Real Success Measurements For Startups
How do we measure success?
How best to measure success is a question I’ve been pondering, experiencing first hand, as well as reading about as the St. Louis startup ecosystem grows. We’re seeing strategic deals, significant funding, a growing cohort of fantastic programs and some truly innovative businesses hatch and flourish.
But how we measure success for the individual companies out there? It can be subjective.
Much of the regional news reporting speaks to fundraising; sometimes the amorphic ‘users’; perhaps announcing a hire. It’s all over the place.
So what are some solid metrics we should use for success?
Making money is the principal metric for success. I love hearing companies talking about revenue – a raw number, a growth metrics (CAGR for example), market penetration.
These are all fantastic, and as someone who has deployed north of $200 million into startups. It’s how I measure my own success.
Active Usage Statistics that Turn Into Revenue
Are people using your tool? Are you getting them to come back daily, hourly, or whatever to use you? Are you harvesting all the data of their interactions and building a capability to monetize it?
I love hearing people say, “We have ‘X’ number of active users per day, growing by ‘Y’ percent, with a specific value of ‘Z’ revenues to the data companies we are selling the data to.
Number of Accounts / Users
Not at all.
I really don’t care if you have 1 million users on your system. I care how much revenue those users create.
Every single user equals some sort of dollars in direct or indirect revenue. If you cannot make that part of your reporting metrics, then wait until you can explain that. If your business model does not directly derive from number of users, then stay away.
Any metric that does not tie to your business model and revenue, if reported, can actually be embarrassing. It shows a lack of understanding of your business. And let’s all remember we’re starting businesses and not just trying to get to the cool kids table at lunch.
No. Not unless one of them is Elon Musk.
Fundraising is like table stakes. It’s like knowing how to incorporate, build a MVP, sign a sales contract or run a social media account.
If you aren’t fundraising, you aren’t doing your job. It just means you know the basics of launching a company. Raise $1 million from a named VC in New York, Boston or the Bay Area and that makes for a credible news announcement.
The region has a non-trivial capitalization issue in that there is significantly less active capital here than is needed. Small fundraising announcements simply reinforce this gap.
Here’s a new rule to follow: Don’t put out a press release unless one of the following is also true about your fundraising:
- Announcing a key strategic partner (Fortune 500, market leader, or some company with more than $1 billion EBITA);
- Bringing on a zeitgeist leader (Google, Uber, etc.);
- Announcing some sort of contract with an organization outside the United States;
- Trumpeting a raise in excess of $10 million;
- Bringing on an investor with no previous connection to the St. Louis ecosystem whatsoever.