Define Ventures
Define Ventures
Published in
16 min readOct 20, 2022


A cross-collaboration between two tech entrepreneurs on the fundamentals of consumer acquisition and how growth accounting is the new fundamental in healthcare.

Bangaly Kaba, MBA is a product management leader and advisor to Define Ventures. Previously he was an EIR at Reforge, the leading career development company for tech professionals, VP Product at Instacart, and Head of Growth at Instagram, where his teams helped Instagram scale from 450M to over 1B monthly actives in just 2.5 years. He’s also led a growth team at Facebook and consulted on strategy and growth for notable consumer tech companies like Discord and Twitter.

A.G. Breitenstein, JD, MPH is a serial entrepreneur & investor. She is a Venture Partner at Define Ventures and the Founder and Executive Chair of FOLX Health – a telehealth platform that supports the LGBTQIA+ community. She was previously Co-Founder and Partner at Optum Ventures, Co-Founder & Chief Product Officer of Humedica (acq: UNH/Optum). Before Humedica she was a Director at Leerink Swann, a leading health care investment bank.

“As go the people, so goes the money”
–A.G. Breitenstein

What is CAC and why is it important?

BK: CAC is Customer Acquisition Cost. It’s generally defined as:
(Cost of Sales + Cost of Marketing) / The new customers we acquire

CAC and LTV (Life-time Value) are calculations used to try to understand the health of a business.

While this is a generally straightforward calculation, oftentimes businesses aren’t honest with themselves regarding their true cost of sales, and true cost of marketing. These costs depend on what kind of business you’re running and what the Go-to-Market motions are. E.g. ad spend, salaries for people who are going out and actually acquiring users or businesses, the cost of making creative, the writers who publish your content, etc. If you have inventory: include all of the inventory marketing & sales dollars into CAC.

A lot of companies make mistakes with attribution; this often happens with putting all of your customers in the denominator instead of those you actually acquired from where that specific set of work was done. Your real CAC is going to be the Cost of Sales or Cost of Marketing (Paid CAC) over the customers that are acquired through those specific efforts–and are attributable to those specific efforts–as opposed to all of your overall organic customers.

You should be tracking both Paid and Organic acquisition in order to calculate your Blended CAC. This metric represents the overall CAC based on the attributable and organic customers you have acquired. It’s important that companies are honest with what their real return on ad spend is, as that greatly affects the calculation of CAC.

What is LTV and why is it important?

LTV is the gross profit a customer delivers to your business in their lifetime, or the amount of revenue your business will make from a customer over their average lifetime as a customer. There are several inputs that go into LTV: the purchase value (how much are people paying for it, etc.).

Purchase Value and Purchase Frequency greatly impact LTV. An example would be companies that have chronic illnesses that require routine spend on medicine. In that instance you might have a pretty high average Purchase Value because someone might need asthma medicine every month that costs $4/month. This is different from buying a pair of shorts twice a year. The shorts cost $30/each but the frequency is much less (twice a year instead of monthly). The customer value is the combination of the Purchase Value ($30) and the Purchase Frequency (2x/year).

LTV requires that you extrapolate that across the lifespan of the customer. You can project LTV over your customer lifetime by dividing the average revenue per product or subscription by the churn rate. This is an estimate as churn rates will vary over time.

In healthcare, a chronic condition is going to be vastly different from a quick, treatable infection. One might take place over years where the other might only last weeks or months. It’s important to be honest with what the expected lifespan is.

Acquisition and Retention

It’s important when calculating CAC to think not only about the customers you acquire, but the customers you retain. If you are just acquiring customers, but customers aren’t retaining, then you’re not really able to calculate a true LTV.

How do you decide what is the real retention of the people you bring in the door? How do you measure that?

When you think about LTV::CAC, you’ll often hear of the 3:1 ratio, commonly known as The Golden Rule. If the ratio is 1:1, that means the money you’re spending is exactly the same amount of money that you need to acquire people: it’s not capital-efficient. Whereas a 3:1 ratio is supposedly capital efficient. Additionally, some people like to believe that if the ratio is more than 3:1, you’re being inefficient because you’re not spending enough money on acquisition. Regardless of whether or not that is The Golden Rule, the rationale behind that is that there is a sweet spot.

