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5 things you’ll learn in the 500 Startups’ accelerator program

5 things you’ll learn in the 500 Startups’ accelerator program

Written by Poornima Vijayashanker

As a founder you might be thinking, “Is a startup accelerator program worth my time? What could I possibly learn from a startup accelerator program that I couldn’t just learn on my own?”

I’d say if you have a network filled with prospective investors, employees, customers, and attorneys who have years of expertise on the ins and outs of your the particular market and industry your company is serving, and of course, the time to share all of it, you’re all set 😉

Don’t have it all? Here are 5 things you’ll learn, specifically from the 500 Startups’ accelerator!

PreMoney 2018

1. The startup accelerator program keeps up-to-date on what is going on in the fundraising market.

The fundraising market is continuously in flux.

One area of flux is the amount of investment. In a span of 15 years, the private investment market has gone from contracting to expanding to contracting again. Many factors contribute to this caterpillar effect, here are a couple:

Fundraising typically expands during a period where companies have exited by either going public or have gotten acquired. As a result, founders decide to put their new funds to use by becoming an angel investor or contributing to private investment funds in hopes of receiving better returns than what public markets are providing at the time. Venture capitalists operate the same but manage other people’s money and receive it from limited partners.

Contraction soon follows an expansionary period, and how much depends on if there was a glut of companies that received funding, who couldn’t raise additional capital, were not able to successfully exit, or if limited partners and angel investors start pulling back and scrutinizing investment practices and areas. Usually, they go into a holding period until one of their investments has successfully exited.

As a busy startup founder, do you think you’ll have time to keep up with the flux?

In the 500 Startups’ Accelerator, our staff is dedicated to keeping up with these trends. You’ll have an opportunity to meet with them, and learn what matters to the success of your company, such as:

  • how to grow your company to attract investment
  • how much capital you need to raise
  • which investors are actively looking at companies like yours and writing check
  • what are acceptable or unacceptable deal terms, for you and your investors

PreMoney 2018

2. The startup accelerator program knows how investors think and will prep you for meetings.

Another area of flux is how investors evaluate companies for the various stages of funding, e.g., Seed, Series A, B, C and so on. Here are a couple of examples of this flux:

10-15 years ago, a first-time founder who had built a prototype (irrespective of the industry they were disrupting) could probably get meetings with investors and raise around $250K of seed capital to get going. Fast forward, and today, first-time founders better have traction, traction, traction, and know what that means concerning their industry and business model. Not to mention having answers to questions like why now, why them, why they chose specific distribution channels, and how their product is defensible?

The investors who previously wrote $25-$50K checks to 10-20 founders are now deploying larger checks to fewer founders.

Plus, it’s hard to tell how an investor is evaluating your company.

  • Did they say no because they have 10 other similar investments?
  • Did they say no because they have seen 10 other similar investments fail?
  • Did they say no because have talked to 10 founders like yourself, and they don’t think you and your team are the ones to execute?
  • Did they say no because they think the market you are going after is contracting?
  • Did they say no because they don’t understand how the market you are going after is expanding?

Hard to say, and you probably won’t get a ton of detailed feedback even if you ask! However, having invested in 2000+ companies, you can count on 500 Startups to teach you what will and won’t resonate with other investors.

500 Blockchain Track

3. The startup accelerator program connects you to other founders. You can learn how other founders run their companies.

Everyone has their style of leadership, but entrepreneurship can get pretty lonesome without a trusted peer group to lean on.

The 500 Startups’ Accelerator provides co-working as part of its 3-month startup accelerator making the daily grind a lot more manageable and friendly.

Here’s why other founders found it invaluable:

“At the low-point of my startup, I had a serious founder issue that I could only chat with my fellow 500 Startup founders. Thanks to 500 Startups’ accelerator for the great friends and family, who provided me solid advice and support when I was down.” — Aaron Blumenthal

500 Batch 24 Demo Day

4. The startup accelerator program stays up-to-date on the legal landscape.

If you’ve launched a product and are making money, do you need to worry about legal?

