Have a Burning Startup Question? Get it Answered on the Founder Hotline!

Are you a founder who needs advice? (Answer: yes, yes you are).

We’re starting a new podcast dedicated to answering tough questions from startup founders. Have fundraising issues? Dealing co-founder drama? Unsure of how to divide equity among employees? Clueless about marketing or distribution? The 500 team is here for you!

How to Submit a Question

There are a few ways to send in your questions:

#1 Use the Google form below:

#2 send us an email at FounderHotline@gmail.com

#3 Call in at (775) 574-8685 to leave a voicemail. The number automatically goes to voicemail, so don’t worry about Dave McClure picking up .

Remember: your submission is 100% anonymous. Follow the show @FounderHotline for updates on our first episode. We’re excited to answer your questions!

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They’ll Never Be Normal – Introducing Batch 007!

When we opened up applications for Batch 007 secret agents a few months ago, we received more applications than we knew what to do with – almost 1300! After countless interviews with talented founders, the 30 startups of Batch 007 have finally entered the building! They started our rigorous training program a few weeks back and are excited to take on their first #500Strong mission from Agent DMC.

So, where are our new agents from? Pretty much everywhere – they hail from Sweden, UK, Italy, Mexico, China, Taiwan, Thailand, Australia, India, and Brazil, just to name a few. We also have founders from all over the US, including Hermosa Beach, NYC, Boston, Philadelphia, Gainesville, Nashville and other cities.

This time around, we have startups that do everything from micro-biome sequencing to electric skateboards. Oh, and we even have a few that focus on inventory management (can you say “unsexy”?). As always, the founders are incredibly diverse, with 5 female founders and 12 startups from outside the US.

For their big debut, our secret agents decided to put their own startup spin on the pop hit Royals. Check it out.

 

We also interviewed nearly all the Batch 7 companies in the latest episode of the Startup Founders Podcast! Listen to their 3-minute lightning interviews here:

Do YOU want to be #500Strong? You’re in luck  – we’re already taking applications for our next accelerator class! This batch will kick off January 2014 in a brand new San Francisco office! Warby Parkers and fixies are optional, but recommended. You can APPLY NOW through AngelList. Applications CLOSE on Nov 27 at 11:59pm, so don’t delay!.

Learn more about all our fall accelerator companies on AngelList or below. Welcome to the family, Batch 7!

Full List of Batch 007 Startups

3sourcing

3Sourcing

A search engine that helps people find, connect with and hire technical talent.

AngelList: https://angel.co/3sourcing
Founders: Tom Savage, Razvan Dinu
From: London, UK and Bucharest, Romania
Fun Fact: Tom is living in a campervan while at 500. Raz has always been more sensible. Oh, and we won a European iTalent Award and acquired 400k users for previous product, but decided to pivot.

adespresso

AdEspresso

Super easy SaaS to manage and optimize Facebook Ads for SMBs and media agencies. On average, our customers achieve savings of up to 40%.

AngelList: https://angel.co/adespresso
Founders: Massimo Chieruzzi, Carlo Forghieri
From: Milan, Italy
Fun Fact: 2 Years ago we came in Silicon Valley to get feedback for our MVP of AdEspresso. Our first event, “The Startup Conference,” was located in the plaza in front of 500 Startups, and Dave was the keynote speaker. 2 years later here we are…that’s fate 🙂

Anyadir

Anyadir Education

We empower universities to recruit socially.

AngelList: https://angel.co/anyadir-education/
Founders: Manish Katyan, Duleep Deosthale
From: New York and Bangalore
Fun Fact: Founder is a Spanish professor who became an entrepreneur to fix education after visiting 500+ universities in 100+ countries.

BountyHunter

Bounty Hunter

A contest platform for brands to run creative contests.

AngelList: https://angel.co/bounty-hunter
Founders: Hana Chang, Roxman Yang
From: Taipei, Taiwan
Fun Fact: We bootstrapped and managed to get Google, Blizzard, Adobe and Microsoft as our customers.

buzzstarter

Buzzstarter

A distribution as a service (DAAS) platform that takes any content from an advertiser, creates a value reward for sharing, and then has the brands’ most ardent followers make it go viral. We deliver results that are 6-7X more effective than any other online campaign.

AngelList: https://angel.co/buzzstarter
Founders: Ken Zi Wang, Alex Gold, Alexi Nedeltchev
From: San Francisco, CA
Fun Fact: We have over $350,000 in revenue after just a few months.

BTCjam

BTCJam

The first and leading global peer to peer bitcoin lending platform, and the first to offer a global credit score to its users. It’s a disruptive credit model powered by the bitcoin economy.

AngelList: https://angel.co/btcjam
Founders: Celso Cardoso, Paulo Lellis
From: São Paulo, Brazil

builk

Builk

We digitize the construction industry by providing free SaaS for small and medium contractors.

AngelList: https://angel.co/builk
Founders: Patai Padungting
From: Bangkok, Thailand
Fun Fact: Launched in Thailand and Indonesia. More than 500M USD of construction information on hand.