Sometimes, however, there are unique opportunities in products where you might have a highly efficient opportunity to go and spend where you don’t need to have a 3:1 ratio, where it’s okay to have a 20:1 ratio. An example is in some communities, such as the black community and the queer community, where these communities are highly viral, highly organic, and word of mouth goes a long way. You might have a content motion where you’re creating amazing content that supports your product, and the CAC is very high and you shouldn’t just be spending money to drive down your LTV to CAC.

CAC :: LTV Ratio Measures The Health of Your Business

What are funnel loops and why are they important?

BK: A lot of traditional understanding of growth mechanics has been funnels: for example, an Acquisition Funnel, an Activation Funnel, Retention, etc.

There are four main buckets of types of loops you can build:

  1. Viral Loop (aka Build Your Network, Invite Your Friends): This is a virality loop predicated on building your network. It happens when you join the platform, find value, and then go through an invitation experience to invite my friends. This becomes self-sustaining.
  2. User-Generated Content (UGC) Loop (or Company-Generated Content): UGC was a kind of SEO engine where user profiles and embedded content generate high SEO rankings for increased discoverability. Every time someone created an account on Instagram, we had incredible SEO on that profile and their identity became very searchable. For example, if you type your name on Google, it ultimately starts to rank high on SEO, towards the first page and position zero. That UGC loop helps to drive a lot of user acquisition.
  3. Word of Mouth (WOM) Loop (e.g.Celebrity Partnerships): This was a very creative content and influencer-generated play at Instagram. The cost of acquisition surrounded all of the people who managed and grew the celebrity network.Those celebrities had extraordinary reach. That reach extended every time a Kim Kardashian or a Bella Hadid posted. These celebrities reach millions of people; sometimes news outlets would continue to distribute that content over and over again.
  4. Paid Advertising Loop: In the early days, Instagram had a nine-figure advertising budget. This focused on driving SEOs, SEM, mobile app install ads, etc. You name it, Instagram did it. They were able to make paid advertising very efficient because all of the other loops did a lot of the brand marketing for them. The strategy was for marketing to build user awareness and interest in consideration. The advertising helped with conversion.
  5. Sales Loops: inbound (self-serve, bottoms-up motion where people reach out to you, such as Slack); and outbound where you have channel partnerships

All of these loops are interactive and create an everlasting momentum machine. They are tracked individually, but they also interact with each other. Depending on what kind of business you have depends on what kind of loops you want to build. You need to figure out one first, that’s going to work for your business. It takes a while, but you have to figure out what makes sense for your specific business.

There are several steps in a funnel. One different embedded way of thinking is that funnels are an important component, but they’re not sufficient in and of themselves. This means that while you can get people through the funnel, what you actually need is a loop that is self-sustaining, where the inputs are less than the outputs.

You can have different types of loops: there can be a constant loop. An example of this is a DTC healthcare company that creates content that is highly important to specific users: they are spending a very specific amount of money on content writers and/or on publishing. They then use that content to reach people via Search-Engine Marketing (SEM) and Search Engine Optimization (SEO). They can measure what that looks like.

With a certain amount of new content, they can drive a certain amount of Top-of-Funnel, which will then drive a certain amount of conversion. Then the retention is high enough that it pays for itself. Therefore, feeding this loop drives more and more output. You want to build loops on top of one another: that is how you build a growth engine. You don’t just do one or the other. Find one, build it, and then rinse and repeat to add more value.

AB: A lot of the fundamental flaws in the health care system trace back to asymmetries of information. Patients want information about their health in digestible formats that they can consume on their own. This is a huge opportunity for companies. This idea of using content and generating loops is very powerful relative to the fundamental problems that patients, physicians, and all the stakeholders in the healthcare system.

How do you measure and execute these loops?

BK: Some of these are more measurable than others: the paid loops are pretty measurable. It is important to make sure that you have someone who knows how to run your campaigns on Facebook, or Google etc. Ensure those campaigns then flow through, segment, and connect to the actual users who are signing up. I think the key is that for any consumer or B2B, B2C or B2B business, there is some activation metric that is highly correlated with long-term retention on the platform.

An example of an activation metric at Instacart was that making two grocery orders in the first month was highly correlated with being a long-term user a year later. It isn’t rocket science, but you have to do the work to make the funnel.

As an example, if you’re going to do the paid loops, you want to understand the following:

  • What are you paying to reach users
  • How many users are coming through that conversion funnel
  • What does the signup rate look like
  • How many users are dropping off
  • How many users are actually creating an account
  • How many users are getting to paid purchases in the first month

All of this data enables you to be honest about what your CAC is.

