B2C Metrics You Must Track

The most important metrics you need when pitching investors and why they matter

I am an Associate at Icebreaker. We are a €100M pre-seed fund which means that we make lots of investments and look at lots of companies. We want to invest as early as possible, and we are often the first investors to take the leap of faith. We’ve made 100+ investments in bridging the pre-seed gap in Sweden, Finland, and Estonia (get to know some of our portfolio cos here).

When we evaluate B2C companies, we place a great emphasis on user metrics, just like any other VC. But, at pre-seed, companies don’t usually have thousands upon thousands of users which means that data is often hard to get by. Nevertheless, most companies have a small set of beta/alpha users testing the product when they aim to raise their first round.

Unfortunately for us, very few have any metrics in place for these users, and even fewer are tracking the right ones. Not only are these metrics absolutely critical for the fundraise, but they are also immensely valuable in understanding user behaviour and shortening the time to product market fit. Even worse, if usage is not tracked from day 0, it is often hard (sometimes impossible) to retrospectively gather them.

In this article, I want to cover the key metrics (organized by type of business) that B2C companies should be tracking from day 0 to make life and funding a lot easier (explanations provided where needed).

Subscription-based products w/ Trials

Trial-based products tend to succeed by having a low CAC, high conversion from free to paid, and high retention rates.

The cohort retention piece is the one metric I see the most confusion around. How to conduct a cohort analysis is beyond the scope of this article. Nevertheless, Here is how it is supposed to look:

Size is just the number of people that signed up / got started for the week. What you choose activation to mean depends on the company. Stripe defined activation as “first payment received.” However, activation can also mean download, signup, etc. Cohort (activation week) is the time at which that batch of new users or cohort got started. The percentages shown displays how many of that cohort are still actively using the app. Again, “actively” is also defined by the company. For example, a company such as Instacart (grocery ordering & delivery app) will have a different definition of “active” than Twitter.

Subscription-based Product w/Freemium Model

Freemium products tend to succeed by having large pools of free users (typically by having some sort of WOM growth), enough of those converting into paid, and high retention rates.

Ad-Based Products

Ad-based products must be able to acquire a lot of users to make sense business-wise. There needs to be a swath of users that are engaging intensely with the product and high user growth. The WoM (word of mouth) component is not a must in the beginning but a rather interesting metric to track how well the product is spreading organically.

The activation metric for Twitter might mean that a new user tweets, for Snapchat it might mean that someone sends a snap, and for Facebook, it could be the first like/comment, etc.

Marketplaces

A vast majority of the successful marketplace businesses started out concentrating heavily on the supply-side. For marketplaces, supply tends to drive demand and not the other way around. In the list above, especially for super early stage marketplaces, supply growth, supply activation, supply retention, and supply success is of vital importance. Great supply increases the fill rate, bookings growth, revenue, and buyer retention.

DTC

The most important metrics for a DTC brand is highly efficient acquisition costs, sustainable margins, and high AOV.

Thanks for reading! I hope you found this useful and I hope you’re inspired to track some of the metrics listed above! This post was greatly influenced by the work and research of Lenny Rachitsky — a former product lead at Airbnb and now product researcher and writer at https://www.lennysnewsletter.com/

If you are an early-stage founder — with a company based in Sweden, Finland, or Estonia — looking for funding, let’s talk