CarreiraBeauty

Carreira Beauty

Destination site for Beauty Professionals: provides career development and leverages small businesses while boosting online distribution.

AngelList: https://angel.co/carreira-beauty
Founders: Rui Miadaira, Antonio Miadaira Filho
From: Sao Paulo, Brazil
Fun Fact: Brazil is the third largest beauty market in the world after the USA and Japan.

cityblis

Cityblis

The #1 eCommerce platform to discover unique fashion brands.

AngelList: https://angel.co/cityblis-2
Founders: Christopher Scott Price, Pouria Sanae, Emily DeSanctis
From: Australia, Sweden and USA
Fun Fact: Cityblis was born during NY Fashion week and now boasts 3000 Brands across 60 countries.

EquityZen

EquityZen

A stock market for private companies. Shareholders get cash for their stock and small investors access investments in large private firms like Warby Parker, ZocDoc, and DropBox.

AngelList: https://angel.co/equityzen
Founders: Atish Davda, Shriram Bhashyam, Philip Haslett
From: New York, NY
Fun Fact: Every year, $500M is lost by employees who don’t exercise their stock options when they leave their company. Enter EquityZen.

Goods

Goods

A platform designed for the modern wholesaler. Goods provides an intuitive, easy-to-use, and secure service that enables any wholesaler to accept B2B transactions, manage inventory, and create digital catalogs.

AngelList: https://angel.co/goods-platform
Founders: Duy Huynh
From: New York, NY
Fun Fact: The team ran a wholesale distribution business that sells to major retailers like Costco, Target, Home Depot, Amazon, SkyMall, Fab, etc. Through all of these transactions, we used paper, pens, and fax machines. We created Goods to fix this problem.

Grata

Grata

Live, on-demand travel concierge on your smartphone.

AngelList: https://angel.co/grata
Founders: Andrew Schorr, Ellis Rahhal and Alex Miller
From: Beijing, China
Fun Fact: All three Caucasian American founders are fluent in Mandarin.

LaunchTrack

LaunchTrack

Intelligent ticketing that turns each ticket into an opportunity to build a relationship with simple communication tools, analytics, and reporting.

AngelList: https://angel.co/launchtrack
Founders: Jonathan Cordeau, Dave Clausen
From: Tampa, FL
Fun Fact: Jonathan has previously produced concerts for artists such as Maroon 5, Queens of the Stoneage, Jessica Simpson, Wyclef Jean, Live, and Wu Tang.

MailLift

MailLift

Twilio for handwritten letters. Real handwritten letters, automated for enterprises. The $42B direct mail industry just got personal.

AngelList: https://angel.co/maillift
Founders: Daniel Jurek, Brian Curliss
From: Austin, TX
Fun Fact: One founder previously exited. We hire artists and retired teachers to handwrite our letters.

OLSET

OLSET

A proactive virtual travel agent that saves travelers time and automatically finds them the best hotels based on their preferences.

AngelList: https://angel.co/olset
Founders: Gadi Bashvitz, Amyn Sheriff
From: San Francisco, CA, USA
Fun Fact: We have traveled more than 2M miles and stayed in hotels more than 1,000 nights over the last decade, so we really understand the pain that frequent travelers feel.

Partender

Partender

Via a few taps and swipes on iOS, Partender brings bars into the 21st century and reduces the time it takes managers to do bar inventory from 6 hours to 15 minutes or less.

AngelList: https://angel.co/partender
Founders: Nik Kundra
From: Gainesville, FL
Fun Fact: We started Partender because we were trying to hook up with bartenders/managers. They couldn’t meet up because they were stuck doing inventory until 7AM. We looked into it, and it turns out inventory blows and is a serious problem. That’s why we created Partender.

Platejoy

PlateJoy

Creates highly personalized weekly menus based on health goals, lifestyle, and dietary preferences. PlateJoy then partners with grocers such as Whole Foods to next-day delivery all of the ingredients and easy recipes you need to prepare your meals.

AngelList: https://angel.co/platejoy
Founders: Christina Bognet
From: Boston, MA
Fun Fact: Christina was inspired to start PlateJoy after losing fifty pounds. She realized how difficult it was to consistently eat healthy meals at home without wasting considerable time planning and shopping.

PopBasic

Popbasic

We design and manufacture limited edition micro collections for women. Each collection includes three pieces of clothing and accessories, sold as a set for under $100 with free worldwide shipping.

 

AngelList: https://angel.co/popbasic
Founders: Madeline Veenstra, Coen Hyde
From: Brisbane, Australia
Fun Fact: We are featured in InStyle’s ”Best of the Web 2013.”

Populr

Populr

A micro-publishing platform that helps business people easily deliver information through single web pages. You don’t need a designer or a developer to create a web page that is attractive, mobile optimized, secure, and most importantly – trackable.

