How Do You Know If a Startup Is Getting Traction?

Investors look at a lot of startups before laying a bet. But how do we know if the company’s product is catching on, or has failed to find traction? And as a founder, how do you know if you’re headed in the right direction or…nowhere?

In a recent episode of the superb podcast This Week in Startups, investor Jason Calacanis and guests Craig Zingerline and Allen Chen broke down a key metric: customer retention.

Do you have product-market fit? There’s no one better to answer that question than the people who use your product every day. Here are the customer retention numbers to look for, over a 6 month period, for different types of startups:

  • Consumer social (think Instagram): 25% is good, 45% is great
  • Consumer transactional (think Uber): 30% is good, 50% is great
  • Consumer SaaS (think Netflix): 40% is good, 70% is great
  • Small and medium business (SMB) and midmarket SaaS (think Freshbooks): 60% is good, 80% is great
  • Enterprise (big company) SaaS (think Oracle): 70% is good, 90% is great

As you can see, business-to-business products should be a lot stickier than business-to-consumer ones. Consumers are fickle and their investment is minimal. At the other end of the spectrum, major corporations don’t adopt new software lightly. It’s a process that sometimes takes years and costs a fortune. So they don’t switch often, either.

The panel emphasized that you don’t have to get to these numbers right away, but that they should be a goal. Good luck!

For more on startups, check out these posts:

If you found this post interesting, please share it on Twitter/Reddit/Facebook/etc. using the buttons below. This helps more people find the blog! And please leave a comment at the bottom of the page letting me know what you think and what other information you’re interested in!

Check out the Stuff I Use page for some great deals on products and services I use to improve my health and productivity. They just might help you too!

Photo: “Jason Calacanis” by jdlasica is licensed under CC BY 2.0

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s