SaaS Growth Handbook by Intercom

If your business isn’t growing, nothing else matters. It’s the perennial problem that faces businesses at all stages of their development. Late in 2017 we began to think about creating a podcast series devoted to the topic of growth. The thesis was simple: we wanted to interview the people who established the growth marketing function at some of the most successful software companies of our generation.
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
product customer growth active business acquisition time user people
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
product customer growth active business acquisition time user people
Authoritative, actionable strategies on how to grow 
your business.
Intercom builds a suite of messaging-first products 
that all modern internet businesses can use to 
accelerate growth across the customer lifecycle, from 
acquisition to engagement and support.
www.intercom.com
We also regularly share our thoughts on growth, 
marketing, sales, startups and the business of 
software. 
blog.intercom.com
Executive Editors: Adam Risman and Geoffrey Keating
Copy Editor: Karen Ostergren
Book Design: Judson Collier and Kelly Carpenter
Art Direction: Justin Pervorse
 2018 Intercom Inc.
ISBN:  978-0-9861392-9-1
We'll spare you the legal mumbo jumbo. But please don't share 
this book or rip off any content or imagery in it without giving us 
appropriate credit and a link.
Got questions? Drop us a note at team@intercom.com.
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When asked, I often tell people that the key to 
understanding growth is two things:
1. A fundamental understanding of your product and, 
specifically, what the key reasons people use it are. 
It's easy to be confused about what true value looks like 
and, as a byproduct, conflate causation and correlation: 
motivations and root causes versus byproducts and 
outcomes. Knowing your true product value allows you to 
design the experiments necessary so that you can properly 
isolate cause and effect. For example, at Facebook, one 
thing we were able to determine early on was a key link 
between the number of friends you had in a given time and 
your likelihood to churn. Knowing this allowed us to do a lot 
to get new users to their "aha" moment quickly. However, 
this required us knowing what the "aha" moment was 
with a fair amount of certainty in the first place.
2. A simple framework for doing your work. Too 
many people "complexify" things in an attempt to 
seem smart. Great things are simple. We had a very 
simple framework for growth  acquisition, activation, 
engagement, virality. Having this framework allowed 
us to prioritize our work, design experiments, build 
products and so on. It also allowed everyone to 
understand it and see how decisions were made in a 
logical, transparent way.
This book will help you and your business understand 
all of the above. It serves up a full package of ideas, 
suggestions and lessons from across the entire 
spectrum of growth, from acquisition to activation. 
Featuring contributions from people who've grown 
businesses from $0 to many billions in revenue, it 
outlines time-tested advice for anyone working in 
product, marketing and sales. 
Done right, a smart effort around growth puts 
companies into hyperdrive. Good luck on your journey.
Chamath Palihapitiya, Founder and CEO, 
Social Capital and Facebook's first VP of Growth
If your business isn't growing, nothing else matters. 
It's the perennial problem that faces businesses at all 
stages of their development. Late in 2017 we began 
to think about creating a podcast series devoted to 
the topic of growth. The thesis was simple: we wanted 
to interview the people who established the growth 
marketing function at some of the most successful 
software companies of our generation.
We got such a positive reaction from listeners that we 
began to think about how we could bring that content to 
an even bigger audience, the result of which is this book. 
As well as excerpts from our podcast, we interviewed 
our own team for their insights and have also included 
samples from some of the best writing on growth that 
helped and inspired Intercom in its early days. 
The result is a set of stories from people who have figured 
out some of the hardest growth problems so you don't 
have to. Perhaps you're acquiring customers but they're 
not sticking around. Perhaps you don't understand 
what metrics you should be tracking? Or maybe you've 
found product market fit but are struggling with getting 
pricing right. This book will help you answer all of these 
questions, and much, much more. 
The book is written as a collection of short sections, 
which are self-contained and address one of six topics 
we feel are essential to growth: acquisition, activation, 
retention, monetization, testing and optimization, and 
metrics and measurement. Read the sections in any 
order that works for you  this isn't a book you need to 
read front-to-back. 
In each section, you'll find links to learn more about 
each topic. We don't pretend to have all (or even most) 
of the answers, nor are all of our ideas applicable in all 
situations. We'd love for this book to be the first point in 
your journey to learn more about growth, not the last.  
Last but not least, we owe a huge debt to our 
contributors. Without their valuable insights and hard-
learned lessons, this book simply wouldn't be possible. 
Thank you for all your time and wisdom.
Geoffrey Keating & Adam Risman, Intercom
6
[01] Acquisition
In the early days of a startup, customers are likely 
discovering a product through word of mouth. At first, this 
looks like a founder emailing contact after contact, asking 
all of them to try the product and showing them how it can 
help accomplish their goals in a cheaper, faster or easier 
way. If the team is doing everything in their power to help 
those very first customers fall in love with the product, 
they'll tell their friends, and the cycle will begin anew.
Word of mouth is the most economical way to acquire 
new users, but over time, its returns are diminishing. This 
requires new thinking and new acquisition channels alike. 
Let's be clear  there are no silver bullets when it comes to 
where and how to acquire new customers; there is, however, 
a golden rule before getting started: Your software has 
product market fit. Marc Andreessen, who coined the phrase, 
defines that as "Being in a good market with a product that 
can satisfy that market." In practice, that looks like:
 Software solves a fundamental problem;
 People who have that problem are able to find that 
software;
 They're successfully activated and experience 
value through the software;
 They stick around, and would be genuinely sad to 
see this software cease to exist;
 They tell their friends about the software; and
 Product usage continues to grow up and to the left.
When your software shows this pattern, and you've got 
a system in place that can accomodate onboarding and 
activating all these fresh faces, then it's time to ask, 
where are my future users spending their time? What pain 
points are most important to them, and how can I (cost-
effectively) connect those dots back to my product?
[01] Acquisition
[01] Acquisition
7
[01] Acquisition
The new sales and  
marketing funnel
Des Traynor, 
Co-founder, Intercom
  Sales and marketing funnels are a very 
old concept but they're finally changing in a 
substantial way. So many businesses, both B2C 
and B2B, are shifting to subscription models. This 
changes the nature of what it means to "close" a 
customer. Landing a new deal in this subscription 
economy might mean $500 per month, not quite 
the $20,000 upfront deal you once got. As a 
result it's no longer enough to just get a customer 
to convert. This new model only works when 
retention is strong enough such that the customer 
is still paying $500 or more in month 40 and your 
customer lifetime value is realized. In this new era, 
acquisition is just not as important as retention. 
Plan accordingly. 
8
[01] Acquisition
 The nail in the coffin is that the 
prevalence of competition and the rapidity in 
producing product has made acquisition so much 
harder that the effectiveness of focusing on that 
lever solely has diminished considerably. To put 
it another way, because it's continuing to become 
easier to switch from product to product and the 
increase of ad, content and social noise has gone 
up, it's not only harder to acquire a customer, it's 
also harder to keep them. 
Yet, just focusing on acquisition means your bucket 
becomes so leaky, all you can do is add more 
customers to the top of the funnel in the hopes that 
you'll make up for all those you're losing. 
To quantify this a bit more, we built what's called 
a simultaneous equations model to normalize and 
compare the impact of doing one unit of effort on 
acquisition, retention and monetization and seeing 
what that unit of efforts impact on that pillar. Put 
another way (although it's a bit oversimplifying), 
Acquisition is  
diminishing in 
revenue  
effectiveness
Patrick Campbell, 
CEO, ProfitWell
we basically looked at if you spent an hour of time on 
each of the three pillars, what would be the relative 
impact on that hour of time to your bottom line. 
What we found is that if you improve your 
acquisition by 1% (by increasing your lead volume 
or conversion rate), you'll see just over a 3% 
boost in your bottom line. This contrasts starkly 
with the relative improvements in monetization 
(increasing your ARPU by 1%) and retention 
(lowering your gross churn by 1%) that see boost 
in roughly 13% and 7% respectively.
The individual numbers aren't as important as the 
relationship that shows improving your retention 
or monetization has 2-4x the impact as improving 
your acquisition. Yet, all we want to focus on is 
acquisition, and to make matters worse, data 
indicates that this trend is getting worse over time.
Excerpt from "Data shows our addiction to acquisition based growth is getting worse".
9
[01] Acquisition
[01] Acquisition
Short-term hacks 
vs. long-term 
strategy
Steli Efti, 
CEO, Close.io 
  Most new businesses use short-term 
 sales tactics to get their first 10 customers. That's 
great at the start but terrible for sustainable 
growth. Transition to more long-term plans as 
you grow.
A short-term plan is one that you won't continue 
doing in the future.
 For example:
 
Handling every support call
 
Visiting every new customer in person
 
Personally following up with every new user
 
Tapping into your personal and profes-
sional network to get customers
A long-term plan is one that scales with your 
business. For example:
 
Cold-calling and cold-emailing
 
Creating a drip email campaign
 
Search engine optimization
 
Building a scalable lead generation process
010 customers: 90% short-term 
tactics | 10% long-term tactics
10100 customers: 80% short-term 
tactics | 20% long-term tactics
100+ customers: 20% short-term 
tactics | 80% long-term tactics
Excerpt from "Early B2B SaaS growth: How to go from 10 to 100 customers."
10
[01] Acquisition
[01] Acquisition
Don't trade growth 
for profitability
Brian Kotlyar,
Director of Demand Generation, Intercom
 There's a silly old business expression 
that says, "We're going to lose a dollar on every 
deal, but we'll make it up in volume." It is also 
an extremely common way that venture-funded 
businesses think about how to grow. They think 
they can burn through tons of capital acquiring 
users and figure out monetization later. But no 
matter how much volume you have, if you don't 
make money on any of the transactions, you 
won't make money at all.
If you look at many of the initially successful 
companies that have come and gone over the 
past 36 months, that's exactly what they were 
doing. These companies had incredibly smart 
and experienced people, but the underlying 
business model was broken: They were creating 
volume businesses without a clear-enough plan 
for how to solve the profitability question. For a 
viable business, the value of the customer must 
exceed the cost of acquiring that customer. You 
don't need to have this solved on day one of your 
business, but you need to have a plan as to how 
that's going to happen.
11
[01] Acquisition
[01] Acquisition
After product
market fit comes 
productchannel fit
Sujan Patel,  
Co-founder, Web Profits
 Once you figure out product market fit, 
it's immediately time to figure out what Andrew 
Chen and Brian Balfour call product channel fit. 
You need to identify your marketing channels, 
particularly the one or two you can use to go from 
wherever you're at to that next level. The whole 
process of first investing in growth marketing 
isn't, "Can I get social ads to work? Can I get 
AdWords to work? Can I do SEO? Can I do content 
marketing?" You have to invest in one or two.
Look at the biggest companies out there, like 
Apple and Microsoft. Each company usually has 
one main channel and two or three secondary 
channels. A startup with limited resources 
has never been able to achieve success at three 
different things at the same time, so find one 
channel that you want to enter, and then as you 
get that one humming along, go after the next 
one, and then the next one.
Let's say you're trying to raise money. You 
probably don't want to invest in content 
marketing or SEO as a primary channel to move 
the needle, because they take too long. Spend 
your marketing budget on ads or outbound sales.
Image credit: Brian Balfour
Sujan Patel as heard on the Inside Intercom podcast.
12
[01] Acquisition
[01] Acquisition
Why every  
business needs 
a mechanism for 
free acquisition
Andrew Chen,
General Partner,  
Andreessen Horowitz 
 