AngelList: https://angel.co/populr-me
Founders: Nicholas Holland, Jared Scheel, Daniel Nelson
From: Nashville, Tennessee
Fun Fact: We created the micro-site http://bestpitchdecks.com while testing Populr, and it has over 25K visits with almost 19K clicks. The best part is that it took less than 15 minutes to create once we had the pitch decks!

RealtyShares

RealtyShares

An online investment platform that uses crowdfunding to pool investors into private real estate investments. Accredited Investor members can browse a variety of investment opportunities, review details on the investment and invest as little as $5000.

AngelList: https://angel.co/realtyshares
Founders: Nav Athwal, Ray Sturm
From: San Francisco, USA
Fun Fact: We funded our last deal for $101,000 in about 12 hours.

salesbeach

Sales Beach

Sales Beach automates your outbound sales. With our technology, you can send personalized emails to hundreds or thousands of possible contacts in your target industry and turn responses into meetings.

AngelList: https://angel.co/sales-beach
Founders: Tim Schwab, Andrew Evans
From: San Francisco, USA
Fun Fact: Our 4 person team has collectively lived in over twenty cities.

Shopeando

Shopeando

Shopeando is the largest online retailer for unbranded products in Latin America.

AngelList: https://angel.co/shopeando
Founders: Isaul Gomez
From: Mexico City, Mexico
Fun Fact: This is our second accelerator program in less than 5 months.

Shopseen

Shopseen

We simplify running a retail business and help merchants reach more customers. Shopseen now helps 750+ worldwide grow their businesses.

AngelList: https://angel.co/shopseen
Founders: Adeel Ahmad, Aakash Desai
From: San Francisco, USA
Fun Fact: Shopseen was started when Adeel tried to grow and manage his vintage retail shop, Vacation (featured in 7×7), in the Tenderloin of San Francisco.

sidelines

Sidelines

We crowdsource and deliver awesome comments to improve the quality and engagement potential of discussion/comment sections on sports websites. Our vision is to power every sports discussion on the Web and on Mobile by becoming the social arm of all major sports content publishers.

AngelList: https://angel.co/sidelines
Founders: Marios Assiotis, Arka Ray
From: San Francisco, USA
Fun Fact: The founders were partly responsible for causing an earthquake during the Seahawks-Saints Playoff game in 2011.

SilverPush

Silverpush

A platform for mobile advertising that converts. It helps advertisers retarget the existing users over mobile and social ad ecosystems, and get new users based on profiles of existing users.

AngelList: https://angel.co/silverpush
Founders: Hitesh Chawla and Mudit Seth
From: New Delhi, India
Fun Fact: Hitesh learned coding just to build this product.

uBiome

uBiome

The first direct-to-consumer microbiome sequencing company. Learn about your bacteria!

AngelList: https://angel.co/ubiome
Founders: Jessica Richman, Dr. Zachary Apte
From: San Francisco, CA USA
Fun Fact: There are 10 times as many bacterial cells as human cells in your body. You are 90% bacteria!

ViralGains

ViralGains

Viral Marketing at scale through technology that measures how consumers watch, share, and talk about video content. The ViralGains Viral Marketing Platform is the first of its kind that maximizes views, shares, and conversations in real time for YouTube content.

AngelList: http://angel.co/viralgains
Founders: Jay Singh, Dan Levin, Kate Willett, Doron Gan
From: Boston, MA, USA
Fun Fact: While teenagers, our founders assisted viral marketing campaigns for brands like Sears, Coca-Cola, and Proctor & Gamble.

WePlann

WePlann

WePlann is an easy way to discover and book unique vacation experiences.

AngelList: https://angel.co/weplann
Founders: Oliver Camargo, Jarrett Vamvakidis
From: Dallas/Fort Worth, TX
Fun Fact: $1.2M Revenues, 7 team members, 6 nationalities, 5 languages, and customers in 30+ countries

wishplz

WishPlz

A web and mobile shopping app that lets you bookmark any product, from any retailer website, and get alerted when the price drops.

AngelList: https://angel.co/wishplz
Founders: Dan Cheung, Eric Goldberg, George Revutsky
From: San Francisco, USA

ZBoard

ZBoard

We design, build, and sell the ZBoard Weight-Sensing Electric Skateboard. Lean forward to go. Lean back to stop. ZBoards are made in California and shipped worldwide.

AngelList: https://angel.co/zboard
Founders: Ben Forman and Geoff Larson
From: Hermosa Beach, CA
Fun Fact: The first time we wired up the ZBoard it worked perfectly…in reverse.

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The Power of Trigger Emails

This post is part of the ongoing Distribution  series. Every week the 500 Distribution Team highlights actionable resources for marketing your startup. Get even more tips by following @500Distribution on Twitter and subscribing to our email newsletter.

I hate getting emails from companies.

With all the different ways for people to contact me nowadays, email is still one of the easiest and most personal, second only to my phone.

But I hate receiving emails from companies. To this very day, I am unrelenting when it comes to unsubscribing from any automated emails I receive. I’ll even mark an email as spam if it doesn’t include an easily visible one-click unsubscribe link.