One tactic under viral loops is casual contact which involves putting your brand in the space where everyone’s going to be. An example is how Uber has signs at every airport: you see their signs when you’re standing in a parking lot, when waiting for the taxi line, etc. It can be hard to measure, so perhaps you include a QR code in those locations which enables you to track net-new signups from a given airport. You’re doing your best to approximate every motion that you have for acquisition.

This is interesting because it works across business models: it works D2C as well as classic enterprise B2B. The key is to meter and measure it, to try different things. Instead of sticking to traditional B2B sales where you’re knocking on doors, consider how to knock on them differently.

How do you reach people?

BK: Think about the purchase journey: healthcare needs to think more about what people are doing and when they are considering your product. From there you go upstream of that so you are top of mind for them before they actually make their decision. Going door-to-door likely isn’t the most efficient way for you to sell, but if you know that your users read certain types of magazines or have conversations with specific types of family members, then you figure out how to target them where they’re making those decisions. There is also variability from market to market. For example, in some markets TV ads may perform incredibly well and if you have custom links to sign up then you are able to track awareness and consideration. The measuring and metering requires discipline in how you construct your funnels which gives you feedback on what is most effective for acquiring and engaging your users.

The Importance of Growth Accounting

BK: Most growth accountants and growth marketers use a growth accounting dashboard. Growth accounting is tracking how your product is growing every day. Examples of this include net growth, new users, resurrected users (people who have come back to your product minus the

Net Growth = New Users + Resurrected Users (the people who have come back to your product) — Churned Users (those who have left)

All “small” change can actually have a huge effect on net growth. E.g. if new users went down by 50K each (to 200K per day for new users and resurrected users go down to 170K) and churn goes up by 50K (to 395k), then your net growth is negative (-25K).Understanding why these fluctuations are happening (bad marketing campaign, broken notifications, etc) can help stabilize the growth engine. Thus, 50% of growth is keeping the engine going. The rigor of measuring is very important because it gives you feedback on the trends and what is happening. It gives you muscle to understand why your churn went up, or why resurrections went down.

The Opportunity In Healthcare

AB: Healthcare tends to understand paid advertising loops, but in healthcare there is a huge opportunity to leverage loops around content and network effects/virality. There is massive untapped opportunity in community building and leveraging virality in the awareness of these products in demographically-defined communities.

BK: Is this how you’re seeing the DTC model coming into play now for healthcare?

AB: Yes — companies understand that patients are looking for help with their health. People are going where they always go to find out stuff: on the “interwebs.”

  1. Start with Organic Sources: These are sources that people use all the time: Reddit, Facebook groups, etc. to see what people are talking about, and what solutions they’re looking for. It also helps you understand what is viral in nature. You don’t want to replace the platforms that have virality: start with the platforms that already have people engaged. Don’t build it again in your own product. A mistake people make all the time is trying to reproduce some of these social platforms within your own product rather than observing the ways in which existing groups share together. That is the potential for a very powerful loop.
  2. Optimize for UGC: what makes people so excited that they want to go on to social media and talk about it? This is not an indulgence but rather a very profitable exercise: not just from a marketing perspective but from your own value proposition perspective. It begs the question of “what are we really doing here, why are we doing it, and why would any patient want to care?” If you can get your patient constituents so excited about you that they’re willing to go on social media and talk about you, that is a defining moment which you should put out there as an aspirational horizon.

The Intersection of Unmet Needs and Identity

AB: A great example of this is how FOLX Health has catered to the LGBTQ+ community. The LGBTQ+ community is a chronically underserved community with a very acute set of needs. They have been ignored and not well-served by the healthcare industry. Giving this population content as a way of rallying and galvanizing the community and giving people a way of sharing with others ultimately builds brand affinity. Once they become a customer of FOLX, they are willing to share on their own because the content loops that they’ve seen and interacted with make them want to spread the word so that others can go through that same experience. The network effect is strong.

The idea of identity and how we identify is powerful when it comes to the body, our health, and the health of our families. In the healthcare industry we don’t think deeply enough about the potentiality of that within our products to ask ourselves how people connect to this? There are a lot of health conditions that define much of a person’s life. This spans the gamut from cancer to chronic disease to LGBTQ+ health. These are identities that align with one of the dominant experiences, and people want to find others that are connected. That is a very powerful connection that is in itself therapeutic.

