Our experience was different from the traditional VC model, in which funding is reserved for true domain experts, those with deep background in their field solving a problem they personally have experienced. For the rest of us, there is an alternative: to create credibility by building a lean startup ...Rather than just focus on the right kind of pitch to use, I wanted to write about the kinds of startups that create lasting value, and therefore are great companies to fund even in down times. The core of the article is my first attempt to articulate the key metrics (in graph form) that I believe demonstrate customer value. When startups ask me what to measure, I always come back to these three as a starting point:
At IMVU, we were terrified by how early we shipped (and charged for) our first product. Frankly, we were embarrassed by how many bugs, crashes, and defects it had. We were even more embarrassed by the pathetically small number of customers we had, and the pathetically low amount of revenue we had earned so far. It wasn’t uncommon for advisors and even potential investors to ask, when we would show our results, “are there some 000’s missing from this graph?” We’d always cringe as we admitted that, no, we really only had a few thousand customers and a few thousand dollars in monthly revenue.
Despite that, we were able to establish credibility, because we used those early numbers to demonstrate that our customers were getting real value from our product and, more importantly, that we understood how to build more of it.
- Revenue per customer.
- Retention cohort analysis.
- Funnel averages over time.