At the same time, I’m pushing companies I work with to send more emails. Why? Because they work so damn well.

A little more than a year ago I was arguing with my ex cofounder about not wanting to send our users any more emails. I couldn’t imagine anybody wanting to receive email from us, let alone gaining significant value from these emails. I was dead wrong. My previous cofounder started showing me replies and messages from our customers telling us how much they love their daily digest emails, weekly reports, and more. The notion of people gaining value and even enjoying receiving email was further validated by numerous 500 Startups mentors.

I realized that people outside of the tech industry receive a fraction of the emails we receive. The reason for this is clear – they sign up for a fraction of the web services we sign up for.

Emails work. They increase engagement, remind users to come back, push users further down funnels, and increase conversion rates.

One of the easiest (and free) ways to convert more users into customers is by using funnel abandonment emails (aka trigger emails). The goal was simple – increase funnel conversion rate.

The Implementation

Let’s look at a very simple example funnel – someone browses a site, clicks on a product description page, clicks “buy now,” fills out their credit card info, fills out their billing info, and then completes the purchase.

The goal of our trigger email in this example is to incentivize people who abandon the checkout funnel to come back and finish their purchase. A great way to do this is to incentivize users who have already expressed interest in a specific product with a minor discount.

But there’s a question we need to answer before we start implementing our trigger email: at what point are we asking for our user’s email addresses? If we ask for emails early in the funnel, our conversion rate early in the funnel will decrease. If we wait until the end of the funnel to ask for emails, we’ll only be sending trigger emails to the people who make it that far down the funnel.

My preference is to get email addresses as early as possible in the funnel. My reasons behind this are as follows:

  1. Asking for emails early might decrease our conversion rate initially but the ability to send trigger emails and remarket to people who provide their emails far outweighs the drop in conversion rate.

  2. If someone is intent on purchasing our product, an email address field won’t be an inhibitor.

So in our example, let’s insert a required email field after someone clicks “buy now.”

The next thing we need to do is make sure we are storing all of the necessary events in our analytics/email platform. I won’t go into too much detail about how exactly analytics/email should be implemented but we need to have a distinct event for each step of the funnel and a property for the time each step was completed.

Next, we need to set up our logic in our analytics or email platform that will send emails to our funnel abandoners. We can start with a general email to everyone who clicks “buy now” and enters their email address but doesn’t complete a purchase with a discount if they complete their purchase in the next 24 hours. This type of time-sensitive discount works extremely well.

Our email content can be dead simple, just text even. Here’s an example:

===============================

Hey {first_name},

We noticed you were interested in {product_name} but weren’t quite ready to purchase. We wanted to let you know that we have a special offer for you that if you buy {product_name} in the next 24 hours, we’ll give you 5% off!

Just {click here} and use promo code “5percent”.

Enjoy!

===============================

The {click here} button can link to the checkout page of that specific product. And that’s it! You will be amazed at how many people will convert with a little nudging and a slight discount.

One thing to be weary of is training your customers to wait for the discount because they know it’s coming. This doesn’t happen often but just something to keep an eye out for it.

This example works extremely well for e-commerce products but what about services? If we slightly alter our email campaign, this works just as well for service products!

For example, let’s say we have a SaaS product that has a 8 step sign up process. If we track where each user drops off per step, we can send them very customized emails asking them to finish the next step in the funnel with more information how to do it and an offer to walk them through it over the phone.

Another option is reactivation emails.

If you have a subscription business, each month people might unsubscribe for many reasons. Your goal should be to understand why they unsubscribed and to attempt to get them to subscribe once again. You can use trigger emails to accomplish this.

For example, you can send users a trigger email a few days after they unsubscribe asking why they unsubscribed. From this information you can improve your product or try to get that customer to subscribe again under the right circumstances. If a customer unsubscribed because they thought your product was too expensive, just offering them a 5% discount for a few months (if it makes business-sense) might be enough for them to continue being a customer.

Conclusion

Email works very well, specifically highly tailored, event-driven email. Keep in mind who your customer is when determining how many emails to send and you are sure to see an increase in activation or engagement.

Trigger emails are especially potent because they take information you know about your customers to build meaningful emails and offers to your clients, potential clients, and lost clients.

What’s Next?

If you enjoyed this post, first check out these additional resources for how you can up your game from the 500 Distribution team:

Then, sign up to get a daily bite-sized distro hack (and one awesome GIF) delivered to your inbox:

>> Subscribe to Distrosnack here <<

 

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Geeks On a Plane Lands in Colombia and Speaks with .CO Founder Juan Diego Calle

Often referred to as the “United Nations of Startups,” GeeksOnaPlane bridges the gap between Silicon Valley & thousands of developers, investors, and executives in emerging technology markets. During our recent Latin America tour, we got an insider’s view of the exploding opportunities in Mexico, Colombia, and Brazil by visiting high-growth startups, attending conferences & networking events, and meeting with government officials & industry leaders.

