Andrew Chen's 10 Metrics for Product Market Fit
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Andrew Chen (a VC at A16Z and former growth lead of Uber) says that simply getting a bunch of random users from launching on social media often leads to just getting a bunch of lookey-lous or copy-cats rather than actual customers.
These crappy signups often evaporate quickly and leave your metrics down. HOWEVER if you experience these metrics happens perhaps you truly have product market fit.
10 magic metrics indicating a consumer tech startup probably has product/market fit:
1) cohort retention curves that flatten (stickiness)
2) actives/reg > 25% (validates TAM)
3) power user curve showing a smile -- with a big concentration of engaged users (you grow out from this strong core)
3) viral factor >0.5 (enough to amplify other channels)
4) dau/mau > 50% (it's part of a daily habit)
5) market-by-market (or logo-by-logo, if SaaS) comparison where denser/older networks have higher engagement over time (network effects)
6) D1/D7/D30 that exceeds 60/30/15 (daily frequency)
7) revenue or activity expansion on a per user basis over time -- indicates deeper engagement / habit formation
8) >60% organic acquisition with real scale (better to have zero CAC)
9) For subscription, >65% annual retention (paying users are sticking)
10) >4x annual growth rate across topline metrics
Image Description
The image displays a list of ten metrics that indicate product/market fit for a consumer tech startup, as outlined by Andrew Chen.
Positive Aspects
This image effectively breaks down complex metrics into a clear and concise list, making it easy for readers to understand what benchmarks they should be aiming for in assessing product/market fit. The layout is straightforward, which helps in quickly grasping the essential points.
Key Takeaways
- Cohort Retention: Flattening retention curves indicate stickiness and user satisfaction.
- Active Users: Having more than 25% active users validates the total addressable market.
- Engaged Core: A 'smile' in the power user curve signifies a strong concentration of engaged users.
- Viral Growth: A viral factor greater than 0.5 is crucial to bolster other marketing channels.
- Daily Habit: A daily active user to monthly active user ratio over 50% shows the product is part of a daily routine.
Additional Insights
Andrew Chen highlights the importance of genuine, engaged users over vanity metrics. Focusing on quality over quantity, these metrics are not just numbers but indicators of deep-rooted engagement and growth potential. Remember, it's better to have a dedicated core of users than a fleeting spike of uninterested ones.