 There's a reason why B2B SaaS 
companies have a recurring revenue model. 
It's also why a transactional marketplace like 
Uber, which has a large number of riders who 
use it use it every day for commuting, is nice. 
That regularity and habit formation means the 
company has better lifetime value. It also means 
the engagement can power organic acquisition, 
because customers naturally tell their friends 
about it. Look at Dropbox or Slack  a natural 
network forms, where every user has the 
opportunity to acquire one of their co-workers. 
Another example is DocuSign, where folks who 
are collaborating within a workflow involve other 
people from across companies. That's going to 
be even more viral than something that only 
exists within a company. How many folks have 
discovered Intercom because they saw the little 
window on the bottom right and thought, I want 
that too? You get all of this free acquisition.
13
[01] Acquisition
[01] Acquisition
right moment, you can build a pretty decent 
company. But eventually you should just plan 
on losing it, right? This is another reason why a 
lot of gaming companies are hard to fund from 
a venture perspective: there's built-in natural 
churn. Dating apps are also like this. You have 
that combined with the need to actually buy 
the traffic because it's very hard in a dating 
app to say, "Oh, you should download this 
too." That doesn't make sense.
If you're building something in fintech or 
healthcare, these are all things you have to be 
very careful with. Make sure you understand 
how customer acquisition is going to play out 
long-term.
Make sure you understand 
how customer acquisition is 
going to play out long-term.
When I look at some of the high-profile cases 
where chasing acquisition didn't work, I see a 
couple of things that work in concert to make it 
more difficult. First, you have an acquisition model 
that is a single channel. Maybe it's Facebook ads, 
maybe it's Google ads, maybe it's SEO  but you 
don't have any natural virality. 
Second, specific to ecommerce, if you're 
buying something like a mattress or a car, 
that happens very infrequently. Because of 
that, you end up in an acquisition treadmill, 
where you've got to run really, really fast and 
then  if you're on a single point of failure on 
your acquisition channel  there's an arbitrage 
for a period of time. If you hit it at exactly the 
Andrew Chen as heard on the Inside Intercom podcast.
14
[01] Acquisition
[01] Acquisition
Mobilizing your  
influencers
Karen Peacock, 
COO, Intercom
 When it comes to getting the word out 
about your product, ask yourself, "Who do my 
customers and prospects turn to for advice when 
they are looking to learn about great solutions 
or make a buying decision?" Understand who 
influences your prospects most, then earn the 
trust of those influencers. You'll need to win both 
their hearts and their minds. 
Before I joined Intercom, I led all of Intuit's 
small-business products and services, including 
QuickBooks accounting, payroll and payments. 
For accounting and payroll products, the No. 
1 influencer for a buyer was the accountant. 
Makes sense, right? When small businesses make 
decisions around accounting and payroll, they 
end up talking to an accountant roughly half 
of the time. So, we focused on being great for 
accountants  winning their hearts and minds to 
help drive word of mouth. 
15
[01] Acquisition
[01] Acquisition
Once you find the folks who are trusted advisers to your 
customers and prospects, you need to help them do four things. 
In order, they need to know, use, love and recommend your 
products or services. 
1. Know: They can't recommend your solution if they 
don't know about it.
2. Use: To build their confidence, they have to actually use 
and understand your product.
3. Love: Figuring out what matters most to those folks is 
crucial. Make sure that they're experiencing real value 
and that they see the value your product will provide 
for others.  This is also about giving them an experience 
that is emotionally engaging, wins their hearts (not just 
their minds) and gets them excited.
4. Recommend: Find ways to help influencers amplify this 
love. Make it easy and rewarding for them to recommend 
your product. You can use things like referral fees 
to align your business interests. At Intuit, we built 
capabilities into our products that made accountant's 
lives easier when their clients used QuickBooks, so they 
were motivated to get more folks using our products. 
How can you motivate your influencers to get more 
folks using your product or service?  
Understand 
who 
influences 
your 
prospects 
most, then 
earn the 
trust of those 
influencers.
16
[01] Acquisition
[01] Acquisition
Why content is your most  
powerful acquisition channel
Eric Siu, 
CEO, Single Grain
 I was talking growth with Neil Patel recently and we discussed 
the channels that we would both invest in long term. If we were to start all 
over again, what would we do? The answer was one you'd expect us to give: 
content marketing.
The way we see it, content is the foundation. If you get content marketing 
working, then you are able to retarget people. You are able to build lookalike 
audiences on different channels. If you're creating great content, it builds 
links, which brings your domain authority up.
You can write more content and then you can collect more emails and 
optimize your conversion rate from there, but everything starts with content 
first. Look at a lot of media companies  they're building agency services 
divisions now. It's easier to build an audience first, and from there you can 
start to branch out into other areas.
I'll share a story. Four years ago, I spent six hours a week on "Growth 
Everywhere," the first podcast I started. Editing, recording  I did 
everything by hand the first year. And after the first year I was only 
getting nine downloads a day. That number is terrible. I should probably 
have given up, but I kept going because people kept emailing me saying, 
"Hey, I don't know why you're not getting more downloads but this has 
been really helpful. It's made a difference in my life." I worked for another 
year, again six hours a week, and I was only getting 30 downloads a day.
My point 
is just be 
relentless. 
Content 
marketing 
works. Yes, 
it takes time, 
but anything 
good takes 
time. Just be 
patient.
17
[01] Acquisition
[01] Acquisition
Nowadays "Growth Everywhere" has 
about 80,000 downloads a month. Not 
bad, but the "Marketing School" podcast 
gets about 640,000 downloads a month. 
Those succeeded because I was relentless.
The framework that I'll give is really easy 
for everyone to follow. It's the Content 
Reusage Framework from Aleyda Solis. 
She has this flowchart you can follow 
when you're creating content, and it 
doesn't mean you always have to be 
writing new stuff all the time. If you use 
that framework, it's going to work out 
really well for you.
My point is just be relentless. Content 
marketing works. Content marketing 
is the foundation for building whatever 
you're trying to do in the long term. Yes, 
it takes time, but anything good takes 
time. Just be patient.
Eric Siu as heard on the Inside Intercom podcast.
18
[01] Acquisition
[01] Acquisition
How early is too early?
Sujan Patel,  
Co-founder, Web Profits
 Yes, you can definitely invest in acquisition too early. 
Unfortunately, at my first SaaS endeavor contentmarketer.io, which has 
pivoted to Mailshake, we made that exact mistake. 
If you don't have a product that can fit that channel, then I would 
recommend not leveraging that. For example, at contentmarketer.io, we 
had a product that was kind of okay, and we were still validating product 
market fit. Naturally, I went to town as a marketer. I built an audience. 
I built an email list. We started blogging. We got lots and lots of traffic. 
People even converted into customers. But the feedback we got from the 
first month was, "I don't think this product is right for me. It doesn't 
fit." We wasted that whole channel, and we had too many people talking 
about us. That sounds like a good problem to have, but it's a really bad 
one because the first impression those people had of us was a product that 
doesn't work for them or a bad product.
In the early days, if you're figuring out your product and it's still not fully 
ironed out, go lay the groundwork of content that you know is going to be 
potentially optimized or something that can rank. Go to town on channels 
that you can turn on and off, like outbound or cold email or advertising. 
Make sure when you turn them on you get feedback and data, and then 
turn them off until you're ready to go.
Sujan Patel as heard on the Inside Intercom podcast.
19
[01] Acquisition
[01] Acquisition
Acquiring the right kind of 
customers
Rachel Hepworth,  
Head of Growth Marketing, Slack
 One of the things I'm really concerned about is that we're not just 
acquiring free teams. We're here to acquire teams that have the potential of 
paying Slack at some point. Last year we pivoted from asking "How many 
teams are we creating?" to "How many work teams are we creating?" Even 
though an enormous amount of our team creation is social, based on how 
much people love Slack, work teams are the teams that pay Slack.
Then we moved from looking at work teams created to looking at what 
we call "early-activated work teams created", which are teams that have 
actually invited somebody to join. A Slack team of one is a lonely place, and 
unlikely to be successful. Then, if a team has invited a couple people, have 
they exchanged any messages? The bar is fairly low, because it has to be 
something people can achieve quickly, so that we can iterate and test off of 
it and not wait five months. But, it's high enough that it actually screens out 
a lot of teams of people who have said, "I don't really know what Slack is. I 
just want to get in there and experiment with it and see if it's at all like what 
I think it's like."
Looking at the full funnel of metrics and not just stopping at that team creation 
number is really important for knowing whether we are driving value for the 
company. The friction is so low to starting a Slack team that you could really 
drive a lot of really poor quality teams if you didn't pay attention to it.
Rachel Hepworth as heard on the Inside Intercom podcast.
20
[01] Acquisition
Your ideal customer 
profile should bend  
but not break
LB Harvey,
VP of Sales, Intercom
   Acquiring customers through outbound 
sales is expensive. So, the more your company 
has honed its ideal customer profile, the better 
targeted your sales team can be. That allows you 
to be a lot more efficient from both a sales and 
marketing standpoint, because you're investing 
dollars against a segment of customers that is 
more willing and likely to buy your products, and 
to find success with them too. You know those 
target prospects are going to have good product 
market fit, and you know that when you actually 
sell those deals, they're not going to quickly churn 
out and leave you with a brand that's known in 
the market for its lack of customer success.
That said, if your sales team isn't pushing the 
envelope a little bit when it comes to your 
customer profile or target segment, that's a miss 
too. Your sales team talks to more prospective 
customers than any other team in your 
organization, and they will have the best pulse 
on where you might unexpectedly be resonating 
in the market. They'll press on the edge of 
product market fit and gather important intel. If 
those prospective customers represent the next 
wave of customers you want to start acquiring, 
then begin to understand the largest problems or 
business pains your product can solve for them. 
That's valuable information for R&D.
21
 [02] Activation
If you work at a growing SaaS company, you might be 
familiar with the "Pirate Metrics Model" (termed so 
because of its acronym AARRR). Its five metrics represent 
the five most important stages of a customer's life cycle 
 acquisition, activation, retention, referral, and revenue. 
Most growing SaaS companies focus first on acquiring 
users and getting them into the funnel. Then, they focus 
on retaining those users and turning them into loyal, long-
term customers. But they're missing that second A in 
AARRR  activation. 
Activation is the science of turning acquired users into 
active customers: people that pay for and value your 
solution. After all, 10,000 free trial signups is a vanity 
metric if no one actually uses your software. 
Since activation comes right after acquisition and right 
before revenue, it's an incredibly important part of your 
business to optimize. In fact, when a lot of companies are 
struggling with growth, it's not that too few people are 
coming to the products. The real growth problems start 
when people land, and then leave.
[02] Activation
[02] Activation
22
[02] Activation
Acquisition vs. Activation
Justin Mares, 
Co-author of Traction: A Startup Guide to  
Getting More Customers 
  Most SaaS companies are (rightly) concerned with user acquisition 
but fail to pay adequate attention to activation. What few realize is that 
activation plays a major role in user acquisition itself.
Imagine that you (and your competitors) can spend $10 on Facebook to get 
one user signup, and that you make $20 for every customer you have. Let's 
also say that half of your users that sign up for a trial will not activate  they'll 
never experience the key action that separates your product from the other 
SaaS tools out there, and won't become a fully featured user.
So, overall, you're breaking even on your marketing spend: $20 per customer 
x 50% of users that activate equals the $10 per signup you spent on Facebook.
If you can boost this activation number even just to 60%, your marketing 
channel suddenly becomes profitable, not just break-even. That increase 
also opens up new audience and ad targeting options, and allows you to 
profitably scale your advertising.
Just like you'd optimize your ads, you should be optimizing your activation 
process to successfully onboard as many users as possible.
Excerpt from "Activate or die: 10+ ways you can improve your user activation for SaaS."
You should 
be optimizing 
your 
activation 
process to 
successfully 
onboard as 
many users 
as possible.
[02] Activation
23
[02] Activation
    When I became the VP of Marketing 
for the Intuit payroll business, I took the first 60 
days to assess what was working and what wasn't 
working, and then came up with a set of priorities 
about where we were going to invest. The first big 
decision I made was to take a significant chunk 
of my marketing program budget and use it to 
hire a product team to build a better first use and 
onboarding experience. 
My peers in marketing came to me and said, "Karen, 
we know that you're new to being a VP of Marketing, 
but this is not what we do. We don't hire product 
teams. Our money and our budget is the biggest 
source of control and power we have to hit our 
numbers  you can't give it away to a product team." 
I understood where they were coming from, 
but I wasn't giving it away. I was making what I 
believed was one of the best investments I could 
Activation  the 
hidden marketing 
opportunity
Karen Peacock,  
COO, Intercom 
make  an investment that not only would enable 
us to hit our numbers that year, but would drive 
results for many years to come. 
We were able to staff up a team on the product 
side, which I worked with closely, and that team 
was able to increase the trial to paid conversion 
by about 20%. It was the best investment not 
only that I made, but that any of the marketers 
across the company made. It enabled all of my 
other spending to be wildly more efficient. We 
complemented this with the right engagement 
activity led by marketing, including messaging 
to welcome new customers, get them started and 
successful, move them to the next step and upsell 
and cross-sell with targeted streams depending 
on who they were and what they had or hadn't 
done yet with our product.  
Marketers should care as much about the 
onboarding and first use experience and getting 
customers from trial to paid as they do about 
driving customers to their website or to sign 
up for trials. The points on the board are when 
customers become paying users or active users 
who get real value and tell others.  
[02] Activation
24
[02] Activation
    Helping your customers experience 
the full value of your product is key to ensuring 
their loyalty, and you do that through first 
uncovering your activation steps. For your 
product to survive, you need to activate your 
new signups by getting them to take the 
actions that will enable them to see value in 
what you're selling. These are the actions that 
Uncovering your 
activation steps
Ruair Galavan,  
Senior Manager, Product Education, 
Intercom
if a customer takes, you know they'll start to see 
value in your product, and thus stick around. 
The key to getting this right is to first know what 
the key actions are for your product. Start by 
first looking at the steps your most successful 
customers take before becoming successful. As an 
example, let's imagine a ride sharing app, where 
all customers who complete two trips in the first 
30 days after signup are 40% more likely to retain 
in month two, compared with the customers who 
take just one or no trips. In this case the activation 
step is "orders 2 rides by the end of day 30". 
Once you're aware of these steps, it will directly 
influence your activation strategy. In this case 
you'd get laser focused on encouraging customers 
to take 2 rides in their first 30 days. Hopefully 
you'll know these steps in your product already, 
or at least have a good idea of the steps successful 
users are taking.
Remember, over a long enough timeframe most 
customers churn. And most companies die. It's 
tough out there. This lack of traction with new 
signups isn't because your product has no value. 
Well, it could be. But, it's more likely because your 
customers just don't see the value of your product. 
25
[02] Activation
[02] Activation
 If I were starting up and had $100, I'd 
bet $80 of it in the activation phase, because 
what happens is people fail to have their "aha" 
moment. And even if they have their "aha" 
moment, they can drop out before using the 
product becomes a habit. And that's a huge 
amount of value lost.
The tactics I use in that space are first understanding 
what my dropoff rates are, and then watching users 
in their very first experience. I try to understand: 
What are the buttons they don't find? What are 
the things they are confused about? Then try really 
simple stuff like a dialogue box saying, "These are 
things you are probably looking for." Lead them in 
the three places they most likely want to go.
Putting all your chips 
on activation
Shaun Clowes,  
VP of Product Management, Metromile
(former Head of Growth at Atlassian)
At one point we had a 12-step onboarding flow at 
Atlassian. It was deeply involved; it had a whole 
bunch of things that it taught you; it was very 
successful. But when I talk about champion/
challenger, we were constantly trying to beat 
that, and we later ended up with an onboarding 
flow called "Choose your own adventure". It 
was one dialogue box with three buttons, and it 
outperformed the 12-step program. The 12-step 
program was trying to tell you enough that you 
could do the rest, but most people arriving at the 
software wanted to do one of three things. Rather 
than needing to educate them about those three 
things, about the way in which they could go about 
thinking about the software and finding them, just 
giving those three things to them was enough.
Shaun Clowes as heard on the Inside Intercom podcast.
26
[02] Activation
[02] Activation
 For Facebook the "magic moment" is that moment when you 
see your friend's face. Everything we do on growth  if you look at the 
Linkedin registration flow, if you look at the Twitter registration flow, 
or you look at what WhatsApp registration flow when you sign up  the 
No. 1 thing all these services look to do is show you the people you want 
to follow, connect to, send messages to, as quickly as possible. Because in 
our vertical, this is what matters. 
When you think of eBay, it's about finding that unique item, that PEZ 
dispenser or laser pointer, that you really, really cared about and want 
to get a hold of. When you see that collectible you are missing, that is the 
magic moment on eBay. When you look on Airbnb and you find that first 
listing, that cool house you can stay in, and when you go through the door, 
that's a magic moment. 
On the other side, when you're listing your house on Airbnb or an item on 
eBay, that first time you get paid is your magic moment. 
Think about what the magic moment is for your product, and get people 
to experience it as fast as possible. You can go from 60% retention to 
70% retention easily if you can connect people with what makes them 
stick on your site.
Finding your product's  
magic moment
Alex Schultz,
VP of Growth, Facebook
Excerpt from "Alex Schultz's Lecture in How to Start a Startup." 
27
[02] Activation
 At Intercom, we define activation as 
the point at which a customer first realizes or 
derives real value from the product. In order to 
define value, we look at it through a retention 
lens. Customers who find value in your product 
come back. Customers who continue to find 
value over time will continue to come back. 
So we look at customers who retain versus 
customers who churn, and investigate the 
actions they took in the first few weeks. What 
are the actions that separate these groups in 
particular during their early experiences with 
the product?
To understand activation, 
understand retention first
Karen Church,  
Director of Product Analytics & Data Science, Intercom
If you can identify the 
early actions that separate 
the retained customers from the 
customers who leave, you'll be able to 
define and track activation and what drives 
real customer value. To use a concrete example 
from Intercom: For our Capture & Convert Use 
Case, a team that has five conversations with 
a lead is 79% more likely to retain than a team 
who has no conversations with a lead.
28
[02] Activation
[02] Activation
 Identifying the key action can be easy or 
hard   it depends on your business. At Grubhub, 
it was pretty easy to determine. You receive value 
only if you ordered food, so we looked at if you 
placed a second order. At Pinterest, this was a 
little harder to determine. People derive value 
from Pinterest in different ways, from browsing 
lots of images to saving images to clicking through 
to the source of content. Eventually, we settled 
on saving (pinning an image to a board), because, 
while people can get value from browsing or 
clicking through on something, we weren't sure 
whether it was satisfying. People only save things 
if they like them.
Tracking activation
Casey Winters,  
Scaling and growth advisor
(former growth leader at Pinterest and GrubHub)
Once you know your key action and your 
frequency target, you have to track that target 
over time. You should be able to draw a line of 
all users who sign up during a specific period, 
and measure if they do the key action within 
the frequency target after signup. For products 
with product market fit, the line flattens as a 
percentage of the users complete the key action 
every period:
 
