Metrics are important for measuring the health of any startup. As soon as the company has been launched, all eyes are on measuring its performance, and those measurements will affect the company’s trajectory, prospects, and future funding.
Given the importance of metrics, it’s a little surprising that measuring metrics is one of the least commonly talked-about parts of the pre-launch period for a startup. It’s something that every team of founders should take the time to monitor, however, because it can be critical in building a foundation towards success.
Why pre-seed metrics matter
There is no crystal ball that will tell you definitively that your startup is on a pathway to success, but tracking the right metrics can give you some confidence that you’re heading in the right direction. More importantly, it can also help you engage with investors and secure pre-seed capital. Usually when we talk about metrics, we’re looking at data for things that have already happened. Every post-launch business is looking at sales and revenue data, for example, as a way of tracking progress and predicting what will come.
For a company that has yet to launch, however, that kind of historical data simply isn’t there. Instead, the right sets of pre-seed metrics will focus on proving the demand for the product and evidence that the company being built will be a capital efficient and long-term sustainable business. Essentially, you want the metrics to point to the idea that you’re pursuing something worth doing.
Because the focus is firmly on looking at future potential, these pre-launch metrics can also highlight red flags in the business before it has launched. In other words, the pre-seed metrics are an opportunity to refine the approach to market that the business will have and ensure that it’s going to hit the right notes with the market once it’s operational.
How do you determine what pre-seed metrics to focus on?
Once you start digging into what data is available for your pre-seed startup, you’ll realise that there is actually a lot of information that can be tracked. Not all of it will be useful, and indeed, some of it will be counter-intuitive. For example, your pre-launch website might have a teaser block of text and an email signup to go on the mailing list for the company launch. If the block of text has been written well with SEO in mind, your website might well be attracting organic traffic, but that doesn’t mean much and it would be a mistake to track it.
The metric that does mean something is the number of signups that you’re getting, and the conversion rate, because that percentage, from visitor to someone interested enough to sign up, is an indication of the underlying appeal in the business.
The pre-launch metrics that you should be focusing on will speak to the following:
- It should be actionable—The data insights should help you refine the business model.
- It should give you insights into the customer—You might not be able to measure sales, but what you can measure is demand, where it’s coming from, and what strategies have been effective in reaching and engaging with your key audience.
- The metrics need to be testable—There’s no point having data that you can’t prove.
What metrics do investors look for when assessing pre-seed companies?
As we noted previously, the kind of historic data that defines metrics post-launch isn’t going to be available to pre-launch companies. In its absence, what investors look for in pre-seed companies are metrics that point towards momentum.
Momentum is not an abstract concept—it is something real and demonstrable. It’s not feelings and impressions. A pre-seed company might be drumming up a lot of chatter—let’s call that “hype”—but that’s something different to momentum, and investors will generally see the difference.
A good example of the difference between the two is Quibi. Quibi was actually able to generate a lot of pre-launch investment—it raised nearly $2 billion before it even launched across multiple rounds of funding—but that investment came purely from hype. It was a company with a rockstar founder and enormously well-respected, veteran CEO, and it was going to deliver video content in a mobile-friendly format. It sounded like a slam-dunk of an idea.
Quibi shut six months after launch. Had people paid close enough attention to the important pre-launch metrics and the momentum behind the company they would have surely seen red flags, because no company that has momentum is going to shut down mere months after launching.
A post-mortem on Fortune even highlighted the hype effect that Quibi had—big-name investors were getting on board with is, so other big-name investors wanted their piece of the pie: “there was also some follow-the-leader logic: Big-name investors such as J.P. Morgan and Goldman Sachs gave Pegasus some comfort with the company’s viability.”
How investors find momentum in pre-launch metrics
Quibi was a rare exception to the rule—a case where investors let FOMO and hype override their typically cautious approach to pre-launch companies. Most of the time, they’re going to be looking for metrics that demonstrate momentum, not hype.
There are several qualitative and quantitative metrics that can point towards momentum. These include:
You don’t necessarily need to be able to fill all of these metrics in. If your startup is not at the stage where it has this data, then it doesn’t have the data. The idea is that you want to be as comprehensive as you can, however, as these metrics will provide the picture on where your business is and where it is going.
How to use metrics to pitch your pre-revenue company
The metrics that you gather will form the basis of the numbers that you present in your pitch deck. They need to therefore tell two stories. Firstly, they need to explain the market opportunity and why there is room in the market for the startup. Secondly, they need to tell the story of the company and highlight the personal interest that people will have in it.
Start with the objective data
One useful technique to achieve this and give your data weight is to be fully transparent in the data that you’re providing. The pitch deck itself would have, for example, a table with a competitive analysis breakdown that looks at the revenue, funding, user numbers, employees and target markets, and that your metrics around pre-registrations for users show that you’ll be able to quickly accelerate to be competitive with these organizations.
Aside from the pitch deck, however, create a data room resource in Dropbox or on a Google Drive, and in it put all the sources and resources that you’ve drawn on in your research. Show your working, in other words.
For these metrics where you’re providing cold, hard facts, giving investors the chance to verify them after the meeting is going to lend your pitch a great deal of credibility.
Then source supporting data of your own
Once you’ve got the objective data, the next step is to source metrics of your own, which you’re going to use to tell the story of your company. Here’s where you can get creative and there are a nearly endless number of ways you can generate your own data. Real-world interviews are a goldmine of information and, surprisingly, one that many startup founders neglect in their pitches.
Surveying the audience is also an excellent source of hard data that you need on your company. Once you’ve built up a wait list of interested customers, you can go to them and test a variety of price points through a survey, and use that to demonstrate that your pricing model hits the right notes.
Another opportunity might be to create a simple application In Bubble—a no-code tool that allows you to rapidly create and deploy an application—and use that as a way to push an early feature test out to the customers and gauge how they interact with it.
Your pitch should have a combination of both of these things—you want the customer experiences and feedback that tell your story and point to some early internal metrics, and then you want the objective, researched evidence to demonstrate that there’s substance to the qualitative feedback.
One final note: be aware that the metrics will evolve as your business grows
As your business moves through the pre-launch stages and then launches with the MVP and beyond, the metrics are not going to stay static. It’s important that you approach this from an iterative perspective, and constantly track and update the metrics. The closer that you keep an eye on the data, the more agile and flexible you’ll be able to be in responding to what it’s telling you.
It is easy to overlook the value of metrics to companies that haven’t yet launched. The founders are busy juggling the practical steps towards the MVP, and there’s the perception that, given there aren’t customers, there also isn’t that much data that the company is generating yet.
This simply isn’t true, and a company generates data from the moment the founder embarks on the entrepreneurial journey. The trick is in understanding how to gather and use this data, and founders that are successful at that are positioning their company to have the biggest possible impact with their launch.