Dave McClure of 500 Startups (a seed accelerator and investment fund) has a great slide presentation on slideshare called Startup Metrics for Pirates: AARRR!!!. Don't let the old school graphics fool you, it's packed with a ton of insight about how to strategically think about your startup in terms of quantifiable metrics.
On a previous post about Chamath Palhapitiya and focusing on the right things I included his simple 4 stage growth framework which had the following stages: Acquisition, Activation, Engagement & Virality.
Dave's metrics, called AARRR, have an additional stage (5 in total) and are as follows: Acquisition, Activation, Retention, Referral and Revenue. In Dave's case the Referral stage is similar to Chamath's Virality stage except for the fact that Dave goes into some detail about using it to effectively acquire new users on the back of your existing users. Chamath advocates quite passionately to not even focus on the concept of virality due to its illusive nature and the negative distraction it will cause. There are some very subtle differences between virality and referral but I will discuss those in an upcoming post.
Chamath's team at Facebook never spoke about virality or k-factor while building out their incredibly successful social network. He believed it was essential for his team to focus on the quality of the actual product and continue trying to make the overall experience for users better and better. Chamath says far too many people focus on this holy grail of trying to make their "bad" product viral in some way instead of finding ways to make their product better (or even just decent/okay) so users actually keep using it over time.
Either way Dave's startup metrics for pirates (described in the presentation above) give a solid footing to any startup interested in building a quality product/service and a business around that product/service. Measuring how successful things are going during a startups lifecycle is difficult due to the dynamic nature of a startup, but this simple framework and associated metrics are sufficiently generic enough that they are still relevant as a startup morphs into a revenue generating business.
I am a huge fan of Mixpanel's event based analytics platform. I use it extensively at RESAAS and love the ease of setup and ability for both engineers and marketers to easily sift through tons of data, explore theories and then develop insights that impact future product decisions. If Dave's startup metrics for pirates, AARRR, is something you decide to build yourself then I highly suggest trying Mixpanel as the analytics platform behind those metrics (other product you could use include Google Analytics, Kissmetrics, Woopra, Flurry... etc). What's nice is that the Mixpanel team even put together this great blog post back in November, 2012 about using Mixpanel to implement Dave's AARRR metrics.
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