Friday, March 26, 2010

Startup wisdoms are plenty, but data are scarce

If you are trying to implement "Lean" model of startup or building  SaaS business, you probably are looking for answers to these questions like me-

What is a typical time a company spends in "customer discovery" (problem-solution fit) in a specific category of application in my industry?
What is a typical time a company (in my industry/category) spends in "customer validation" (product-market fit)? 
What is a typical customer "acquisition" conversion rate in my industry?
What is a typical customer "activation" conversion rate?
What is a typical customer "churn" or "retention" rate?
What is a typical customer "referral" rate?
What is a typical CAC or CLTV in different stages of development?

You may say, the answers to these questions depend on specific situations. Yes, I agree. However, without any empirical shared knowledge, it is like walking in the dark. A shared database of such data would be helpful, don't you think?

When it comes to advices on how to start a business, run and grow it to a success, there are plenty to go around on the net. I appreciate all those insightful words of wisdoms. These wisdoms help me pull through days when going gets tough. They show me what I should consider when presented with a situation. However, these wisdoms fall short of actually helping us validate that we are on the right track, or we are capital efficient. As much we are open about sharing wisdoms as we are closed when it comes to sharing actual data. I understand we are very reluctant about sharing real data because we are then exposed (to our competitors, or to the scrutiny /critique by the media or industry experts). As a result, we are repeating the same mistakes as our sage predecessors have experienced themselves. It is a vicious cycle.

The value of these metrics will vary from industry to industry, but for the same industry and similar applications, they should be similar. When I started to look for data for SaaS business, I came across a great blog by Philippe Botteri from Bessemer Venture Partners. He maintains these data for public SaaS companies. However, it is not helpful for startups. I wish we were tracking these numbers for "SaaS Satrtups" without revealing the identity of individual companies. There are some examples of brave individuals- Peldi of Balsamic, Dharmesh of Hubspot who shared some data in the past. We can create a shared Google spreadsheet where we can voluntarily share these data as we progress through different stages of our ventures.  The format for this spreadsheet could be
                                                                                Stages of Development
Industry Category  Metric  "Customer Discovery"    "Customer Validation"   "Transition to Growth"    Growth


With a shared  database of these metrics, we can become more efficient with our capital, and we all will be better off.

What do you think of the idea of sharing these data? Am I missing something that would "really" get in the way to start sharing data anonymously? Or, do you think it is not an issue and hence not worth solving for?

2 comments:

  1. I am on the LSC mailing list, where I found this post. I have gotten very little value from that list so far, I really get the impression that the community there is interested in throwing around buzzwords and acronyms.

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  2. Jesse,
    Yes, that is true, but I think that is more for concise communication than anything else. Since we discuss startup related issues in the context of "lean startup" model, people generally know those acronyms and "buzzwords." At least, my experience interacting with the group has been very positive. If you want specific feedback about your startup, you would get good responses that will steer you in the right direction.

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