You have probably received advice like: “You don’t need an attorney to start a company!”

It’s when there’s a “people problem” staring right at you, such as a disgruntled employee, co-founder issue, or customer complaint that you think about getting legal counsel.

Even waiting until things go well is too late. Founders who start looking for counsel when they need an LOI, convertible note, or some other legal document drawn up become THE bottleneck to closing deals!

Not to mention that business law is also in flux.

Do you know what general solicitation means?

Case in point, as a founder you need to know what the boundaries of doing business are in the US and abroad. 500 Startups brings in attorneys to give talks and share best practices around building a company. They also showcase what to look for and how to work with legal counsel.

This alone ends up saving you $$$$.

500 Batch 20 Demo Day

5. The startup accelerator program provides access to growth marketers and growth marketing techniques

“There are many marketing channels. I’ll try them all till I find the one that works!”

However, do you have the budget, time, and energy?

You might think of hiring an agency or a growth hacker, but finding, vetting, and hiring them can be challenging!

The challenge with going with an agency is that they typically require a 6–12-month retainer and usually a minimum of $3K-$5K per month, not including ad spend. In case you’re curious ad spend, depending on your market, could be a minimum of $2K to $10K+ per month.

Hiring a growth hacker is similar to the agency, you’d need to hire someone on an ongoing contract and set aside funds for the ad spend.

The other BIG issue is that if you hire a growth hacker-slash-agency when you aren’t sure which channels your customers are on, you will blow through a fair amount of money running experiments. Of course, growth hackers and agencies don’t mind. They are getting paid to run experiments regardless.

Moreover, while they do their best, they cannot guarantee results immediately, which is why they ask for the retainer.

At the 500 Startups’ Accelerator, we’ll walk you through experiments, and help you optimize the results.

The 500 Startups’ Accelerator assigns each company an advisor focused on distribution. Their sole role is to help you grow, grow, grow.

These are experts who know what is and isn’t going to work and why, which saves you time, money, and energy!

Chandini Ammineni who runs 500 Startups’ growth program says:

“Startup founders tend to do what’s the next coolest thing in marketing, instead of what is right for them. Part of that is lacking focus and not knowing how to prioritize. The 500 Startups growth program, helps startup founders figure out next steps for the stage of their company. We have people on staff who have worked with hundreds of early-stage startups and have amassed a wealth of knowledge. They know what does and doesn’t work based on the size of a company, customer segment, product type, pricing, and other factors.”

 

NOTE: This post first appeared on 500.co under the title “5 Things You’ll Learn In The 500 Startups’ Accelerator Program

 

Ready to pitch?

Apply to 500 Startups Vietnam


San Francisco
814 Mission St., 6th Floor
San Francisco, CA 94103, USA

© 2010-2019 500 Startups

You have been accepted into 500 Startups. Now what?

You have been accepted into 500 Startups. Now what?

Author – Eugene Vyborov, CTO, YayPay (A 500 Startups Batch 20 Company)

Among the 180+ independent accelerators around the world, American programs hold sway and considerable appeal. Getting into a US-based accelerator is a dream for many startups, especially ones that are based outside the United States. It’s easy to see the attraction: accelerators offer access to the American ecosystem of innovation, collective wisdom of successful entrepreneurs, visibility to prominent VCs, and a trip to the US, all in one package.

From reading cover stories in magazines, one might buy into the idea that once a company is accepted into a prestigious accelerator program, its path to success is clear. The reality is far from it. As I have previously mentioned in “5 Things International Startups Should Know Before Joining a U.S. Accelerator,” acceptance into a top program is just the beginning. My earlier article was based on my experience at Techstars Boston. Now that I have completed Batch 20 at 500 Startups, I am ready to share my thoughts on what it takes to maximize the opportunities and deal with the challenges that come with joining the 500 Startups family.

Let me begin by saying that accelerator programs like 500 Startups are highly competitive. Thousands apply, 30-50 get in. In fact, you have a better chance of getting into Harvard than joining a new 500 Startups batch. If you have been accepted, you definitely have a reason to celebrate. Now, the real work begins.