Below is an overview of the key players in the region, as well as an interview from Juan Diego Calle. A Colombian & U.S. entrepreneur, Juan is the CEO & Founder of .CO (as in, 500.co) and has a very experienced POV on innovation and investing in Colombia.

MEET COLOMBIA’S KEY PLAYERS…

An initiative launched by Colombia’s Ministry of Information Technologies and Communications (MinTIC), Apps.co promotes innovation through digital entrepreneurship (in particular, mobile application, software and content development). Special thanks to APPS.CO, our Country Host in Colombia, who made the tour possible. They also hooked us in to key players in Colombia including these 4 hot companies to know….

hub

HubBOG is the first and largest campus for startups in Latin America. HubBOG offers acceleration, tech classes, coworking space, and investment for startups. In addition to organizing meetups & networking events, HubBOG also has 20+ courses and workshops focused on management and technology.

voicebunny

Voice Bunny delivers human, professional voice overs on-demand from a crowd of thousands of voice actors working from home studios. They’ve drastically simplified, and made affordable, the process of getting a professionally voiced recording. They are used for everything from video games to radio & TV commercials, etc.

laspartes

Laspartes an online platform that helps car owners in Colombia service and fix their cars in a simple way. Laspartes.com has created a network of +100 certified car workshops and autopart makers that guarantees adequate service and autoparts.

tappssi

Tappsi the Uber of Colombia, Tappsi makes safe and reliable taxis readily available.

brainzgames

Brainz is backed by $2.1M in VC funding and is one of the most recognized studios in Latin America for creating next-gen entertainment company focused on making high quality games featuring unique story worlds with rich narratives and characters.

juancalle

Our Favorite .CO-lombian – Colombian Entrepreneurship with Juan Diego Calle

Juan Diego Calle, CEO & Founder of .CO, is a true Colombian success story. In less than 3 years, .CO has established itself worldwide as the web address for innovators and entrepreneurs worldwide, with more than 1.5 million domains registered in 200 plus countries. And they know how to throw a party like no one else. Here’s what he has to say on the startup ecosystem in Colombia:

What is the state of Colombia’s startup ecosystem?

Juan: The Colombian startup ecosystem is developing quickly, aided in great part by both public and private initiatives that focus on innovation and digital entrepreneurship. In the past couple of years there has been a surge of accelerators, incubators, co-working spaces, and events promoting and fostering entrepreneurship. Through these programs, Colombia has really rebranded itself as a hub for tech innovation—just this year, Medellin was named Startup City of the Year by the Wall Street Journal. In contrast to that of many developing startup ecosystems, in Colombia, the education system is very good and has bred a talented pool of young designers, programmers, and engineers. As we all know, talent can be difficult to find and is a key contributor to the growth of any business, especially one at a very early stage.

How is the government helping (or not helping) foster the startup ecosystem?

Juan: Colombia’s Ministry of ICT (MinTIC) under the stewardship of Minister Diego Molano has taken a leading role in fueling the growth of the startup ecosystem and promoting innovation and digital impact entrepreneurship through notable programs such as ViveDigital and sister programs such as Apps.co, among others.   These programs are designed to improve infrastructure and digital literacy in the country, and to provide entrepreneurs with guidance and mentorship –some programs even provide grants to help startups get off the ground.

What are the challenges that startups and investors face in Colombia?

Juan: While Colombia is definitely on the right track, the ecosystem is still young, especially when compared to the more mature ecosystems of its peers, namely Chile and Brazil. As a result, investors are likely to look first at these neighboring economies before considering Colombia. From the investor standpoint, the startups in Colombia are still new and haven’t achieved the level of traction that those in other markets have.

Why should investors be interested in Colombia?

Juan: A number of reasons:  First, Colombia is privileged by its geographic location relative to other LATAM markets.  It’s a central hub for any tech company doing business throughout the region.  Second, Colombia’s institutions are some of the strongest in the region and respect for contract law is solid.  Third, we have a well-educated, talented population.

We look forward to seeing more innovation from Colombia, and we hope to continue visiting the region with #GOAP.

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Startup Metrics: Don’t Let Your SAC Get WACC

This post is part of the ongoing Distribution Tuesday series. Every week the 500 Distribution Team highlights actionable resources for marketing your startup. Get even more tips by following @500Distribution on Twitter and subscribing to our email newsletter.

“If you can’t measure it, you can’t manage it.”

 

Generally misattributed to Peter Drucker, this concept forms the foundation of the data-driven culture that just about every company lays claim to these days. The thing is, not all data are equal, and being data-driven isn’t enough.

 

It’s been almost four years since Eric Ries called BS on vanity metrics, yet they still persist in many companies’ dashboards. So what’s the big deal? Running your company based on bad metrics will likely get you in more trouble than having no metrics at all.

