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The Red Flags and Magic Numbers That Investors Look For in Your Startup’s Metrics
Article

The Red Flags and Magic Numbers That Investors Look For in Your Startup’s Metrics

Andrew Chen, 2018

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Editorial Rating

9

Qualities

  • Analytical
  • Innovative
  • Applicable

Recommendation

Entrepreneurs and investors base decisions on user growth forecasts. But common models for user growth rely on lagging indicators. In this clever article, venture capitalist Andrew Chen details a method for understanding and predicting growth via user “acquisition loops” and “engagement loops.” Start-up investors and entrepreneurs will appreciate Chen’s authoritative take on this crucial subject, as well as his emphasis on sustainability and quality.

Take-Aways

  • Investors and entrepreneurs can build a predictive model of user growth by examining customer “acquisition loops” and “engagement loops.”
  • These loops reveal how gaining a cohort of new users leads to bringing in more new users and how current engagement leads to future engagement.
  • “Acquisition mix” represents a key performance indicator.

About the Author

Andrew Chen is a general partner at the venture capital firm Andreessen Horowitz.


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