If the line flattens rather quickly, your successful 
activation metric is people who are still doing 
[key action] at [set interval] at [this period 
after signup]. So, for Pinterest, that was weekly 
"savers" four weeks after signup. If your cohort 
takes a longer time to flatten, you measure 
a leading indicator. At Grubhub, the leading 
indicator was a second order within 30 days of 
the first order.
Excerpt from "Why onboarding is the most crucial part of your growth strategy."
29
[02] Activation
[02] Activation
Define your  
activation metrics 
before it's too late
Andrew Capland,  
Director of Growth, Wistia
 I wish someone had told me to clearly 
define our activation metric and get serious about 
tracking the inputs to that metric ASAP. Many 
teams avoid this because it seems hard (and time-
consuming) to define  which is a huge mistake. 
The clearer that definition is, the easier it will 
be to prioritize projects to increase it. Before we 
begin any new onboarding project, we ask "How 
does this project increase our activation metric?" 
and "Will this project increase our activation 
metric more than this other project?" Clearly 
defining your activation metric will provide huge 
dividends to your users and your company.
Excerpt from "User Onboarding Advice From SaaS Leaders."
30
[02] Activation
[02] Activation
Activating customers  
long term
Ruair Galavan,  
Senior Manager, Product Education, Intercom
 A common mistake I see companies making is only 
focusing on activation for the first 14 days of a customer's life 
cycle. Activation varies from product to product. For example, 
if you're UberEats, activation is the customer's first order. 
Nothing really changes after that. The customer just comes 
back and orders food again. But for a product like Intercom, 
users can be activated in hundreds of ways. They might have 
used a few key features, but have whole areas of the product 
they haven't even explored yet. 
That's why we don't just think about activation at a product 
level  we tackle it on a per feature basis too. When we launched 
our bot Operator, we were activating people who were active 
power users of Intercom for almost two years. So we found 
ourselves having to educate people all over again on a new 
workflow, and how it could make their existing ways of doing 
things better. It's limiting to think about product activation 
too broadly. It should be about individual feature activation 
too, and that has to be a continuous process that happens long 
after a customer's trial ends. 
31
 [03] Retention
Once you have driven visitors to your product and have 
successfully helped them take the most important actions 
within your product, it might seem like you are out of the 
woods. But another crucial component is retention. It 
doesn't matter how many active customers your startup 
acquires if none of them stick around in the weeks and 
months after signup.
For many companies today, retention hacking is the new 
growth hacking. There are a number of reasons for this:
 