 

Let’s say that you and your team are committed to focusing only on actionable metrics. That leaves you deciding between CAC, ARPU, MRR, LTV and other fun acronyms. So which metrics should comprise your KPIs? Using the concept of the one metric that matters (OMTM), described nicely by the authors of Lean Analytics, the answer depends on your business model and what stage your company is in. Put another way, as your business evolves over time, the metric(s) most closely tied to the success of that business does/do also.

 

Early-stage start-ups in search of a simpler metrics framework would do well to (re)read Marc Andreessen’s seminal blog post on product/market (P/M) fit. Spoiler alert: it’s the only thing that matters. As such, trying to measure lifetime value (LTV) or focusing on customer acquisition cost (CAC) at this stage is probably not the best use of your time. Instead, you—and by that I mean everyone in your organization—should obsess over P/M fit: do you have a product or service that customers actually want to use?

 

How do you determine whether you’ve achieved P/M fit? In his post, Andreessen states, “…you can always feel product/market fit when it’s happening.” Making a more objective assessment can be non-trivial, though I’m partial to the survey approach Sean Ellis devised to assess whether customers find real value in a product or service. You can think of P/M fit in the context of engagement: are your customers using your product on a regular, ongoing basis? Measuring engagement is therefore another way to evaluate your P/M fit (using a metric that’s most relevant to you business).

 

Let’s go beyond P/M fit and look at some other metrics that may be key to your business (again, depending on your model and stage) and how they’re calculated:

 

    • Churn rate (r)

        • Some choose to focus on retention rate, which is calculated as 1 – r

 

    • Conversion rate (CR)

 

    • Customer acquisition cost (CAC), or subscriber acquisition cost (SAC)

 

    • Average revenue per user (ARPU)

        • SaaS businesses tend to focus instead on monthly recurring revenue (MRR)

 

    • Lifetime value (LTV), sometimes referred to as lifetime customer value (LCV)

 

    • Average customer lifetime (ACL)

 

Churn Rate

 

Churn is most relevant to subscription businesses and while calculating it seems trivial, the reality is a bit more complex. As it is a rate, churn is considered over a period of time, usually monthly or annually. As the analytical folks at Shopify explain, one of the simplest way to represent churn rate is:

 

churn rate formula 1

 

However, this formula doesn’t yield comparable results for periods of different length (monthly vs. quarterly vs. annually). Though slightly more complex, the following formula produces current, timely, and comparable churn rates (in this case, for a period of 30 days).

 

churn rate formula

 

Conversion Rate

 

Any call to action involves a funnel of behavior that the user is expected to pass through in order to complete the CTA. Conversion rate lets you quantify the effectiveness of your funnel and is simply calculated by dividing the number of users who converted by the number of users you started with at the top of the funnel e.g., number of landing page visitors.

 

Customer Acquisition Cost

 

To calculate CAC, divide your sales and marketing expenses by the number of acquired users. Sounds simple, but there are some nuances to consider. First, to get a true sense of the full CAC your the numerator should include variable as well as fixed costs, salaries and overhead expenses, for example. Second, if your business model features a free trial, remember that an acquired user is equivalent to a paying user i.e., you have to factor in dropoff from free trial users who don’t convert to paying. As your company get far enough along where you can also confidently calculate LTV (described below), you’ll want to consider the ratio of CAC to LTV, which VCs and others suggest should be in the 25% – 35% range.

 

Average Revenue Per User

 

ARPU is a relatively straight-forward metric that is calculated by dividing total revenue in a period by the number of purchasing customers during that time. SaaS or subscription businesses tend to prefer looking at monthly recurring revenue (MRR), which requires separating revenue generated by recurring customers from that generated by new customers, and serves as a complement of sorts to churn.

 

Lifetime Value

 

LTV is a semi-controversial metric that has prominent critics and proponents. Keep in mind that early-stage start-ups e.g., those having less than 12 months of customer data, will be challenged to calculate an accurate LTV. As Bill Gurley points out, it’s a tool, not a strategy. LTV can serve as a gauge for how effectively you’re acquiring and monetizing customers, but it’s not the end-all metric to grow your business by. The LTV formula Gurley speaks to is written as:

 

LTV formula

 

Where Costs represents the annual costs required to support a customer during the given period, SAC is equivalent to CAC, and WACC, weighted average cost of capital, factors the time value of money over the course of the users lifetime i.e., a dollar earned today is worth more than one earned a week from now.

 

Start-ups are probably best off using a simpler version of this formula where LTV = ARPU – CAC. Arguably less rigorous, this formula can simplify LTV-based decision making and also reflects the reality that start-ups generally don’t/can’t access capital markets to deploy capital.

 

Average Customer Lifetime

 

In order to determine LTV, one must know a user’s (or a cohort’s) average lifetime. For example, a 5% monthly churn rate corresponds to a 20 months ACL.

 

A Final Note

Defining your business’ key metrics is non-trivial, as is the challenge of calculating them correctly. No two populations of users are the same, and understanding true customer behavior requires segmentation and cohort analyses in order to avoid the pitfalls of using averages.

 

What’s Next?

