Several years ago, a key challenge with launching a new tech startup venture was that there weren’t many precedents to follow.
- How do you scale a company?
- How do you measure growth and costs in a more meaningful way?
- Does the company have real traction?
Of course, there were knowledgeable people in the tech ecosystem that knew these things – for example, venture capitalists and ex-founders that had been successful with previous ventures – but they were tough to gain access to, and many of their theories and best practices weren’t yet widespread.
Fast forward to today, and the practices around new startups are much more established. While this can be a blessing and a curse to new founders, at least a more standardized set of metrics helps to give founders a sense of where their company stands.
Key Startup Metrics, According to VCs
The infographic from Funders and Founders lists 34 startup metrics for founders to know – but which one should be a focus for new ventures?
Here’s what three bigtime VCs have said about the startup metrics that they consider to be most important at early stages:
“Month-over-Month Organic Growth”
For most companies, MoM organic growth is a very useful metric and depending on the base, 20–50% MoM growth can be good. Retention, referral, and churn are all things we look at, too.
– Aileen Lee, Cowboy Ventures
According to Aileen Lee, who originally came up with the “unicorn” term, organic growth is a particularly useful metric.
On the other hand, Bill Gurley of Benchmark says that monitoring conversions is a comprehensive metric that is a good proxy for several key business areas.
No other metric so holistically captures as many critical aspects of a web site – user design, usability, performance, convenience, ad effectiveness, net promoter score, customer satisfaction – all in a single measurement.
– Bill Gurley, Benchmark
Paul Graham, of Y Combinator fame, says that the metric depends on the stage. If you have revenue, then revenue growth is the metric you want. If you’re not there yet, user growth is a good proxy.
“Revenue Growth or Active Users”
The best thing to measure the growth rate of is revenue. The next best, for startups that aren’t charging initially, is active users. That’s a reasonable proxy for revenue growth because whenever the startup does start trying to make money, their revenues will probably be a constant multiple of active users.
– Paul Graham, VC and co-founder of Y Combinator
It should also be noted that the most relevant metric to you depends on your business model. For example, MRR (Monthly recurring revenue) and churn rates would be particularly important to SaaS (Software-as-a-service) startups, while MAUs (Monthly active users) and organic traffic may be more important measurements for online media companies.
Article by Jeff Desjardins, Visual Capitalist