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Tip #7: Obsess over core metrics

September 17, 2008

For those of you with good memories, you’ll recall that I have been blogging a series of startup tips. I’ve previously done tips 1-6 of twelve startup tips that I derived from my TechStars experiences.

This tip is about “core metrics.” I think most startups should have 2 or 3 core metrics that they use consistently to evaluate their business. If you have many more, then it’s hard to focus your efforts. Having just one probably oversimplifies things. So 2-3 core metrics is a good rule of thumb.

I’ll give you an example from last summer. Intense Debate is a company from TechStars 2007 that replaces the crappy built in comment system on most blogs. Subsequently, it drives subscriber engagement and page views. Early on in the life of the company, we often talked about the number of publishers (blogs) using the service. It was a metric everyone had in their heads. We also obsessed over “number of commenters per post” early on. We thought that improving engagement primarily meant getting new people into the conversation. At first glance, these seem like reasonable metrics. But we quickly learned that they’re lousy metrics, and certainly not metrics that we want to orient the business around.

Think about it for a minute. Should they go out and just get every tiny little publisher as a goal? Is Intense Debate really “about” number of publishers? Does that somehow increase the value they create? Sure, it’s nice to improve more and more blogs, but in the end they needed to monetize the service somehow. Number of publishers and commenters per post were quickly replaced as a core metrics for the company with core metrics like “total comments per post” (subtle difference - who cares how many commenters there are) and “page views per post.” If you’re a blogger, I’m sure you’ll recognize that comments per post and page views per post are good things to be focused on.

It turns out that Intense Debate has an enormous impact on both of these core metrics where substantial existing communities are present. We quickly learned that comment systems don’t (necessarily) create user engagement. Instead, where there is already user engagement, they enhance it greatly.

This meant that it was doubly important for us to focus on the new core metrics, not the original ones that we theorized might be true. It seems so obvious looking back. However, for many early stage web startups I meet, they appear to be obsessing over either a) nothing, or b) seemingly inappropriate core metrics.

So the first point here is: Obsess over the correct core metrics. Harder than it sounds.

The second point is to actually obsess over them. Everyone in the company should know the current values of these core metrics. Experiments should be undertaken with the goal of manipulating them.

One of the tactics that we regularly use with TechStars companies is that we insist that they build core metrics into the product very early on. In my experience, there’s a definite correlation between building measurements for these core metrics right into the product and long term success. It turns out that it’s very easy to build these sorts of measurement and reporting systems into the product early on. But it’s often surprisingly difficult to do it later on once the product is sufficiently complex. So the lesson is simply: Build in automated reporting systems for your core metrics very early on.

Most TechStars companies with products in alpha, beta, or launch phase have a daily email that goes around to the founders and mentors with detailed statistics relating to their core metrics. Those that don’t often send weekly updates with this information. They make their core metrics visible. When things change in a major way, they’re often asked what moved the needle. It’s like the old adage: If you don’t measure it, you can’t improve it. So stick them in everyone’s face!

In my opinion, the best startups have 2 or 3 metrics that represent true drivers of their business, and they literally obsess over understanding and improving those numbers on a day to day basis.

What are your core metrics? How do you report and communicate them?

Written by David Cohen · Filed Under Blog, Personal |  

Tip #6: Scratch your own itch (but it’s just one possible way to become passionate)

April 20, 2008

I’ve been slowly blogging twelve startup tips from last summer at TechStars. Here’s #6 about “scratching your own itch.”

The original idea behind this tip was that many successful startups start out fixing a problem that pisses them off, and that they believe needs to go away.

But I’ve since refined my thinking on this. Scratching your own itch is certainly no guarantee of success, just like all the other tips. I now think of this as just one way of being passionate about what you’re working on. If you’re scratching your own itch, then you’re likely to be passionate about the solution.

But it’s just as easy to be passionate about a problem you don’t personally have. When I think back on the three startups that I founded prior to TechStars, one was scratching my own itch and was successful. The other successful one was solving a very real problem for a very large market. And the one that failed was one where I’m now pretty confident that I was scratching the faintest and least annoying of itches - one that just didn’t need to be scratched by anybody.

But you’ve got to have passion about what you’re doing. So scratching your own itch is a great way to generate passion. The way that I generated passion in my public safety software company (I had no personal itch to scratch in that case) was thinking about my customers customers. We could get ambulances on scene more efficiently and for less money than the competition. Trust me, when millions of patients are relying on your software to save their lives, it’s easy to sustain your passion.

I’m not talking here about the fake passion that I see so often. It’s often phrased as “the world really needs this cool product” and “therefore I’m very passionate about bringing it to market.” I think it’s important to stop and ask yourself what’s generating and sustaining your passion, and whether or not that source of passion is real. You’re going to need it or it will be too easy to just give up.

Startups are a ridiculous amount of work that (on average) come with a low probability of success. It’s not going to work if you’re not passionate and dedicated about solving a problem or bringing something to life.

So, founders: What’s the unending source of your passion about your company?

Written by David Cohen · Filed Under Blog, Personal, Startups |