If your retention is low then all of the ingenious 
growth hacks that you apply to your product are 
basically meaningless. Your members will leave 
your product at the 11th hour (or the very end of 
your funnel). Leaky buckets don't need more water. 
They need their holes fixed.
 
Increasing your customer retention rate can have a 
big impact on your bottom line. Harvard Business 
Review researched the value of customer retention 
and found that by raising retention rates 5%, the 
average business will increase profits by 25% to 95%.
 People that have been retained for long periods of 
time are more likely to evangelize for your product. 
Word of mouth referrals result in new users, which 
drives habits among groups of friends and colleagues 
as they begin relying on the same product.
Plain and simple, your eye should be on retention. It's the 
tide that lifts all other boats  acquisition, monetization, 
virality and beyond  and is the difference between a 
business that sustainably grows long term, and one that 
flames out and dies.
[03] Retention
32
[03] Retention
[03] Retention
How churn  
disrupts the SaaS 
business model
Des Traynor,  
Co-founder, Intercom
 It's difficult for many startups to assess 
the real impact of churn because they lack the 
longitudinal data. Churn is usually seen as a factor 
limiting growth on a month to month basis, but 
the impact on customer lifetime value (LTV) is 
equally significant. It's hard to build a subscription 
business on short term subscriptions. The whole 
idea of the SaaS business model assumes the lower 
revenue per customer per month is offset by a 
longer lifetime of that revenue.
If your customers aren't sticking around for years 
then you have a business model problem. This 
is common for products that have immediate 
upfront value, but give no reason to stick around 
months later. In these cases, you can spam 
customers all day long, but you'll see a better 
return from rethinking your business model.
If analyzing churn, cohorts or lifetime value 
gives you big results that you didn't expect or 
can't explain, then you should be talking with 
your customers more often to work out what's 
going right and wrong for them. It's likely you're 
out of touch. These days you can automate and 
visualize almost anything, except caring. That 
has to come from you.
Excerpt from "Reduce churn by re-engaging your customers."
33
[03] Retention
[03] Retention
Reducing the  
"time to pie"  
and increasing  
stickiness
Karen Peacock,  
COO, Intercom
 If someone is using your product but 
they're just dabbling and coming in once a 
month, your whole relationship with that 
customer could easily tip over. As soon as they 
find a more interesting or useful solution, you'll 
get cut out. Of course, what you want to have is 
a deep engagement and involvement with your 
customer. The question is, how do you get that? 
Focus on providing meaningful value in a 
way that requires as little work as possible for 
customers to get that first taste of value  lower 
the barriers. As an example, look at Mint, the 
personal finance product. That team found that 
the first "aha" moment, the first taste of value, 
was when a customer could see the pie chart 
of where they were spending their money. 
Customers who got to that point were likely to 
stay, so Mint did an overhaul of the onboarding 
experience to make connecting your bank 
account and getting to that pie chart as fast 
as possible. They took out every other part 
of setup and held it for later, which reduced 
the "time to pie." That led to much higher 
engagement and dramatically accelerated the 
growth of their active customer base.
Another key is to make your product or 
service sticky. For example, when I was the 
General Manager for Intuit's payroll products, 
we saw that customers who set up a direct 
deposit service that connected to payroll 
and automatically moved money from the 
employer's bank account to the employee's had 
34
[03] Retention
[03] Retention
much higher retention rate and much higher 
net promoter scores. They were happier and 
stayed with us. This makes sense  nobody 
wants to go through the hassle of having to 
redo a bank account routing setup, write 
physical checks or manually go into their bank 
account every week.  
Unfortunately, setting up that direct deposit 
was, at the time, a much later step in our 
onboarding process and required a back and 
forth to your bank that took days. We did three 
things to tackle this:
1. We changed the onboarding experience 
to make the direct deposit setup for the 
employer early in the process. 
2. We found a partner who could do a real 
time confirmation of the bank routing 
info for the majority of our customers, 
Focus on providing meaningful value in a 
way that requires as little work as possible for 
customers to get that first taste of value  lower 
the barriers. 
making the process immediate rather 
than split over multiple days. 
3. We created a way for employees to do 
their own direct deposit setup, instead of 
waiting for their employer to do it (after 
all, who cares most about seeing the 
money show up fast in the employee's 
bank account  the employer or the 
employee?).  
The result? Higher usage of direct deposit, higher 
retention and higher net promoter. Customers 
were getting more value and were switching less. 
Strong retention comes from driving up the core 
value of your product, helping customers get 
that value as fast as possible with as few barriers 
as possible, and creating an experience that is so 
good that no one can imagine going back to the 
old way.
35
[03] Retention
[03] Retention
The no-BS way to 
understand churn
Des Traynor, 
Co-founder, Intercom
 No matter how successful your 
business is, your percentage growth of your 
customer base will decay over time, but if churn 
is endemic in your business, you don't have a 
similar guarantee with it. At some point you'll 
be faced with a reality that you'll soon be losing 
as many customers are you're adding. 
 
That's why one of our investors coined a term, 
the SaaS quick ratio, to help startups understand 
the extent of their customer churn. 
The importance of this ratio can be crudely 
summarized as: I don't care how fast you're 
growing, keep your customers or it'll all go bust. If 
there's a million target customers in the world and 
you're winning 100,000 of them every month, but 
losing at 50,000 as well, in ten month's time you'll 
have a powerful monopoly in the market, and just 
ten months later you'll file for bankruptcy. 
Churn matters.   
36
[03] Retention
[03] Retention
The SaaS Quick Ratio
Mamoon Hamid, 
General Partner, Kleiner Perkins 
 We've coined an accounting term, 
"the SaaS Quick Ratio." It measures assets and 
liabilities that we apply to SaaS businesses. It's the 
MRR (Monthly Recurring Revenue) that's gained 
every month divided by the MRR that's lost.
On the next page are two examples of companies. 
On the left are two companies that we did not 
invest in and to the right are two companies 
that we invested in. 
You do the quick math, and this is what it looks 
like. The companies on the right have a quick 
ratio of four or above. The companies on the left, 
less than four. It's not always this simple. But 
we try to use data as much as we can to make 
good decisions. 
It's not 
always this 
simple. But 
we try to 
use data 
as much as 
we can to 
make good 
decisions.
37
[03] Retention
[03] Retention
Excerpt from "Mamoon Hamid On Why Sh*t Really Gets  Funded at Saastr."
38
[03] Retention
[03] Retention
Why negative 
churn is such 
a powerful 
growth  
mechanism
David Skok,  
General Partner, 
Matrix Partners
 In the early days of a SaaS 
business, churn really doesn't 
matter that much. Let's say that 
you lose 3% of your customers 
every month. When you have only 
100 customers, losing three of them 
is not that terrible. You can easily 
go and find another three to replace 
them. However as your business 
grows in size, the problem becomes 
different. Imagine that you have 
become really big, and now have 1 
million customers. Three percent 
churn means that you are losing 30,000 customers every 
month! That turns out to be a much harder number to replace. 
Companies like Constant Contact have run into this problem, 
and they have found keeping up their growth rate very hard.
The ultimate solution to the churn problem is to get to 
Negative Churn.
There are two ways to get this expansion revenue:
 
Use a pricing scheme that has a variable axis, such as the 
number of seats used, the number of leads tracked, etc. 
That way, as your customers expand their usage of your 
product, they pay you more; or
 
