Arsham Memarzadeh of @OpenView Partners published a blog post on 13 November "Why Enterprise Mobility Calls For New Metrics and How You Can Help Fill The Void." He is identifying with a common problem. Many investors and advisors struggle to understand how tech start ups make money. Founders explanations are often unclear and business plans rarely include a simple description of the business model. Mobile start ups are even more poorly understood.
Helping investors, leaders and teams
Metrics might help solve this problem. Good business metrics do 3 things - paint a picture of the business for outsiders especially investors; help leaders make better decisions; and influence the behaviour of teams. In a start up context they can help investors, focus management, build culture and drive performance.
Finding the right answers
How can you select measures which help achieve these objectives? Tomasz Tunguz (@tomtunguz) has attempted to fill part of this gap with his regular analysis of public filings by SaaS companies. This is useful but limited by regulatory requirements. To fully answer the question think about these dimensions.
Clarity and transparency
It will take some time to find common metrics which work for each business model and give investors and analysts an accepted basis for comparing companies. Until then the best approach is to try get a clear, easily explained picture of your business. I have to admire the openness of Buffer (@buffer) who have shared their investor term sheet, entire performance dashboard and even the salary levels of everyone in the management team. The dashboard is produced by another start up that believes in full transparency, @baremetrics.
How can we find measures that are clearly linked to business outcomes, communicate the right messages and will be understood by non finance people? What metrics do you use to drive success for your start up?
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.