My startup Speek just raised a large seed round – over $1.2 million large. 500 Startups came in first and really kicked things off for us. After a few more months of work, we got some really great angels and VCs in on our deal. We got a bit of press and then celebrated for about 1/3 of a millisecond. Yay for us.
Raising a seed round is hard, but it wasn’t hard for me. I run product and tech; I showed up and looked pretty and sounded smart for the last meeting with angels and VCs, and tried not to screw things up. The lion's share of the work was done by John Bracken, my cofounder and Speek’s CEO.
But now it's my turn to man the forklift.
As I said, I run product and tech. So let’s assume our seed money will last us 12 months. We do two-week sprints with a release at the end of each one. That means I have just 24 shots to get it right, 24 decisions to make deciding on what our small product development team should be focused on that is going to a) get us users, b) keep our users, c) grow our users virally, and d) get people to upgrade and start paying us.
This is why startups are not for the faint of heart.
24 decisions, each costing $62,500. Together, these decisions compound to determine whether we win or lose. We get fewer than 24 chances to get our product to the point where it attracts enough users and/or revenue to get us Series A funding or to become enough of a fly in the ointment to corporate America to get bought for millions of dollars.
It’s not a lot of time, so we'd better make smart decisions.
At startups, there’s a lot of talk about the infamous trough of sorrow. When you get your first real attention from the press or investors, it’s all kittens and cupcakes. Then reality hits: you are running a startup. Your purpose in life is to figure out how to achieve astronomical growth before the cash dries up. Every dollar spent must roll up into either successfully achieving growth or failing fast so that you can learn something and spend the next dollar successfully achieving growth. Yes, those high-value smart-money angels and VCs you closed during the seed round are only an email or a phone call away, but at the end of the day they aren’t going to spoon-feed you. Mentors are great for the very big and the very small – high level brainstorms and specific granular issues – but it is the messy in-between where your company will live or die, and that's where the buck stops entirely with you.
This is why metrics and data become increasingly important to your success. Any edge helps. Anything that helps you to better decide how to spend your 24 development cycles is your friend. Mixpanel, user testing, Google Analytics, customer interviews, viral experiments, growth hacks, paid advertising, data analytics – metrics and data, data and metrics. A startup is an organism that must learn to evolve very quickly: it is the data that will allow you do that. The ability to quickly and efficiently gather and – as importantly – interpret information is akin to growing an extra appendage, or a few more eyeballs; each additional input allows you to more rapidly learn about the world around you, and as with any organism, this heightened situational awareness greatly increases the chances for survival.
We made sure from the beginning that our company culture is quantitative. Here are some of the things we do that have worked very well:
- We defined the #1 metric we care most about very early on. For us it is active users. We define active users as users who a) register, and b) did a real conference call (two or more people, more than five minutes) in the last 30 days. Our reasoning for this is that our active users are the users who will eventually upgrade to paid accounts and also will virally attract more users through usage.
- Active user growth on a weekly and monthly basis is where we focus most of our attention.
- We track acquisition, activation, retention, referral, and revenue on a weekly and monthly basis. When we view it, we view it as both a number and growth percentage.
- When prioritizing development tasks, features, and business development deals, we always ask the question: “Will this help us grow right now?” Prioritizing what work the development team focuses on becomes a constant discussion on return on investment – lowest spend, highest return wins.
It is through constant learning, adjustment, and refining that we are able to cover new territory. Ever heard of pirate metrics? Well all aboard, matey: Time to become the peg-legged love child of Jack Sparrow and One-Eyed Willy.
A final word of advice: if you’re not a quantitative-minded data nerd, you had best become one. Else you’ll be flying blindly through the trough of sorrow.