Cross-sell them to more powerful versions of your 
product, or upsell them on additional modules.
Excerpt from "SaaS Metrics 2.0."
39
[03] Retention
[03] Retention
How to fix a  
leaky bucket
Bobby Pinero,  
Senior Director of Finance, Intercom
 Monthly recurring revenue (MRR) retention 
will make or break the growth of your SaaS business 
 there's no point filling the bucket if it's full of holes. 
This topic has been covered over and over and over 
again. Read these articles and digest them. Investors 
will be heavily focused on this aspect of your business.
You'll need to show retention in a few ways.
Gross churn:
Of all the committed revenue you had last period, 
how much has walked out the door this period? Do 
the same on a customer count basis.
40
[03] Retention
[03] Retention
Net churn:
Of all the committed revenue you had last period, 
how much has walked out the door this period net 
of upsells?
Cohort retention:
Churn metrics as described above are a great 
snapshot into the business at a point in time. 
However, it's a blended average of all customers 
at different points in their lifecycle. Retention by 
cohort gives you a longitudinal view of how good 
you are at keeping, upselling and cross-selling 
any given customer and how that has evolved 
over time. In other words, for every dollar you get 
today, how many dollars do you have six months 
later, one year later, and so on?
To the right is an example of how this is typically 
displayed. This fictional business is getting better 
at retaining customers and upselling them over 
time; a promising sign. Cohorts greater than 
100% is what investors want to see. Consistent 
cohorts of greater than 100% will lead to negative 
net MRR churn.
Excerpt from Intercom on Starting Up.
41
[03] Retention
[03] Retention
What the gaming 
world can teach us 
about retention
Gina Gotthilf,  
Former VP of Marketing and Growth, 
Duolingo
 Duolingo was meant to be a game from 
the get-go. That comes from our founders. They 
thought, "You know what? Learning is a drag. 
Learning a language takes forever. We need to 
find a way to get people to keep coming back," 
so making it a game was baked in from the very 
beginning.
My team would do things like assign games to 
different members of the team. I'd say, "Okay, 
this week you're going to play this game"  a top 
grossing game or top downloaded game  "and 
then you're going to give a little three-minute 
presentation, each person, in our next meeting, 
about what you thought was effective in this 
game." That could be something like how they 
onboard people. Look at this metric system for 
points. Look at how you have this set of points, 
but you also have this other type of points. Look 
at how you earn them and how one influences 
the other. We were constantly talking about game 
mechanics and applying them to Duolingo with 
the goal of getting people to stay interested in 
42
[03] Retention
[03] Retention
learning a language and to automatically, like a habit, go back 
to Duolingo whenever they were bored, instead of to a normal 
game on their phone.
It was a fine line. Our team was the growth team, and we were 
just trying to get more users and users to stick around. There 
was a separate learning team and a separate monetization 
team. Having those three metrics separate and having teams 
advocate for each one of them was really important. Otherwise, 
we could have just made a product that was super easy and 
fun, that people would play more of and stick around more and 
buy more things, but not learn anything at the end. Because if 
it's easy, it's more motivating, but you're not learning. If it's 
harder, you might be learning more, but then you might also 
give up more easily because it's frustrating. We didn't want to 
make something that was just there to entertain, or to make 
money and get users and be the next thing that everyone 
forgot a year later.
We definitely had hard conversations. Sometimes one team 
won, and sometimes another team won. Some things that we 
A/B tested that hurt monetization, for example, or an A/B test 
that the monetization team launched that hurt our retention. 
The same goes with learning, although we prioritized learning 
above all at Duolingo, so fighting against the learning people 
was a harder battle.
We didn't want to 
make something 
that was just there 
to entertain, or to 
make money and 
get users and be 
the next thing that 
everyone forgot a 
year later.
Gina Gotthilf as heard on the Inside Intercom podcast. 
43
[03] Retention
[03] Retention
A low investment 
with massive 
rewards
Shaun Clowes,
VP of Product Management, Metromile
(Former growth leader at Atlassian)
 It never ceases to amaze me how much 
time we as an industry spend optimizing our 
acquisition tactics to acquire a huge bunch of 
people. When I think about all the energy that 
has gone into this, and understanding who those 
people are and how to go and find them, and 
then I look at the number of people that drop 
off in the first five to 10 minutes, the first day, it 
always breaks my heart. Even at Atlassian, where 
I felt like we were getting better and better at 
this, we had the charts that would show us what 
was happening. Every one of those people is a 
person whom you have fundamentally burned. 
You have failed to give them what you told them 
you would give them.
When I think about the ROI of things that you can 
do in a business, make certain that your customer 
is safely handed from acquisition to activation. 
Make certain that you have done everything 
in your power to help them find their "aha" 
moment and begin habit forming. Then make 
certain that they're getting the maximum value 
from your software though engagement. Those 
are generally very low investment, but with 
potentially massive rewards. Not only because 
you keep those users, but if you truly succeed at 
that, and you get high engagement, then what 
you really get is sustainable businesses, because 
you get word of mouth.
People who are highly engaged with your 
software are always the people who love it, and 
those people who love it will tell other people. 
The most authentic form of acquisition, by 
far, all day, every day, is word of mouth. It's 
amazing the business you can build once you 
have that engine going.
Shaun Clowes as heard on the Inside Intercom podcast.
People who are highly 
engaged with your 
software are always the 
people who love it, and 
those people who love it 
will tell other people. 
44
[03] Retention
[03] Retention
Eliminate friction 
at every step
Samuel Hulick,  
Founder, User Onboard
 In order to hit the retention metrics 
necessary for scaling and sustaining your 
business, it is imperative that you smooth your 
users' path forward at every opportunity.
Fortunately, however, 
that doesn't mean 
creating a tedious interstitial stage at every step 
of your onboarding. In fact, it's best when it's just 
the opposite: Rather than provide a plodding, 
Playskool-level "My First Interface" for your 
users, harness the power of technology to warp 
your users right past the tedium of having to deal 
with the task at hand at all.
Want a real world example? Look no further 
than Medium.
Ever wanted to tweet a highlight of a compelling 
passage that you just read? They could have left 
it up to you, which would involve the clunky, 
user-has-to-leave-the-product workflow of:
45
[03] Retention
[03] Retention
 
Highlight the compelling passage 
 
Take a screenshot
 
Locate the screenshot
 
Upload it to Twitter
 
Come back and copy the post's url
 
Go back to Twitter and paste that
 
Look things over before pressing "Tweet"
 
And then, finally, remember to come back to Medium to 
pick up reading wherever you'd left off
Instead, Medium warps you through all of that by providing this 
helpful little Twitter icon whenever you highlight something 
(whoa, this is about to get meta). When you click on it, you're 
teed up to tweet it out from the article itself! And then you're 
free to keep reading, having never even left your place.
This is good for the user because it cuts out a bunch of 
steps you don't actually care about, but it's even better for 
Medium because they've prevented the risk of you leaving 
and not coming back!
Excerpt from "Product People: Mind the Gap."
46
[03] Retention
[03] Retention
Act before it's too late
Ruair Galavan,  
Senior Manager of Product Education,
Intercom
 Your retention strategy has to be 
proactive. Don't wait until customers are on 
the brink of churning to throw some last-ditch 
attempts at them. What you do to stop it  and how 
you do it  depends entirely on your relationship 
to that customer. For active customers, you'll 
need to continuously ship new features that better 
serve their needs. For inactive customers, you'll 
need to offer training so they can start seeing the 
value of your product. Specifically, you'll need 
to understand why someone might leave your 
product, look for the signs that your customer is 
getting ready to leave and then choose the right 
tactic to stop it.
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[03] Retention
[03] Retention
Retention is a sales job too
LB Harvey,  
VP of Sales, Intercom
 Who owns customer success within an organization can vary. 
For example, some companies have a Head of Sales and a separate Head of 
Customer Success. When speaking with companies who use that model, 
I often hear the same back and forth: Customer Success feels like Sales is 
selling bad deals, and Sales feels like Customer Success is dropping the ball 
when it comes to managing their beautifully sold deals and customers. 
I feel strongly that Sales should be accountable for the long-term success 
of their customers, not just the initial deal. Some people worry that a sales 
team isn't going to be quite as ambitious about driving that success and 
engagement. There's very few things better than winning the initial deal. 
But guess what? There's not much worse than winning the deal only to 
see it churn. That's why actually retaining and growing customers is just 
as exciting and important.
As a result, Account or Relationship Managers should be talking to their 
customers consistently  at least once a quarter. If you're doing that, you 
should be able to feel out how successful they're feeling with your tool, 
and you can help steer the conversation to the value that your product is 
already providing. From there, you can decide when it's appropriate to 
talk about a further investment or enlarging a footprint. 
48
 [04] Monetization
Put simply, acquiring, activating and retaining users isn't 
cheap, and they only represent one side of operating 
a successful business. Going back to the all important 
concept of product market fit, if you're not in a market 
where you can operate profitably, then your loyal 
customers should begin preparing for the cold reality of a 
world where your product no longer exists.
Growth is a symbiotic relationship. Just as your customers 
should be experiencing the value of your product, you 
should be extracting equal value from them. This is why 
the tiered pricing structure seen in SaaS is so problematic. 
Small, medium and large/enterprise pricing buckets 
inherently mean giving the heaviest discounts to the most 
valuable customers.
Monetization is really the process of marrying your 
business model to customer value. Do that successfully, 
and you'll be able to reinvest in new features or solutions, 
which will provide more value and bring in new users. It's 
that cycle that underpins the most important monetization 
philosophy of all: None of this is set in stone. Your product 
will change, its value will change and your pricing must 
change along with it.
[04] Monetization
49
[04] Monetization
[04] Monetization
Pricing =  
product marketing
Tomasz Tunguz,  
Partner at Redpoint Ventures 
  To figure out the right pricing strategy, determining 
what the buyer cares about is crucial. Do they care about cost 
or value? What is their core unit of their world: people, dollars, 
gigabytes? How predictable is the pricing plan? And can the 
buyer clearly articulate the pricing, advocate on your behalf 
and champion the purchase?
Understanding the seller's needs is also important. How does 
the pricing change the market size? The unit economics and cash 
flows associated with the sale? The competitive positioning?
All of these disciplines fall under product marketing. Well-run 
product marketing teams develop these perspectives before 
product launch. By combining market research, interviews 
with prospective customers and conversations with the sales 
team, the product marketing team can develop a unified pricing 
strategy that is consistent with the company strategy and the 
sales tactics.
The challenge with pricing is that it's never a constant. As an 
industry evolves, competitive pressures change, a vendor's 
positioning changes and the buyer's needs change, and so 
must pricing.
Excerpt from "Ten Year's Worth Of Learnings About Pricing."
50
[04] Monetization
[04] Monetization
The only thing  
certain about  
pricing is change
Des Traynor, 
Co-founder, Intercom
 You can read all the pricing books and 
academic papers in the world and dream up the 
most sophisticated pricing models, but the first 
thing to know about pricing is that you're going 
to get it wrong. Pricing is a moving target, and 
if your business is growing it's likely you'll miss 
that target more than a few times, whether that's 
setting their price low to attract customers and 
never raising it, or keeping a feature free long 
after it's clear people will pay.
The second thing to know about pricing is that 
you need to keep iterating on it constantly. 
If you continue to improve your product then it will 
inherently deliver more value to more people and 
cost you more to support and scale, so naturally 
you may need to change prices to account for that. 
You need to plan on changing pricing, and you 
have to afford yourself that luxury for a variety 
of reasons: your product's quality will change, 
your target market will change, your customers 
expectations of you will change. 
At Intercom we went from a flat fee for the 
whole product, to tiered price plans, to separate 
products priced per metric. I don't think we 
could have pre-empted all of this and started at 
the end, the product wasn't there yet, nor were 
our customers. Every time we learned more about 
our business, we knew a change was coming. 
If your product delivers a unique value, then the 
chances are it won't map onto one of the classic 
SaaS 'bronze, silver, gold' price plans that you see 
everywhere. Pricing is often a tension between 
effectiveness and simplicity, going too far in 
either direction usually leaves either customers 
or revenue on the table. Of course you won't 
know the limits until you go past them, and 
that's why you need to plan for change.
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[04] Monetization
[04] Monetization
You need an effective 
sales process, no  
matter how "viral" 
your product
Mark Cranney, 
Chief Commercial Officer, SignalFx 
 One of the myths of SaaS is that the products 
are so good, so easy to use, so quick to deploy that 
the product sells itself. Given the popularity of try-
before-you-buy and freemium-to-premium models 
for software as a service, it's easy to see where that 
myth comes from.
But as many startups discover to their horror  
after they "land" users and try to "expand" to more 
departments in a large company or government 
agency  this is far from the truth. Even with early 
viral growth, SaaS products don't sell themselves.
Excerpt from "If SaaS Products Sell Themselves, Why Do We Need Sales?"
52
[04] Monetization
[04] Monetization
On your next big deal? 
Double your pricing
Jason Lemkin, 
Founder, Saastr
 There's a fun  and very lucrative and rewarding  exercise 
I like to go through with most of the startups I work with.
It goes like this:
 
First, who's your largest customer? Okay.
 