If you enjoyed this post, first check out these additional resources for how you can up your game from the 500 Distribution team:

 

 

 

Then, sign up to get a daily bite-sized distro hack (and one awesome GIF) delivered to your inbox:

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Interview: Fadi Ghandour on Middle-Eastern Startups and Bootstrapping

The Founder of Aramex and one of the most active early-stage investors in the Middle East, Fadi Ghandour, has been hugely instrumental in developing the region’s entrepreneurial ecosystem. His experiences, opinions on Middle East startups, and thoughts for the future are shared in this interview. We’re thrilled to include Fadi as a Geeks on a Plane (#GOAP) Ambassador for our Middle East trip taking place this Nov 4th – 17th, making stops in Istanbul, Amman, Dubai, & Abu Dhabi.

For more information on our Geeks on a Plane trip or to join, email sheila@500.co.

Fadi Blog Post pic

You’ve described yourself as an ‘accidental entrepreneur’ – can you share with us how you became an entrepreneur of the first ever Arab-based company to be listed on Nasdaq?

Accidental in the sense that I did not plan for it and never thought that I was going to be one. But like all entrepreneurs, you get an idea or share one with a friend, and the minute you decide that you want to act on that idea or do something about it, boom, you are an adventurer, an explorer, an entrepreneur. So my friend Bill Kingson and I talked about the idea of starting a “courier company in the Middle East” and we simply decided to build it. Not knowing how difficult and how rough, and what it was going to take to make it happen. We simply said let’s give it a shot.

What was the biggest challenge for Aramex in the early days? How did you overcome it?

We were able to raise money from family and friends plus we got two other funders, (who stayed on for no more than a year or a bit more, then decided this was not going to work). There were no VCs then and banks were not interested in giving you loans unless you had 100% collateral (which we did manage to do with a personal guarantee). So yes, like everyone else access to capital was an issue, just like it is today only 100 times more difficult.

But the biggest challenge was attracting talent to work in a startup, and maneuvering the Arab bureaucracy of establishing a company that was going to compete with the post office. It was hell, full of regulatory hurdles, monopolies, and laws that discouraged foreign investors and ownerships. Most days of the year I was on the road from city to city in the region finding local partners who would believe that I have a viable business for them to partner with me and get us a local set up. Political instability in our region is an issue we permanently face, starting with Beirut right after the Israeli invasion of 1982, we had to learn and operate in wars and uncertainty. But we never left. Overcoming all the challenges was simply a product of patience, perseverance and hard work, knocking on enough doors, until one opens. It involved small steps, tiny two people operations in several cities, and building a skeleton of a network.

Our biggest breakthrough came when we found our niche which we leveraged for the first ten years of our life as a business. Airborne express (later acquired by DHL) decided that they do not mind us being their partner in the middle east to deliver their parcels on their behalf (since they were not interested to be in the region with their own operation) from Airborne we eventually focused on selling to all the express courier companies who needed a network in the region and did not want to do it themselves (we called it Whole sale) we practically got every company in the business to give us a try, from New York to London, to Singapore, we became the courier company of courier companies delivering the middle east. The big prize came after years of trying, in 1987 FedEx finally believed in us and gave us all their business to the region (from Istanbul to Karachi and anything in between). We financed the business from these clients, but most importantly, we learned how the industry operates, we learned the importance of technology and systems (and later developing our own track and trace technology in house which is used today used by our network of international partners), customer care, operations standards, and more. They taught us because they wanted us to deliver quality for their clients and we sucked and absorbed every piece of knowledge we could get from them. We are today a product of the greatest school of them all, our clients.

What challenges do Middle Eastern startups face today? How are these challenges different from when you were a startup?

Startups face similar problems that we faced back in ‘82 but some on a smaller or different scale. Access to capital even though a much smaller issue today but still is very much a challenge, opening Arab markets for businesses to scale is still a challenge, finding talent is an ever continuous challenge especially with our education systems are becoming more and more irrelevant, legislation and ease of doing business is smoother but still a challenge and not yet incentivized.

What do you think are the 3 key changes that need to take place in the region to create a more vibrant and viable entrepreneurial ecosystem?

1. Open markets and ease of setting up businesses on a regional basis.

2. Education system needs to be fixed to focus on 21st century skills rather than prehistoric rote learning systems.

3. Access to capital. VC money, angel networks and very importantly banks availing debt to SMEs. Where only 8% of banks loan portfolios are for Small and Medium size companies; that says a lot about where our banking system is. If they are risk averse, then governments should step in provide loan guarantees to help startups and small businesses.

What are the main things you look for in a potential investment?

1. The entrepreneur and the team. Key word: team

2. His/her ability to get clients

3. How does he/she intend to scale their business outside their “home market”

There has been unprecedented growth of use of social media and e-commerce in the Middle East in recent years. In your opinion, what are the largest trends you see taking hold in the region?

