An economic moat is a business’s ability to maintain its competitive advantage over alternatives. We’ve previously discussed economic moats on Software Engineering Daily and on our blog here. We look for economic moats when evaluating startups and believe communities are a new moat.
A community is a group of people with a shared interest and a feeling of having a common bond. Growing communities create a sense of momentum and signal the startup’s technology is becoming the new norm or standard. In turn, users are less willing to evaluate alternatives. Communities help brand recognition. By having a thriving community around a startup, it will be harder for alternative solutions to enter the market because users’ minds will be focused the original offering. Once a brand takes hold in the market, new firms will need to spend much more to establish brand recognition than existing firms spend to maintain brand recognition. Hence new entrants are discouraged by what is perceived as a high startup fee, which is a type of barrier to entry.
Startups often actively perform community development to bring individuals together. We see developer community managers leading entire teams of evangelists who share insights on technologies and best practices. The CMX 2020 Community Industry Trends Report found 2/3rds of businesses have 2+ employees running communities. At startups, the Head of Developer Marketing often reports directly to the Head of Marketing.
It is clear founders appreciate the importance of community to their startup’s success. A First Round Capital survey found, “Nearly 80% of founders reported building a community of users as important to their business, with 28% describing it as their moat and critical to their success.” According to the CMX report, “88% of community professionals said that community is critical to their company’s mission and 85% said that their community has had a positive impact on their business.” Fostering communities generate business value.
Businesses see the long-term value of communities. In 2017, 28% of communities had existed for +5 years, and this number has since grown to 42%. Teams understand the value of investing now for the future. CMX’s report stated that 65% of community professionals will increase their investments in community over the next year. Communities are only becoming more important.
You know your company has a vibrant community when non-employees are volunteering to host events. CMX’s survey found the majority of businesses allow volunteers to run events on their behalf. Startups like Gatsby, Databricks, and Confluent have done a great job empowering the community to run their own events. For example, Kafka reached 50,000 meetup members across 201 global meetup groups.
It is important to recognize individuals who have made exceptional contributions to communities. Structured programs like the Confluent Community Catalyst Program and Docker Captain Program include an application process and candidate reviews before bestowing special titles. The increased level of scrutiny results in higher prestige and consistency across representatives.
There is no single metric that can define the health of a community. KPIs will vary based on the business and target user. Below are some metrics we find helpful for calibrating general community health.
Events both digital and in-person:
- # of events
- # of new event attendees
- # of return attendees
- Rate of churned attendees (% of people who only attended one event)
- Average number of attendees per event over time
- # of community members on Slack, Discord, etc.
- % of monthly active members
- # of new member sign-up
- # of posts added in the community by employee and non-employee
- # of comments created in reaction to the community’s posts
- % of comments from new community members by cohort
- # of members leaving the community
Open source communities:
- # of pull requests by non-employees
- # of non-employee contributors
- % of code contributed by non-employees
- # of followers
- Growth rate of followers month-over-month
- # of retweets by month
- # of at mentions by month
- Average number of likes and comments per post
- Net Promoter Score (NPS)
- # of community ambassadors
Community is an economic moat and founders appreciate the business value of a healthy community. From in-person events to social media, a community can be fostered across many channels. While a single metric can’t determine a community’s health, we hope readers find these suggested KPIs useful.