As a startup founder, you know metrics matter! You’ve got a fancy funnel that captures customer impressions all the way down to conversions, but do you know how to convey key B2c metrics into customer insights quickly in an investor or accelerator interview?
Don’t worry we’ve got you covered!
Mistakes around B2C metrics
Let’s start by talking about the five big mistakes we see founders make during interviews to make sure you don’t shoot yourself in the foot.
Mistake #1: Having only one to two months of B2C metrics.
Waltzing into an investor meeting with one to two months of growth is not enough to wow an investor, especially if you extrapolate the growth rate and expect it to be the same each month.
Investors are perceptive. They’re concerned that your initial spike in growth was due to pent up demand in the market, seasonality, or maybe press around launch. Hence, they’ll wait to see if that growth continues over the next couple quarters. Many investors are starting to look for a full year.
Mistake #2: Not measuring marketing efforts.
If you grew “organically” or didn’t spend any money, that is great for you. However, it raises a red flag. Investors would prefer that you told them you had a repeatable model. E.g. for every $2 you spend on Facebook ads, you make $5. For every blog post you write, you see X people read it and Y sign up.
If you don’t have a proven, repeatable model, it is OK to talk about what marketing experiments you are running, and what you hope to get out of them. You can even talk about what didn’t work, e.g., We spent $X acquiring customers on Facebook over Y months, and noticed that most tend to churn after A months.
Mistake #3: Claiming to have no churn.
If no one has canceled or asked you for a refund, it is sure to raise an eyebrow. It’s better to have some, know what caused it, and have a prioritized roadmap for how you are going to resolve the issues, than claim your product is selling like hotcakes!
Mistake #4: Vanity B2C metrics.
If your focus is to grow quickly and you haven’t monetized your product, that is OK. What you want to be wary of is having vanity B2C metrics like “We sent out 10M emails!” While that sounds like a big number, it doesn’t mean anything in the minds of an investor. What investors wonder is: “Why are 10M emails significant? How does it relate to customer growth or engagement? What will happen if you send out another 10M emails?”
Mistake #5: Not knowing basic terminology.
I know this seems silly to state, but many founders don’t know what unit economics mean. Even if you don’t have the numbers, it’s important to understand what terms like LTV (lifetime value), CAC (customer acquisition costs), and MRR (monthly recurring revenue). We highly recommend reading a book like Lean Analytics to gain a basic understanding. You also need to provide some justification as to why you aren’t or haven’t measured specific B2C metrics.
Have B2C metrics that relate to your business model, product, and monetization methods.
Now that we’ve covered the mistakes let’s dive into what B2C metrics are essential if you are a B2C company
We get that it might be a challenge to have many B2C metrics if you launched last month. The problem for investors is that you aren’t the ONLY startup they are talking to that launched last month. So if you are going to be early and don’t have much traction, you need to be able to explain why they need to invest early on.
Part of convincing them is being able to showcase your expertise and unique insights into the market as they relate back to your company’s business model, product, and monetization method (and yes even if you are a consumer play you need to think about how you will monetize).
Here are some examples if you are:
- A media company or user-generated content, then have some understanding of engagement around your content, and how you plan to monetize (subscription, advertising, or sponsorship).
- A marketplace, have B2C metrics around the supply side versus demand side.
- An e-commerce site, then you need to know B2C metrics like average order value, cart abandonment, and repeat transactions.
- A mobile app, then you need to know downloads, in-app purchases, or a subscription model.
- A saas platform, why are you going freemium, what will cause people to upgrade, or why do you think a subscription model makes sense.
B2C Metrics + Traction, traction, traction!
Life is easier if you have traction, or so they say…
The challenge is knowing if you have enough traction. Enough is in the eye of the investor.
The real question you need to answer is how does your traction show that you have de-risked your business for an investor. More specifically does your traction show:
- A steady and realistic growth rate?
- That you are in a big and growing market?
- That you have or have the potential for repeat and referral revenue?
- That your customers find value in your product or service?
- That you have an understanding of why you are focused on specific goals?
B2C Metrics + Investment
Remember investors are trying to gauge what the ROI will be. If they give you $Y, how long will it take you to 2X, 3X, 5X, or 10X, and how can you be sure that the techniques you used to get to 2X will get you to 3X. If the won’t then, it’s OK to say that.
Finally, it’s how you craft a narrative around your B2C metrics that conveys to an investor you are trustworthy and capable of building and growing this company.
You say something like, “We chose to focus on X customer because we noticed they were the fastest growing segment in 1-2-3- market. To attract X customer, we have tried A-B-C experiments to get our first 10,000 customers. Out of that group, we noticed we had a 20% referral rate. Then we hit a plateau. We want to try D-E-F experiments to grow to 100,000 customers. Here’s why we think D-E-F will work, how much it’s going to cost, and how long it’s going to take to get there…”
Want help improving your B2C metrics and communicating them to investors?
An accelerator like 500 Startups can help!