To the extent that we are delivering solutions, the network itself becomes a therapeutic tool. The strategy is not just to acquire users but to serve them and tap into their community values. We know from research that people’s health is best supported when they are connected to the community and that community can help spread the word.

What are the benchmarks you’ve seen for CAC and retention in healthcare?

AB: It varies a lot and is always much higher than Consumer. In healthcare we see a range everywhere from in the $100s-$500s. That said, the CAC:LTV ratio is really important. For example, if your LTV is potentially very high because you have a lifelong condition or there is a lot of benefit to be delivered (fewer hospitalizations, etc.), you have a much higher threshold for acceptable CAC. Judging CAC shouldn’t be a number on a page but it is a metric relative to what you can capture in terms of value — but you have to test it rigorously.

Look at competitors or adjacent businesses that are able to test these metrics can give you insights into how those numbers function. It will tell you how much it actually takes to get someone to take an action (signing up, clicking the buy button).

BK: the companies that will win in healthcare are going to be the companies who can do this better, faster, and more efficiently, at scale. You’re going to start seeing some breakout companies with some of what you’ve seen with entities like Hims and Ro, which are great at CAC but also have high LTV. We are going to see a lot more focus on this: on companies building muscle in growth accounting.

AG: This is a very good thing. Even for B2C companies, if you’re in healthcare, at some point you’re going to touch somebody’s life . Nearly every value proposition and TAM slide we see when companies come through to pitch touches on some aspect of what they’re going to do for patients, providers, etc. There are exceptions to this but the vast majority of us ultimately have to touch a patient’s life. It is an essential skill to have accountability to understand if this machinery works, and how to work it, when building a business in this day and age.

Does this apply to enterprise selling?

AB: When I look back on my past life selling data analytics middleware, I realize that we never really understood what the levers were that got people to buy. One of the things that I love about [growth accounting] analysis is that CAC is the cost to acquire a customer — and that can be an enterprise customer!

Learning how to understand concepts around virality, domain authority and these funnel loops creates levers for any sales process regardless of whether it’s consumer or enterprise. The discipline to say, “how do we get people to talk about us? Where do we get domain authority? Where do we start to differentiate ourselves from our customers?” Answering these questions in an enterprise context is all just as relevant as it is for consumer here.

What toolsets or instrumentation should I use for growth accounting?

BK: there’s no one silver bullet, unfortunately. The early going can be rough for a lot of companies. Some tools in your tool set probably won’t speak to each other, so expect that you’ll likely need to figure out how to manually connect dots through spreadsheets. For example, if you’re using a paid loop with Facebook and Google, then make sure that you have well-defined, clear campaigns with tracking links so you can connect the dots. That is critical to being able to segment through the product. You want to be able to track at the granular campaign level so that you can understand where people are coming from.

Once you start building up your growth accounting, invest in one or two first strong analytics hires who can help you to build the right system for your business.

The platforms that work best for you depend on your business. For example, if you’re going to do a very high content business through emails and content-dense channels, then choose a platform that accommodates that. Alternately, if your consumer acquisition strategy is paid ads and socially driven, that might be a different platform. It doesn’t matter what platform you end up on as long as it serves your needs so you can identify how to be most capital efficient.

AB: There are tools that allow for heat mapping so you can see where people are spending time on your site, such as HotJar. This helps you understand where people are paying attention. Additionally prioritize tools to help understand your sales funnel in a structured way (e.g. how many clicks, how many steps people are taking, when they drop off). Other tools such as Mixpanel allow you to track and understand that process in detail and really deconstruct what is happening.

“This is the magic of social now. Video shorts have proven that you can take multiple shots and see what resonates. Take some time to figure out what people care about. Once you start figuring out the topics that people care about — you will find a step-change function, engagement, sharing and people wanting to hear more — because you figured out what part of their voices actually matter in this moment. And that’s how you start building a brand around who you are.” — Bangaly Kaba

Whether you’re in an enterprise business or a consumer business, you’re going to need to nail the fundamentals of acquisition and growth in order to create a sustainable and effective engagement engine. For more playbooks at the intersection of healthcare + technology + consumer principles from Define Ventures, check out related post Community Building in Healthcare on our Medium page here.

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