Aaron Bai | How To Track The Right Key Metrics (KPIs) | Startup Fundraising Part 4
This blog post was originally posted on Aaron Bai’s personal blog, Aaron Bai’s Soundcloud, and Aaron Bai’s YouTube.
This is part 4 of my 7 part blog + video + podcast series on how to raise a seed round. Note that the blog version is a lot more comprehensive than my short form videos.
Vanity Metrics vs Tangible Metrics
The biggest mistake founders, investors, partners, and even the team can make is tracking the right metrics.
I’m sure you already know that you need to set KPIs for your startup. These will serve as the north star you will want to hit. I’ve been recommend that having 2–3 KPIs is best, because it’ll make sure you understand all aspects of your business. Knowing this is not hard.
What is hard is setting a valuable KPI. There’s something called a vanity metric. It’s basically a number that you think looks good and it helps you feel good . . . but isn’t helping the business improve. Some examples of this includes website visitors, people reposting you, and in some cases — especially in low margin businesses like financial technology — even the number of customers you have.
What is a tangible metric and a true KPI will include CAC, profit generated, cash flow, unit economics, and more. You can see why unit economics is so important in my YouTube video on capital efficiency.
Negative effects of tracking vanity metrics
- Inaccurate feedback: Vanity metrics do not provide a true picture of a startup’s performance, making it difficult to gauge the effectiveness of business strategies and make informed decisions.
- Misleading growth projections: Relying solely on vanity metrics can lead to overestimating growth potential, which can result in misallocating resources, overhiring, or premature expansion.
- Delayed corrective actions: Vanity metrics can obscure underlying problems, leading to delayed responses to issues that could damage a startup’s long-term success.
- Missed opportunities: Focusing solely on vanity metrics can lead to a lack of attention to other critical areas, such as customer satisfaction or product quality, which can result in missed opportunities for growth and success.
Full series
- What you need to prepare (blog version) (podcast)
- How to turn your startup idea into a real business (blog) (podcast)
- How to build the best seed stage pitch deck (blog) (podcast)
- How to focus on the “right” key metrics (podcast)
- How to “wow” investors in your startup pitches
- Understanding the SAFE (financing documents)
- How to plan your financials around your seed round
Contact
I’d love to brainstorm your seed round with you!
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