics is engagement/ retention (i.e. D1, D7, D30). Engagement is a hugely telling figure, especially for early-stage companies. Engagement helps identify the stickiness and value of a product while also providing great insight into features and usage which can help determine direction.

Following engagement, I evaluate churn. Churn is inherently included in LTV, but can be more operational and easier to gauge for customers. I like to review churn, especially, because it measures the value of a product/ service with existing users. It can also underline a “hole in the bucket” issue where strategies to drive new customers can be for naught if existing customers continually exit.

Check out David and Sonia’s post to learn more about CAC and LTV. Then, check out four other metrics (in addition to the two I listed) that are key to success – “8 Metrics from Proper Instrumentation of a Business and Its Product”.

Comments

Popular posts from this blog

You Make Time for What (and Who) Matters

I’ve always been a big proponent that you make time for the things and people that matter. Sounds simple, right? Then, why do so many not implement this better in their lives? Let me take a moment to recognize this more explicitly.
I touched on Laura Vanderkam’s TED Talk “How to Gain Control of Your Free Time” in last week’s post. In it, she shares a story of a woman who had a leak in her home. Coordinating with plumbers, and getting everything resolved, the woman estimated that it probably took seven hours of attention. That’s seven hours of “stuff” the woman hadn’t planned on doing. If you were to ask her (or most anyone) to find seven hours in the week before, she’d have told you, “heck, no, I don’t have seven hours. I’m busy!”
I was thinking of Laura’s talk in conjunction with Jacob Christensen’s How Will You Measure Your Life. Specifically, I’m aligning “making time” with Christensen’s Resources-Processes-Priorities framework. We make (process) time (resources) for the things th…

Leadership Take-Aways from Two of NCAA’s Most Successful Coaches

On my recent Delta flight, I read an interesting leadership article in Delta’s Sky magazine – the feature piece being an interview of two of the NCAA’s most successful coaches – Coach MikeKrzyzewski (Coach “K”) of Duke’s men’s basketball team and Coach Urban Meyer of Ohio State football with five and three national championships, respectively.
Given these two coaches’ storied careers, their leadership has incredible sustainability. Here are my take-aways from the article: Both coaches took leave of absences in their careers due to medical concerns. Their successes cultivated deeper motivations to win exacting significant physical, mental, social, and emotional tolls. After stepping away, however, each returned to coaching posts to continue winning ways, but implemented mechanisms and understanding to keep themselves in check. Take-away: To operate in peak form like their respective teams, leaders, too, need to ensure self-maintenance.The interviewer asked the coaches about social medi…

My Life-Defining Moment Happened When I Failed to Make Varsity in High School

Ever stop to think about who you are? What makes you tick and tock? How about what you truly enjoy and what you’re good at vs. not good at? Or what/ who has shaped you into the person you are today?
I’m at this stage of figuring out whether to continue independent consulting while iterating on ideas for the next startup or take on some full-time employment (consulting, product management, or otherwise). My recent post about my daily/ weekly schedule was an interesting exercise in stepping back and recognizing what I’m actually doing in a day, and made me really think at the macro level.
In one of my recent reflections, I thought about defining moments in my life. One of those watershed events that truly transformed me was my failure to make the Varsity soccer team in high school. I won’t rehash the whole story here – shared the story almost a year ago in my post titled “Getting Through Dark Moments and the Most Vulnerable Story I've Ever Told Publicly”. It’s this moment that I w…