Tech TrailblazersThursday, 14 July 2011 13:47
Keeping your start-up’s score
Ingraining a data-driven culture in your start-up is essential and need not come at the expense of creativity.
The old adage of 'what gets measured, gets done' is no truer than in early stage technology start-ups.
When you are starting out, no one cares if something gets done or not - there are no pressing deadlines (you need to create them yourself), customers aren't angry or happy because you don't have any and you can wrap yourself up in your warm, fuzzy untested vision.
While it may be easy to 'measure' progress in terms like 'feature X added' or 'version y released' it's important to realise these are inputs and not outputs.
Your job in the earliest of stages in a start-up is to create beautiful unit economics.
What I mean by unit economics is a small number of customers that love your product, use it regularly and hopefully pay some amount each month.
$1,000 a month in revenue may not seem exciting by itself but if it comes from a small group of visionary customers who are ecstatic with the product, use it every day and don't churn after a few uses, then you should get very excited.
Without having a core set of happy customers who use and pay for your product or service, doing things like hiring sales people, ramping up PR or any number of other ways of getting ahead of yourself is completely useless and will likely endanger your livelihood.
The best way to measure the healthiness of your web or mobile start-up is via what US Angel investor Dave McClure sets out in his start-up metrics for pirates framework: AARRR.
Essentially it's measuring the funnel of (a)cquisition, (a)ctivation, (r)etention, (r)eferral and ultimately (r)evenue.
A whole post could and should be dedicated to each word in the AARRR funnel but you can find out more here.
The largest set of criticisms of a data-driven culture is that it is for nerds and that it stifles creativity.
The biggest mistake by the haters is that they think the numbers drive the company rather than helping it keep score. Vision is still the most important thing but it needs to be validated and reality checked.
Ultimately, the marriage of a compelling vision with the rigours of keeping score via a data-driven culture produce a magical tandem.
By understanding that the numbers are merely measuring the vision, you're more likely to achieve success and react nimbly to the market.
Niki Scevak is the founder of Homethinking, a real estate startup based in the US, and Startmate, a mentor-driven seed fund that invests in small startups at the earliest of stages. He is based in Sydney.
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