Now, do you have a prospect in the pipeline that's 
somewhat similar?
 
You do? Great. 
 
On that deal, go quote twice your highest price ever.
This is a terrific exercise to drive your deal size up. It does not 
mean you should rip off your customer.
What it does force you to think about is providing a true solution 
to a big problem. A thousand dollars a month is a lot of money 
for a widget, even if everyone on my team uses it. But $12,000 a 
year is dirt cheap for anything that solves a true problem. That 
solves me having to hire an engineer, or three, to do something. 
That fixes something broken in my 500+ person organization.
Challenge yourself.
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[04] Monetization
[04] Monetization
Your biggest deal so far is with Google, for $100,000? Well, 
when Facebook comes in as a prospect, ask for $200,000. 
With confidence. I know you just got comfortable asking for 
$100,000. But if you're worth $100,000, then either your 
product today, or some future variant of that product, is 
worth $200,000. 
You may have to build them an extra feature. Provide better 
onboarding. Improve customer success. Upgrade your sales 
team or, at least, add reps with more experience selling larger 
deals. Build a new integration. Who knows.
You may have to change a bunch of things to get twice what 
you did on your largest previous deal. Or possibly nothing. 
Either way, you'll learn. It's a journey.
And if you have a true solution that really makes an impact, 
you'll probably get the 2x pricing at least some of the time.
Once you do it once, level up. Make 2x the new 1x. Make 
$200,000 your new enterprise price point, not $100,000.  Do 
that for a little while, and then you can multiply it all over again.
Rinse. Wash. Repeat.
Excerpt from "On Your Next Big Deal? Double Your Pricing."
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[04] Monetization
[04] Monetization
Justify or kill your  
lowest price point
Des Traynor, 
Co-founder, Intercom
 A lot of products include a "starter" plan 
for $5 or $9 per month. Usually that's to reinforce 
the claim that the product is "affordable enough 
for everyone", while boosting your customer 
numbers. But remember that a customer on 
the $9 plan often costs just as much to acquire 
and support as a customer on the top tier, $499 
plan. This means your bottom tier can often be 
unprofitable, which is fine if you are confident 
that it's paying out in some other way. 
Some small companies can grow into large 
customers, but more often they remain a small 
customer paying that amount forever. If you can 
justify your lowest price plan either by migration 
to higher price plans, or through marketing 
benefits (word of mouth, etc.) then it's a great 
idea. But you do need to justify it. 
Excerpt from Intercom on Starting Up.
A customer 
on the $9 plan 
often costs 
just as much 
to acquire and 
support as a 
customer on 
the top tier, 
$499 plan. 
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[04] Monetization
[04] Monetization
Make your pricing 
disappear
Yao Choong, 
Director of Business Operations, Intercom
 Your monetization has to feel fair to your customers, 
and that means your pricing has to disappear. When you're 
telling a potential customer the story of your product and how 
great it is, you never want them to think, Do I like this pricing, 
or not? You want pricing to disappear as a consideration. You 
want them to hear it, think that it's fair and then have it go out 
the window. It should never be on their minds. 
As a result, "fairness" is the imperfect way to label the quality 
that gets people to hear your price and ignore it. Ultimately, if 
they think it's unfair, or if they think that it doesn't align with 
their conception of the value that they're getting from the 
product, they will not be able to let that go. That is the biggest 
reason why people reject pricing, because it stops feeling fair.
"Fair" can be simplified to mean industry standard, which is a 
shortcut most companies take. That approach might work, but 
in the process, you might lose out on 
the opportunity to come up with a 
better solution than anybody else. 
This is where you have to pick your 
battles carefully: Do you put in the 
effort to come up with an unusual 
solution and take a risk in exchange 
for 
some hypothetical benefit, 
or do you pick the safe route and 
differentiate yourself in some other 
way? Making this tradeoff is, in my 
experience, the most complicated 
thing about monetization.
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[04] Monetization
[04] Monetization
Earning the right to  
the upsell
Brian Kotlyar,  
Director of Demand Generation, Intercom
  If you have a multitude of features you're trying to get 
people to adopt in a certain order, or you're selling multiple 
products or solutions, getting every customer to buy everything 
at once is not realistic. There's an order of operations for most 
platform products, in terms of consumption, that creates the 
most value for both the customer and the company. 
It's easy to fall into a trap of selling everything you've got as 
quickly as possible to everyone who walks through the door, 
but that's rarely the right approach. Instead, ask yourself, 
"What part of my product has the strongest value, the strongest 
brand positioning and the most differentiated capabilities, 
and can create the most value the fastest?" In many cases a 
subset of your product or solution creates strong initial value, 
but minimizes the complexity of the initial sale. For most 
consulting businesses, this is an initial onsite consultation. 
You do that as a proof of concept for your value, and then you 
transition from that into a long-term consulting engagement. 
In SaaS it tends to be a free trial.
It's easy to fall into 
a trap of selling 
everything you've 
got as quickly as 
possible to everyone 
who walks through 
the door, but that's 
rarely the right 
approach. 
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[04] Monetization
[04] Monetization
My last company, Sprinklr, sold a social media 
management solution. That was our market-
leading differentiated product, and if you adopted 
that, you were getting world class value. We knew 
that if a customer then added the Facebook ad 
buying tool that was linked to that initial platform, 
they got way more value and we got way more 
value. When we tried to sell both at first; however, 
we often failed. It was just too complex  there 
were two different buyers with two different 
budgets and two different sets of requirements.
Using Intercom as an example, let's say someone 
implements our Capture and Convert solution for 
sales and marketing teams. When they see a ton of 
value from lead generation, that gives us the right 
to show up a little later and say, "You would really 
benefit from onboarding those same users with 
the context you've already established."
You can anecdotally figure a lot of this out just by 
looking at your best customers. Find someone 
who's been a customer for years, who's slowly 
over time added every product that you've sold 
them. Then ask, "Does this pattern exist anywhere 
else? Are there other companies who have done 
parts one and two of this four-step pattern?" 
That's your opportunity.
58
 [05] Testing & Optimization
"To learn is to grow." 
This is a common phrase in the world of professional 
development, but it's equally true when it comes to 
growing a business. A culture of, and dedication to, testing 
and optimization is a core component of meaningful 
growth. 
This is because growth is often a game of diminishing 
returns. The growth tactics and channels that worked 
yesterday likely aren't working as well today, and will yield 
even worse returns tomorrow. What's more, these tactics 
are hardly repeatable. What lit a fuse under acquisition for 
a financial technology company, or increased the number 
of daily active users for an education app, is never a sure 
thing in another vertical.
To stay ahead of the curve, you have to test, test and test 
again. Every growth experiment, no matter the results, 
yields an opportunity to learn about your business and 
users, and grow further. If the results are really good, 
you've found something with meaningful impact  
optimize it for all its worth. If you see a small change, ask 
yourself, was the impact worth the effort?
And if you've found something that doesn't move the needle 
at all, there's value in that too. It signals that something was 
wrong with your intuition (about your product or user), or 
you've missed something along the way.
The quickest way to stunt your company's growth is 
resting on your laurels. So, what growth experiment will 
you run next? 
[05] Testing & Optimization
59
[05] Testing & Optimization
[05] Testing & Optimization
There's a time and place for 
growth hacking (and it's not a 
startup)
Des Traynor, 
Co-founder, Intercom
 For young companies, small optimization projects just don't make 
sense. Changing the copy from "sign up free" to "sign up for 30 days free," 
or comparing a red button with a green button might see a slight uptick, but 
you're likely working towards a local maximum. You're trying to go to the 
last 100 yards, and you're doing it with small experiments, each of which, 
unfortunately, takes a long time to run unless you have a very high traffic site. 
That means these generally tend to be a waste of time for startups, distracting 
you from working on projects that matter.
There's a lot of big company envy that happens in startups. They see a 
big company doing an A/B test that pays off with a .2% improvement in 
conversion rate, and for Amazon, that change might be worth $100 million, 
and they get their result in days. But for a startup, it's more like worth $1,000 
in MRR and it took 7 months of a frozen homepage to get the 'learning'. 
When you're pre-scale the time, money and headspace spent trying to 
tweak systems that have to prove their worth is better spent elsewhere. 
Similarly, don't stress yourself if you read an A/B test that guarantees a 5% 
lift in conversions. It never delivers. Copying someone else's test results is 
like wearing someone else's glasses. They weren't meant for you.   
60
[05] Testing & Optimization
[05] Testing & Optimization
Navigating the landscape 
of growth opportunities
Jeff Chang,  
Growth Tech Lead, Pinterest
 A common problem that new growth teams have is that 
they overinvest in a growth opportunity that is not paying off, 
while many other good opportunities are lying around. If a growth 
opportunity is not paying off anywhere near expectations, fail fast 
and try some other ones. Naturally, as the growth team expands, 
it will invest more into opportunities that continue to show high 
impact. In the beginning of Pinterest's growth, quite a few times we 
had decent-size teams working on a project for months, with little 
to no impact. Sometimes, a project would be completely scrapped 
and months of work would be wasted. Since then, we've learned to 
fail fast and now every subteam on growth has a significant amount 
of impact.
As for specific opportunities, I would recommend trying at least 
one acquisition opportunity and one retention opportunity to start 
out. Acquisition without retention has a well known "collecting 
water into a leaky bucket" problem, and retention without 
acquisition leads to slow growth rates. So, you will eventually need 
to solve both problems. Here are some sample opportunities in 
each category and some product characteristics that suggest you 
should try each one.
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[05] Testing & Optimization
[05] Testing & Optimization
Acquisition:
SEO - Product has quality web content
Mobile web to app conversion - Product gets mobile web traffic and also 
has an app
Signup conversion - Every product that requires authentication
Performance - Every product
Paid acquisition - Company has a budget and decent LTV
Virality - Product has social aspect
Referrals - Product has something to give to users to incentivize them
Retention:
SEO - Product has a lot of web content
Email - Every product
Performance - Every product
Push notifications - Product has an app
Login conversion - Every product
Paid resurrections - Company has a budget and decent LTV
As you can see, a lot of these opportunities probably apply to your product, 
and this list is not exhaustive. Eventually, you want to have tried them all!
Excerpt from "How to prioritize the right projects."
62
[05] Testing & Optimization
[05] Testing & Optimization
How incremental  
improvements compound
Yao Choong,  
Director of Business Operations, Intercom
 Venture capital is an interesting, risky game of finding a small number 
