Why We Are Writing Startup Metrics

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My partner Seth Levine and I have decided to write a book together. We are tackling a topic we both care deeply about – the metrics that matter to your startup.

A year ago Jason Mendelson (another partner of ours at Foundry Group) and I wrote a book titled Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. We felt that there was an opportunity to demystify the VC investment process and help entrepreneurs everywhere understand everything surrounding the deal, terms, and negotiation process surrounding a venture capital investment. We had an awesome time writing the book and have been gratified by the response and feedback we’ve gotten from entrepreneurs all over the world.

Seth and I decided to take on a topic that is equally important – that of the metrics that matter to a startup. In our investment activity we are regularly amazed at the lack of financial literacy of many entrepreneurs and investors. But it’s more than just the accounting data – it’s the metrics that apply to every aspect of the business.

There’s an old cliche – if you can’t measure it, you can’t manage it – that is very relevant to every startup. As Seth and I work on Startup Metrics, we’ll explore all aspects of this in depth. Our goal is to write a book as foundational as Venture Deals.

Startup Metrics will be published in Q2 2013. In the mean time, we’ll each be blogging regularly on this topic. Please join us in the conversation.

  • freds4hb

    Brad, I’m by far more excited about this book than any of your others (own em, read em, re-read them, bought the audio book). The multiple references to “metrics” so often was always a source of frustration and annoyance. There was always an assumption of what said “metrics” were and just what they stood for in a greater strategic place, but very little nuts and bolts explanations (I know that’s not the focus of said books, so not mad,, just agreeing that this is THE book for you to write!). Thank you.
    Sorry, no jetpack yet. Still working on it though. You’re still gonna get an email;)
    Thanks again, stay awesome!

  • http://www.digitalocean.com/ Moisey Uretsky

    Totally true, every week Nicole yells (I mean tells us nicely) at us measure everything.

    Get out of assumptions and make sure the data backs up your hypotheses.

    What we’ve found is that whenever we thought, hey those would be interesting metrics, eventually they turn out to be essential to some large decision.

    The sooner we start tracking them, the less work we have to do in the future, and the earlier we get insights into our business.

    Can’t wait to read the blog posts and the book when its finally out.

  • http://www.davidmcohen.com/ David Cohen

    Hopefully, one of the chapters will be: “The Difference Between Revenue and Profit”.

    Looking forward to this one. Good luck with it.

  • http://www.randfishkin.com/blog Rand Fishkin

    Please include something about multi-channel attribution! So many startups (and companies of all kinds) use last-touch on their analytics to determine which channels produce customers. This terrible tragedy of a process ignores the truth – that customers almost always have many touches with your brand via many different channels prior to making a conversion (whether that’s an email signup or a product demo or an e-commerce sale or whatever).

    Oh, and make sure to kill the myth that Alexa, Compete, Hitwise, Quantcast, Google Trends, Nielsen Netratings, Comscore or any other measuring service has any correlation with reality. Much appreciated :-)

    Looking forward to the book!

  • http://twitter.com/phil_od Phil O’Doherty

    Look forward to it. Fuelling my startup reading list addiction at the moment. I would love some in depth reading on “velocity” and customer life time value metrics!

  • COECOVentures

    The problem I’m having is that you can bring a horse to water, but you can’t make it drink. There are two startups I’m working with that have great technical aptitude but can’t grok financials. Hopefully this book will provide training techniques for those of us helping startups build their dream.

  • Pingback: Financial Metrics | Startup Iceland()

  • http://twitter.com/lucasdickey Lucas Dickey

    Interested to see what you and Seth see as “metrics that matter to a startup” vs. “metrics that matter to non-startups”. I’d think that those metrics that really matter are just as valuable to a startup as to a later stage and/or public company when it comes to customer-related metrics (acquisition, retention, appropriately tracking costs therein).

  • http://www.itdatabase.com/ Travis Van

    This sounds like it’s going to be a great read. I wish it were the first one you were writing.

    I think the metrics challenge has less to do with there being a dearth of metrics, and more to do with too many options. For most startups, from day one they have all these ambitions about how they’re going to create data they can interpret around core activities like:

    1. How target customers are defined
    2. How individual leads are generated (and cost per lead)
    3. How those individual leads are contacted
    4. What happens during the free trial
    5. What percentage of trial takers convert into what outcomes
    6. What percentage of customers use the product actively, how many users per company use it, and what percent convert

    From the high level “cost of sale” metrics down to the minutia in these types of core “sales / marketing process” steps – most companies start out with an unlimited appetite for data. But it doesn’t take long for the complexity of the business to swamp the boat, and make it really difficult to maintain that type of data discipline over time.

    It’s sort of similar to how you dutifully add all the RSS feeds of authors you like to your reader with the intention of closely reading them all the time. Next thing you know two months have passed, you have 7,000 unread items …

    Seems like just like good software developers are great at tightening the scope of what they’re focused on, on a per release basis – startups would benefit from getting better at narrowing their sights on the core metrics, and keeping things as simple as possible. I’d be as interested to learn what types of metrics do NOT matter.

  • BuckStartsHere

    Interesting topic. Would you mind sharing the topics you’ll be discussing in the book?

  • http://twitter.com/burtonbeavan Burton Beavan

    Finally!! As an accountant that tries to incorporate innovation accounting as well as the more traditional methods its amazing at how little REAL information there is about this topic aside from things such as pirate metrics. This is a topic that I’d love to see covered in more detail. Really look forward to this.

  • http://www.facebook.com/kevin.cooper.923171 Kevin Cooper

    Anywhere I can get a sneak peak?

  • Timo Lehes – GP BootstrapLabs

    Looking forward to see an approach that focuses on as few metrics as possible, as opposed to the many things you get from various platforms. A simple framework to outline pre-traction, post traction metrics. Happy to engage!

  • http://www.facebook.com/abraham.hoffman.1 Abraham Hoffman

    Can’t wait to read it!

  • http://www.facebook.com/joy.randels.1 Joy Randels

    This is interesting, we have been tracking startup metrics for several years through our own experience and multiple incubators and accelerators. It will be great to compare what we have learned to your experience. Metrics don’t always tell the story but they are extremely helpful in decision making and conversations with your board and investors.

  • Michele Zimmerman

    so, how many years of experience in accounting and due diligence do YOU guys have?

  • Steven Forth

    Looking forward to the book on Startup Metrics. Reading Startup Communities now. You should come up to Vancouver BC and give some talks. Plenty of places to run here.

  • AJ Campbell

    I just finished Startup Communities a couple hours ago and I literally bought Startup Metrics two seconds ago on iBooks. I enjoyed what Eric Ries had to say about which metrics are actionable, but I feel like there’s more we can do at our startup to solidify our understanding of which metrics are most crucial.

  • http://www.ThanksJonathan.com/?disqus Jonathan Drake
    • http://www.feld.com bfeld

      Now we just need to write the damn thing.

  • Bryan Glenn

    Brad – Was this book published? I see a copy on Amazon for $999.11. I suspect that either a) it’s not available or b) it’s a really heavy book.

    • http://www.feld.com bfeld

      We cancelled it. I don’t know why it’s still up on Amazon…

      • Robert D Smith

        Hey Brad, why was it cancelled?

        • Robert D Smith

          This is what happens when you try to post while making your profile all while listening to the audio version of Startup life (at the Kilimanjaro story). I couldn’t delete that picture! I’m really not that vain! But I’m curious about why the book was cancelled. Did you have trouble coming up with metrics that applied to the full range of startups?

        • http://www.feld.com bfeld

          We just weren’t getting to it.