1. Arabic content and localizing global businesses in the region. What I call copy, paste and then innovate.

2. E-commerce is happening big time; it is the biggest new happening business in the region. The GCC e-commerce industry is estimated to grow to US $15bn by 2015, up from $3.5bn in 2010.

3. Smart phone and mobile services/applications are going to be the biggest and fastest businesses in the region. Mobile phone penetration is already at over 100% here.

Knowing what you know now, what advice would you give to bootstrapped entrepreneurs trying to get their business off the ground?

Bootstrap is the key word here. Preserve your cash by spending where it matters to build the business. Build your team, focus on client acquisition to prove your model. Find a mentor and engage her/him all the time, and don’t fall for the hype certainly not yours. And be flexible so that you pivot and change and adapt to what you discover as you are building the business.

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4 MORE Marketing Channels You’re Not Using (But Should Be)

This post is part of the ongoing Distribution Tuesday series. Every week the 500 Distribution Team highlights actionable resources for marketing your startup. Get even more tips by following @500Distribution on Twitter and subscribing to our email newsletter.

A few weeks ago, I wrote about 4 marketing channels you might be neglecting at your startup. Here are a few more of places where you might find your customers:

 

Instagram video/Vine

 

You probably think Vine is for people who are trying way too hard to be funny. You’re right, but it’s also a great face for you teach people about your startup! A lot of big brands are doing fancy stuff on these channels, thanks to the fact that they have a TON of money. Check this out:

 

Since you probably don’t have the budget for a zero-gravity Vine flight, you’ll probably have to be a little more creative. Check out what we did at 500 HQ with 10 bucks worth of school supplies:

Short videos are GREAT for teaching someone how to do something. Does your startup focus on healthy eating or dieting? Do 6-second recipes on Vine, or give super quick dieting tips. Do you help startups with SEO? Give quick SEO hacks and tips! You don’t even need to put someone in front of the camera – just use a whiteboard or paper like we did in our distribution tip video.

There are some important differences between Vine and Instagram, so read up on them before you decide to use one or the other. Here’s a great guide from TechCrunch.

 

In general, Vine LOOKS better, but there are more people on Instagram. If you’re using one or the other for live events, I’d suggest going with Vine – when you tweet a link, a preview will show up on Twitter. With Instagram, someone will have to click through to watch the video (not good).

 

Also, be sure to research what hashtags your audience is using. For us, tags like #siliconvalley, #tech, #startups, and #design get us more followers and likes.

 

People LOVE tips and hacks, so take advantage of that with short-form online video!

 

SlideShare

 

PowerPoint presentations are usually the last thing that comes to mind when you think about marketing. But they really are a great – and unexpected – way to make an idea from your company go viral. Don’t believe me? Netflix’s culture deck has more than 5 MILLION views on slideshare.

Do you want to position someone at your company as a thought leader? Get them to put together a deck about the core problem your startup is solving with interesting stats and insights about the market. Have tips or lessons to share about running a startup? Make it into a deck and share it! If you ever present at a conference, take 5 seconds to upload your deck to SlideShare and tweet it out. Don’t be ashamed to pimp out your content on every channel imaginable.

One fantastic thing about this channel – SlideShare links are viewable right on Twitter as an embedded presentation.

 

slideshare

This is a feature we always use during demo days and conferences, and lots of the decks on our SlideShare channel have upwards of 10K views (one even has 100K).

Reddit

 

Redditors can be a tough crowd. They can smell marketing from a mile away, and many people learn the hard way that you can’t just spam subreddits with your content without really pissing people off.

 

So, what do you do? Pay for ads. They’re really cheap, and I’ve heard success stories from more than a few startups about getting new users through Reddit ad units. They sit right at the top of the page, and people can upvote and downvote them like other content on the site.

 

Screen Shot 2013-10-08 at 11.12.38 AM

 

Test out lots of different subreddits related to your startup and see what sticks. I heard from one startup that r/atheism was the best performing channel for one of their ads, and their startup has absolutely nothing to do with philosophy or religion.

 

Just exercise more restraint here than you would on other channels; Reddit users aren’t fun to deal with when they’re angry. Don’t make a sales pitch – teach them something new or show them why your product is cool.

 

Google Plus

 

Yeah, Google Plus is the lamest dude at the party that no one wants to talk to. That’s OK. While you’ll never go viral here, it’s a great place to build links and help make your content easier to find on the web.

 

There are different opinions about how this channel affects SEO, but what isn’t up for debate is that link-building anywhere helps your ranking in search results. Google Plus is a great place to do that.

 

Google Plus is also a great way to make your blog’s content look much better in search results. By verifying your email with your G+ profile, your photo will show up along with a bio whenever someone finds something you’ve created. Like this:

 

googleauthorship

 

It’s a little tricky to set up, but KISSmetrics has a nifty guide on how to do it.

 

As with all of your marketing, focus on what works and TEST TEST TEST. Are there any marketing channels I missed that you think startups are stupid for not using? Tell me about them below!

Next week, I’ll have even more marketing tips for you, so stay tuned!

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