of outlier companies that are going to generate all of your returns. When I 
worked at Social Capital, our CEO, Chamath Palihapitiya, tried to change the 
game. He thought that if we could shift the odds of success for the companies we 
invest in, even by a few percentage points, that edge would compound across 
all the investments in our portfolio, and result in a large cumulative gain in our 
performance. A good public markets investor might make a good decision 55% 
of the time versus a mediocre investor who's basically a coin flip (or worse), but 
the performance of the good investor compounds over time. Creating a growth 
mindset and applying a set of growth best practices across our portfolio was his 
way to systematically shifting our odds.
What this looked like in practice was helping our portfolio companies make 
little investments in doing things better: Could we make one improvement in 
X? If that works, could we make another improvement in Y? As long as these 
investments are carefully judged and fit into a holistic framework, they stack 
on top of one another and compound. They synergize, which is precisely 
the power of exponential growth: Consistent 1% improvements over time 
will yield larger and larger absolute increases in performance. In that sense, 
growth is not about coming up with the one master stroke that fixes all of your 
problems. Growth is the judicious, iterative improvement of all of the parts of 
your business that need to be improved, while maintaining a holistic sense of 
how all the parts fit together.
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[05] Testing & Optimization
[05] Testing & Optimization
Test to learn
Sean Ellis,  
CEO, Growth Hackers
 The goal of a growth team is to test at a high 
tempo. You're testing across each of the vectors 
in the AARRR framework. The more testing you 
do, the more you're going to learn. It's all about 
learning to figure out what's going to work and 
what's not going to work in the business.
A good example of that is Twitter. We all know that 
Twitter's had some growth problems recently. 
That's probably part of the reason they're open 
to the idea of adding an algorithm. This isn't the 
first time that Twitter had growth challenges.
In late 2010, they had an almost flat quarter. At 
that time, they were running less than one test 
per week; they brought in a new head of growth, 
who pushed to get that testing frequency up. 
They got it to 10 tests per week. You can see they 
had years of consistent growth once they got 
their testing up to 10 a week. 
It really does come down to testing, and you 
obviously want to be smart about what you're 
testing.
Excerpt from "Sean Ellis On Building a Company Wide Growth Culture."
64
[05] Testing & Optimization
[05] Testing & Optimization
The temptation of  
recency bias
Brian Kotlyar,  
Director of Demand Generation, Intercom
 It's human nature to have recency bias. "This works, 
let's do more." Salespeople see this challenge often. They index 
on a deal that they recently lost or recently won, and they 
assume that's a pattern they can exploit more broadly. The 
truth is they can't, because they either don't see or don't fully 
appreciate all the unique factors in how they closed, or lost, 
that deal.
It's the same in marketing. In online advertising, for example, 
you'll find a targeting tactic or a creative tactic that works 
super well on a small scale, and when you try and scale it up, 
it doesn't work. The efficiency dissipates as you spend more 
money. This happens to us all the time. We figure out a good 
piece of creative and a good piece of copy, and it produces a 
couple customers at a really good rate. I'll tell our agency to 
push it harder, they try and all of a sudden we're spending 
10 times more than we had planned to get those customers. 
Then I have to tell them to pull back.
On one hand, you want to keep a childlike mindset where 
you're willing to continue to try and experiment and not feel 
burned by a particular channel or tactic. At the same time, you 
have to really be cautious as you try to scale  push too hard too 
fast based on limited data and you might end up in big trouble. 
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[05] Testing & Optimization
[05] Testing & Optimization
The law of shitty 
clickthroughs
Andrew Chen,  
General Partner at Andreessen Horowitz
 The very first banner ad was for 
HotWired, and it had a clickthrough rate of 
more than 70%. Now, 20 years later, the average 
clickthrough rate is close to .05%. It's very low, 
and anyone who has worked in the industry long 
enough has seen this happen with email, SMS and 
all sorts of other things for a bunch of reasons. You 
have competition, and you have the platforms 
themselves saying, "Hey, we need to clamp down 
on this." There's literally habituation from end 
users who are thinking, Oh, it used to be fun to 
get a invite from my friend, but now I'm getting 
it all the time. It's less effective, because you have 
a crowding effect.
I call this "The Law of Shitty Clickthroughs", 
because it's something that has been with us for 
a really long time and will continue to be. For 
all of us in marketing and growth, that means 
we have to continually find the fresh powder, 
because inevitably whatever worked in the past 
will no longer work. By the time a case study has 
been published on Medium about something that 
works, it's probably done. Everyone still has to do 
it, but then you have to move beyond it.
A lot of the interesting work happening out there 
ends up on these "frontier platforms." These are 
areas where maybe some of the big companies 
haven't quite wised up yet; maybe they haven't 
started experimenting; maybe the channel is a 
little too small. These are things like Alexa Skills.
One big area I have found really fascinating is the 
ecosystem that's being built around gaming right 
now. You can livestream things, you can do voice 
chat  you can do all of these different things 
around ephemeral networks of players who are 
getting together over a short period of time to 
play one game. You're not going to want to add 
all these folks to your Skype or Google Hangouts 
because you are literally just coming together for 
one game. However, a product that understands 
that ephemeral network can then build a whole 
ecosystem around it, and that's what we've seen 
with Discord and Twitch.
It behooves all of us in the industry to stay on top 
of these trends and to see what's working, because 
otherwise we're in constant competition where 
all of our stuff stops working over time.
Andrew Chen as heard on on the Inside Intercom podcast.
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[05] Testing & Optimization
[05] Testing & Optimization
The best startups resist 
snacks
Des Traynor, 
Co-founder, Intercom
 The best lessons in business come in plain English and 
speak uncomfortable truths. One such example is something we 
learned from Hunter Walk. He pointed out how fundamental it 
is to avoid low-impact work. To explain, he drew a 22 graph 
that has since become famous in our company.
Everyone's favorite quadrant is the low-effort, high-impact 
stuff. But when you continually pick the low-hanging fruit, 
the branches will stop growing, so this work dries up quickly 
as your product and team matures. Most startups are sensible 
enough to avoid the high-effort, low-impact work. The lower 
left quadrant is the one worth talking about.
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[05] Testing & Optimization
[05] Testing & Optimization
It's the low-effort, low-impact work that can kill you, because 
it's so attractive. Hunter refers to it as "snacking". It feels 
rewarding and can solve a short term problem, but if you never 
eat anything of substance you'll suffer.
This work is easy to justify, because "Why not? It'll only take a 
few hours." And when it achieves nothing useful, it's easy to 
excuse, because it "What's the problem? We only spent a few 
hours on it". The wasted time compounds a lot quicker than 
the insignificant results. Do this enough times and you'll grow 
a low impact team that doesn't achieve anything.
Excerpt from "The first rule of prioritization: No snacking"
68
[05] Testing & Optimization
[05] Testing & Optimization
Adding layers to 
the cake
Jeff Jordan,  
General Partner, Andreessen Horowitz
(Former GM, eBay North America)
 One of the first places eBay looked for 
growth was in buying formats. At the time, ebay.
com enabled users to buy and sell solely through 
online auctions. Many in the community 
thought this was the magic of the site, and it 
clearly helped propel the company to a very 
strong start.  But auctions intimidated many 
prospective users who expressed preference for 
the ease and simplicity of fixed price formats. 
Interestingly, our research suggested that 
our online auction users were biased toward 
men, who relished the competitive aspect of 
the auction. So the first major innovation we 
pursued was to implement the (revolutionary!) 
concept of allowing sellers to offer items for a 
fixed price on ebay.com, which we termed 
"Buy It Now."
Buy It Now was surprisingly controversial to 
many in both the eBay community and eBay 
headquarters. But we swallowed hard, took the 
risk and launched the feature  and it paid off 
big: Buy It Now complemented auctions well, 
brought new users and new listings to the site 
and became a very important driver of growth for 
many years. These days, the Buy It Now format 
represents more than $40 billion of annual Gross 
Merchandise Volume for eBay, 62% of their total.
After that initial success, we doubled down on 
innovation to drive growth. We introduced stores 
on eBay, which dramatically increased the amount 
of product offered for sale on the platform.  We 
expanded the menu of optional paid features for 
sellers to better highlight their listings on the site. 
We improved the post-transaction experience 
on ebay.com by significantly improving the 
"checkout" flow, including the eventual seamless 
integration of PayPal on the eBay site. Each of these 
innovations supported the growth of the business 
and helped to keep that gravity at bay.
I came to call this process of layering in new 
innovations on top of the core business "adding 
layers to the cake." Much of the natural effort in 
the organization is spent on chasing optimization 
of the core business. This makes sense, as small 
improvements in a big business can have a 
meaningful impact. But there is huge potential 
leverage to adding layers of new, complementary 
businesses on top of the core (aka "cake"). In 
the ebay.com case, Buy It Now, stores, features, 
checkout and PayPal integration were all new 
initiatives that layered on top of the core business.
Excerpt from "A Recipe for Growth: Adding Layers to the Cake."
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[05] Testing & Optimization
[05] Testing & Optimization
You are not your  
customer
Casey Winters, 
Scaling and growth adviser
(former growth leader at Pinterest and GrubHub)
 It's common to hear someone at a startup say, "When I 
do this, this is the way that I do it." But you're not the customer. 
I don't care how much you look like the customer, you have 
way too much knowledge about this problem to assume that 
the way you do it is the way other people will do it. Do a lot 
of qualitative research and get something in front of potential 
customers. Put a phone in front of them, tell them to sign up 
for your product and watch what they do. Ask them questions.
I spent most of 2015 traveling to different countries to watch 
people sign up for Pinterest. It was horrifying. Everyone was 
confused. No one understood what the product was for. It was 
bad. But that time led to a number of insights and, in turn, a 
bunch of successful experiments that grew the activation and 
retention rates of our products. You can't learn if you're not 
putting your product in front of users and watching how they 
do it. Sure, an experiment can tell you what's going on, but it's 
not going to tell you why. You really need to get in front of your 
user base to understand that.
Casey Winters as heard on on the Inside Intercom podcast.
70
 [06] Metrics & Measurement
Growth metrics are the heartbeat, blood pressure and 
temperature of your company: the core indicators that 
reveal the health of your SaaS business at its most 
fundamental level. (This is the reason they form a crucial 
part of many investors' due diligence.)
The problem is that growth metrics can be complex, 
confusing and contradictory; keeping a finger on the 
pulse of your business can be easier said than done. For 
