I recently had a dinner with an entrepreneur in the very early stages of his venture. And although it was only a couple of months old, the site was showing some considerable traction. During our meeting, I asked some more detailed questions about his growth and the user base to get a feel where he was heading with this. Unfortunately, he didn’t have any key metrics or statistical overview of what was happening. Which motivated me to write a bit about what we as investors look for in numbers and what might help you in your decisions going forward.
Please remember: you might want to figure out and apply your very own metrics going forward as these are just examples!
1. Fundamentals: number of monthly/daily active users
Usually DAU/MAU’s are used to measure social games’ success. However, this fully qualifies to measure how often your users return and if they are engaged. What is always interesting to see are changes over the prior periods: change in comparison to last month, last 60 days, last 90 days.
What to record: date/timestamp of sign-up, last sign-in
2. Demographics: sex, age, location
While the first metric measured how many times users are using your service (at least once per day or month), you now need to learn more about who your users are. So, no matter how you create incentives to make people reveal their sex, age, and location, it ultimately helps you understand what users we are talking about.
What to record: sex, age, location (this could be sign-up location as well as user-entered)
3. Engagement: Page views, clicks
Engagement is what investors generally care about. If people come back, you want to make sure that you know what tasks you expect them to do and that they actually perform them. For many social networks this was simply number of page views. Only later, as they switched to more AJAXified user interfaces, other metrics were established in favor of providing a better user experience.
What to record: length of activity/session, number of page views
4. Virality: viral coefficient, invites
Virality is another metric that is a buzz-word that some people already motivated to write whole books about it. No matter how easy it is to understand, it is unusual hard to measure if you don’t care about recording it early enough. Virality usually means that one user invites (at least) one more who then become a user of the site as well. The interesting part is how many users are inviting how many more and how many get converted. As this is clearly a step-process, there is a lot to learn from the conversion from each step to the next. But it also serves you well showing your potential investors that you learned about your users and know how to motivate them and tweak your product.
What to record: number of invitations sent by people, number of successful sign-ups through referrals
One last comment on metrics in general: there is always a danger of recording stuff which is completely irrelevant and simply serving as statistics porn. However, be aware that you might consider recording more upfront than you might need afterwards.
UPDATE: An article on how fab.com raised $40m and saving itself a lot of trouble by sharing their dashboards with potential investors is a great example how dashboards can save you a lot of pain and time. It’s also a great example on what metrics to focus on in your business and pitch.