Hi,
Welcome (back) to MWAVC, a newsletter about finance, investing, venture capital and all that jazz. My name is Ato (more about me here and here) and I try to write every single day, inspired by Seth Godin (Seth’s Blog) and Fred Wilson (AVC). I haven’t done the best job over the last few months (read: years 😬), but I’m working to be better and more consistent, even as I manage this crazy schedule.
I’ve been investing in some way shape or form for the last 12+ years and now work with one of the pre-eminent VC firms in Africa - Microtraction, and the family office that acts as the GP - Pave Investments. Read more on us here and here. Most of these writing are stuff I find interesting that I’d like to share and hear your thoughts on. This is also an outlet for my thoughts, lessons, asks etc. and I think you’d find most of it valuable if you’re remotely interested in learning about venture capital.
I’d be developing the content more, including things I think will be helpful and would appreciate any feedback on what’s working vs. not, and what could be helpful for you over the long term. If you’d like to sign up, you can do so here. Or just read on.
Following yesterday’s post on investor updates, which I know a lot of readers found helpful, I decided to bring back this oldie from the archives, one one of the most important metrics you should be including in your investor updates. Haven’t heard of the NSM yet or don’t know how to figure out what it is? Read on.
The No. 1 Metric You Need In Your Investor Update 📈
Big sense from @alexgarcia_atx on North Star Metrics. Check out thread below.
What do Airbnb, Facebook, Spotify, Hubspot, and Slack all have in common? They all have a North Star Metric that influences their long-term growth. This means the one metric that all business units focus on.
Here's the breakdown
So, what’s the North Star Metric?
The NSM is the core metric of your business's growth.
It's one metric, but it’s two-fold:
The value you provide to a customer
The direction of the company’s long term growth
If your NSM grows, your company grows.
But, your NSM isn’t revenue.
Ward van Gasteren says, “Revenue is the price your customer pays. North Star Metric is the value your customer gets in return for that price.”
Just because the revenue is there doesn’t mean the value is there.
In theory, by growing your NSM, customers:
Will receive a ton of value
Remain customers,
Repeat purchases
Refer friends
But, how does it help your company?
Focus - Every team has different goals. Different metrics they focus on to determine growth. But with an NSM, all of these metrics and goals collectively come together to increase the NSM.
Transparency - Everyone understands what is considered success and growth. The goal is obvious and being on the right track is transparent.
Customer-Centric - Sure, it’s a hot buzzword. But in this context, it’s true. Your NSM is a result of the value provided to a customer.
Collectively, your entire team knows the ultimate goal, the state of that goal, and the value expectation for customers.
Let’s break down examples.
Airbnb
Airbnb’s North Star Metric is “Number of nights booked.”
The number of nights booked correlates with the value a customer receives from a good experience using Airbnb.
On the other end, it also correlates with the value a host receives from getting a space booked
Zoom
Zoom’s North Star Metric is the number of “Weekly Hosted Meetings.”
The more meetings that happen over time -- the more value customers receive from using the communication tool.
Slack
No surprise, Slack’s North Star Metric is the “Messages Sent Within The Organization.”
Slack’s value comes from reducing emails and improving in-office/WFH collab.
Depending on the amount a company communicates via Slack-- they can track the effectiveness of its NSM.
Uber
Uber’s NSM is “Riders Per Week.”
Uber’s a two-sided platform.
Both riders and drivers receive value from their NSM.
The driver gets paid.
The rider gets to their destination.
Hubspot
During a podcast, @searchbrat said Hubspot’s North Star Metric is "the number of weekly active teams.”
Hubspot’s NSM focuses on the team level and not personal.
This year they hit a milestone of 100k companies using Hubspot.
Huge for their NSM.
For marketers, understanding and determining the NSM is essential.
This lays the groundwork for the value we provide through our marketing efforts.
Sure, we track various metrics.
But, your NSM ties together all metrics for the one that matters -- consumer value.
I hope this is helpful to some founders out there. I’m happy to speak more on this with anyone looking to build a company and wants feedback. Thinking of bringing my Office Hours back for founders to book 30 minutes to tell me about themselves, their businesses and ask for feedback, but haven’t made a full decision yet. Should I? 😬
Currently Reading 🎒
Got a couple of open tabs with articles I need to read. Join me on that journey - India Stack, Excel Never Dies, Platforms and Ecosystems, Union Square Ventures: The Thinkers, How to do Great Work.
Currently Listening 🎧
Found out about this video just yesterday: David Sacks on Unicorn Ideas: What Elements Are Needed to Create a Billion Dollar Success? Like Offiong said, I’m not sure why this is not viral yet.
If you are a (or know any) pre-seed, seed or Series A investor, looking to co-invest in African founders, please reach out to me and let’s do some work together.
Remember: Remember: “Until the lion learns to write, every story will glorify the hunter.”
Please share and subscribe as well.
Till tomorrow,
AB