every growth expert telling you to track month-on-month 
growth, there's another telling you that tracking daily 
active users is where the rubber hits the road.
It's impossible for one metric to give you a 360 degree 
view of your business's growth, but taken together they 
can provide answers to difficult questions: How can we 
increase customer acquisition? How profitable are our 
customers? What do we need to do before we pitch our 
next funding round?
Remember, what you measure is what you end up 
optimizing for. Get a handle on your growth metrics 
early, and you'll lay the foundations for authentic growth 
to follow.
[06] Metrics & Measurement
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[06] Metrics & Measurement
[06] Metrics & Measurement
Bringing analytics 
into your startup 
early
Bobby Pinero,  
Senior Director of Finance, Intercom
  I came to Intercom right after we closed 
our Series A funding round. At that point only 
product people were at Intercom. I think our 
lead series A investor, Mamoon Hamid from 
Social Capital, looked around and said it was 
time to get the house in order from a finance and 
measurement perspective. 
Joining at that early stage, right before we hit $1 
million dollars in annual recurring revenue, was 
really insightful. Eoghan and the founders had 
done a great job setting up the fundamentals, but 
by bringing in finance and analytics, we could 
start to understand deeper questions about the 
business. We could figure out where that ARR 
was coming from. How could we think about 
it moving forward? Why might we need future 
capital? When might we need it? Who might we 
want to start hiring? 
Getting these questions answered made our 
later rounds of fundraising easier. Your job while 
fundraising, whether you're the CEO or the CFO, 
is to use data to build a case for why your company 
is going to be X times more valuable than it is today. 
Then it's up to you to put those data together in a 
compelling story. 
Every business is so different. Every business has 
a different story, is selling to different segments, 
has different market positioning and has different 
buyers. For us  and this is something I'd advise 
any other startup to do  it was all about finding 
the metrics that proved Intercom was on the road 
to being successful.
Bringing finance and analytics in early also meant 
we could all get on the same page regarding 
metrics. One mistake I see at a lot of other early 
stage startups is that they don't have well-defined 
sources of truth. People start talking about churn, 
but what are they really talking about? Are they 
talking about gross MRR (Monthly Recurring 
Revenue) churn? Are they talking about net 
MRR churn? Are they talking about customer 
churn? Too often, metrics get thrown out, and 
it's unclear exactly what they mean. It's easy to 
spend a lot of time arguing about the actual data 
and numbers instead of figuring out what those 
data and numbers are telling you. 
Excerpt from Intercom on Starting Up
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[06] Metrics & Measurement
[06] Metrics & Measurement
Bringing analytics into your 
startup early
Tomasz Tunguz,  
Partner at Redpoint Ventures
   Proxy metrics are powerful for four reasons: 
 They are easy to measure;
 They are correlated to (and ideally predictive of) the business' goals;
 They are concrete and create a unifying vision for the team; and
 They enable businesses to iterate faster by reducing latency.
Great companies employ proxy metrics all the time. If a new Facebook 
user adds seven friends in 10 days, they'll be a long term user. The more 
engagement minutes a customer spent digging through their data in Looker 
during a trial, the greater the likelihood that trial customer converted to a 
paid customer. At ThredUp, the world's largest online consignment store, 
buying products both on web and on the mobile app indicates high customer 
lifetime value. If a user creates an expense policy on Expensify, there's a very 
high chance a company will buy the product.
How do you find proxy metrics for your business? There's no shortcut. 
Andrew Chen has written a blog post describing how to do it, step by step. 
Define the goal, explore the data, run a regression and then backtest.
Excerpt from "How To Create Competitive Advantage For Your Startup With Proxy Metrics."
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[06] Metrics & Measurement
Why lead velocity 
rate is the most 
important metric 
in SaaS
Jason Lemkin,  
Founder, Saastr
 Sales as a metric is a lagging indicator, 
and pipelines are crap for predicting the future. 
The pipeline for this month is useful, but still 
dependent on how various reps get probability 
right. The pipeline for next quarter is almost 
useless for most SaaS startups, even once they 
get pretty big. And actual sales reflect leads from 
the past that were qualified, managed, and then 
closed over a 12-plus month period. Even if your 
sales cycle is short, how long ago was the lead first 
created? The sales you get this month are really 
the sales you began to create more than a year ago.
But there's a better metric, your key metric, that 
you should track and score yourself to, and hold 
your VP of Marketing and your marketing team to 
 qualified lead velocity rate (LVR), your growth 
in qualified leads, measure month over month, 
every month. It's real time, not lagging, and it 
clearly predicts your future revenues and growth. 
And it's more important strategically than your 
revenue growth this month or this quarter.
If you set as a top corporate metric growing your 
LVR about 10-20% greater than your desired MRR 
growth  and you have a consistent sales team  
you'll hit your revenue goals.
And the great thing about LVR is that while sales 
ultimately may vary quarterly, and a lost renewal 
can hurt, there's no reason leads can't grow every 
single month like clockwork  every single month.
As long as you are using qualified leads, and you 
use a consistent formula and process to qualify 
them, you can then see the future.
Excerpt from "Why lead velocity rate is the most important metric in SaaS."
The pipeline for next 
quarter is almost 
useless for most SaaS 
startups, even once 
they get pretty big. 
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[06] Metrics & Measurement
The Customer Lifetime 
Value to Customer 
Acquisition Cost Ratio
Dave Kellogg,  
CEO, Host Analytics
  Some people say, for example, that a customer 
acquisition cost (CAC) ratio of 2.0  meaning that you paying 
a $2 CAC for every $1 in ARR  is bad. And indeed, if you're 
selling a month-to-month product where most customers 
discontinue by month nine, then a CAC of 2.0 is horrific.
However, if you're selling sticky enterprise infrastructure, 
replacing systems that have been in place for a decade with 
applications that might well be in place for another decade, 
then a CAC of 2.0 is probably fine.
That's the point: There is no absolute right or wrong answer to 
what a company should be willing to pay for a customer. What 
you are willing to pay for a customer should be a function of 
what they are worth.
Excerpt from "The Ultimate SaaS Metric: The Customer Lifetime Value to Customer Acquisition Cost Ratio"
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[06] Metrics & Measurement
[06] Metrics & Measurement
How many people 
are really using 
your product?
Josh Elman,
VP Product, Robinhood and 
Venture Partner, Greylock 
 You need a metric that specifically 
answers this. It can be "x people did three searches 
in the past week." Or "y people visited my site nine 
times in the past month." Or "z people made at 
least one purchase in the past 90 days." Whatever 
it is, it should be a signal that customers are using 
your product in the way you expected and that 
they use it enough so that you believe they will 
come back to use it more and more.
Once you can define a metric to answer this, 
then you can really track your growth on a day-
to-day, week-over-week, month-over-month 
basis. And from there, you can identify the key 
supporting metrics that show you how likely it 
is more people will convert to using 
your product on a frequent basis, how 
likely they are to stay on your product 
vs churn out, etc.
At Twitter, we found that if you 
visited Twitter at least seven times in 
a month, then it was likely you were 
going to be visiting Twitter in the next 
month, and the next month, and the 
next month. And we decided this was 
enough initially to be "really using it," 
though of course I think Twitter gets 
even better when people use Twitter 
at least once every day.
Excerpt from "The Only Metric That Matters."
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[06] Metrics & Measurement
Understanding what activity 
means for your product
Karen Church,  
Director of Product Analytics & Data Science, Intercom
 MAU (monthly active users), WAU (weekly active users) and DAU 
(daily active users) are a useful way to help you think about how engaged your 
user base is. However, if you're going to use one of these metrics, it's important 
to assess what "activity" means for your product. Simply logging in is often not 
a good signal of engagement. 
Take daily active users. Is the product or feature you're building something 
you expect people to use every day? Is it every week? For example, if you're 
building tax return software like TurboTax, a metric like daily active users 
doesn't necessarily correspond with how people use the product.
A more meaningful approach is to break your users into segments and look at 
activity based on segments  these segments might be based on demographics, 
company type, geographic location, sales-owned versus self-serve, product 
mix, etc. By tracking MAU/WAU/DAU across these segments, you can often 
learn more about your user base and potential issues specific segments have 
with your product.
Time is another important measure of engagement to consider. This might be 
time spent in your app or some measure like session duration or session length. 
Think of a session as a group of user interactions. Session length is the number 
of actions or interactions in a given session. Session duration is the total amount 
of time a user spends in your app or product in one session. The premise is 
that the more time users spend in your product, the more engaged they are. If 
users log in but don't spend much time interacting with your product or they 
quickly bounce, that might indicate a lack of engagement. 
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[06] Metrics & Measurement
[06] Metrics & Measurement
Setting your  
analytics team up for 
success
Sylvia Ng,  
Director of Product Operations, Shopify
 At a certain point of your startup's life cycle, it 
simply isn't enough to be doing analytics piecemeal anymore 
  somebody needs to set a strategic direction and make sure 
data engineering happens to serve the company's needs. A lack 
of a good analytics program can leave you with a whole slew of 
problems, including projects launching without tracking put in 
place for measuring success, KPI charts with peaks and valleys 
and no known causes, hours spent matching reports produced 
by different teams (e.g., one team has Daily Active Users going 
up; the other has it going down).
Some of these problems may sound mundane, but trust me, they 
are more than just annoyances when you want things to scale. 
If you're trying to build your company's growth machine, you 
can't experiment properly if you have all these issues getting in 
your way.
A lot of startups spend a considerable amount of energy on 
picking the right analytics tools and technology, but even the 
best technology won't help unless you lay the groundwork for 
success. So what is the solution?
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[06] Metrics & Measurement
There are probably many ways to tackle it, but here I'll delve into how we 
approached it at 500px, which is roughly following this framework:
The basics were already set up before I arrived  KPIs, reports and data 
infrastructure. The next step was to scale that out, which required additional 
investments in the team and tools, leveraging the data modeling for deeper 
insights, and most important, implementing standards and process to deal 
with the problems I mentioned above. Once you have a program that can 
scale, you can then focus on the gold  leveraging data in your products, 
making automated decisions (spend allocation in marketing campaigns or 
personalizing your homepage for example) and setting up the infrastructure 
so that data is delivered reliably.
Excerpt from "How to Setup Analytics for Scale."
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