Venture Capitalist at Theory

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1 minute read / Jun 20, 2012 /

The 3 Kinds of Startup Metrics

Clarity is everything in a startup. That’s why metrics can be such a great help. But not all metrics are created equal.

One of my CEOs recently shared with me the way he thinks about metrics. I thought it was simple and brilliant. There are 3 kinds of metrics in a business:

  1. Vanity metrics are great indicators of momentum. These are useful for garnering press, investment and partnering interest. But they most often aren’t the end goal, the metrics that correlate to a business’s value.
  2. Business health metrics are high level metrics about the business. Revenue is a prime example. User activity is a second. Conversion-to-paid is a third. These metrics tend to be the ones shared with the board and leadership of the company. Goals can be established for these metrics and the health of the company’s initiatives can be measured in comparison to these goals.\
  3. Product decision metrics inform product, marketing, sales or other team level decisions. Examples include cost-per-customer-acquisition per channel, % of users using a particular feature, etc. Think through what kinds of metrics you and your team are focused on and run them through this filter. It will help you prioritize the right things.

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