Purple Go at 500 Startups Batch 23 Demo Day

Here is the thing. Accelerator “freshmen” tend to overlook the need to build a solid foundation in terms of logistics, mental shifts, and financial reserves. By accepting the invitation to join 500 Startups they have signed up for a marathon – and the sooner they begin training the better. Participants must trust the process that is built by experienced investors and entrepreneurs, but they must also come prepared. From having been a part of both Techstars and 500 Startups, I can tell you that the accelerator process is powerful, but it has no magic. All any accelerator can do is accelerate the path the company is on, for better or worse. There are things founders can to make sure they are on the right path – before they pick up the speed.

What does that look like? I have interviewed 3 fellow founders and Marvin Liao himself as they prepared to wrap up their journey with 500 Startups’ Batch 20. Here is their advice:

1. Focus on bringing a great product.

An idea, no matter how brilliant, does not cut it. Some programs (like the Y Combinator) will consider applicants in early stages of development, but both Techstars and 500 Startups require that you have a functional product that’s ready for the market. There are some exceptions (a highly innovative idea, or a proven team with strong credentials and a solid track record) but they only confirm the basic rule.

The “functional product” requirement means that you must have a product and it must be good. The accelerator process will fuel evolution and improvements, but your starting point must be sufficiently strong to allow the product to morph without crumbling. Invest your pre-accelerator time and money into making a product that people love. Resist falling in love with the technical aspects of your product, and get the market to fall in love with the way it solves their problem – before you go any further.

YayPay at 500 Startups Batch 20 Demo Day

2. Have a plan for integrating what you learn with the team at home.

The three international startup founders we spoke with all brought several co-workers with them. In the words of Ragnar Sass, the founder of Clanbeat out of Estonia, the ability to include teammates was a “deal breaker” that helped him choose 500 Startups above other accelerators. If your company hopes to break into the US market, it is critical that everyone on the team understands the Silicon Valley, he said.

“I believe that this area is the best environment for developing your business. 500 Startups is also friendly for the non-founders. It is very important that everyone on the team actually understands the Silicon Valley.”

-Ragnar Sass, Clanbeat (Estonia)

That brings us to an important point: few startups can afford to re-locate their entire team to the US for the duration of the accelerator program. You will need a plan for sharing what you learn with your home-base team to bring them along. “Translating” the Silicon Valley culture and conveying the less technical ideas and changes can be difficult. You must have a way of “converting” the knowledge and bringing everyone together, even while you are separated by geography.

PreMoney by 500 Startups

3. Get comfortable with networking.

Participants repeatedly state that networking opportunities are some of the key benefits of participating in 500 Startups. And yet, that networking won’t happen by osmosis. You must have a plan for reaching your mentors, building relationships, and establishing connections that will be strong enough to persevere after graduation.

“It’s all about the people. You can meet your new friends and a lot of very smart people. 500 gives you access to strong mentors who help you understand your real market, give you feedback and advice on how to work with your clients.”

-Alex Zenovich, Friendly Data (Belarus)

The good news is that the 500 Startups program is custom-built to encourage collaboration. Because participants share a co-working space, they get to see each other’s victories and defeats. Don’t under-estimate the power of random conversations over lunch!

4. Remember that “sales” is not a dirty word.

500 Startups is strongly focused on customer acquisition. Whether or not you’re a technical founder, you must understand that just building a great product is not enough.

“Openness to learning sales and marketing is really important. You need to have a mindset for it.”

-Marvin Liao, Founder, 500 Startups

Distribution is the name of the game, and organizers structure the content around helping each batch of companies get to their customers fast. Every startup gets a distribution mentor, but you won’t experience traction until you absorb the idea that “selling” is key to your company’s success.

500 Startups Batch 23 Demo Day

Bonus advice: beef up your English skills!

If you don’t have a high degree of comfort with the English language, there is a limit to how much you will get out of the program. Marvin Liao shared that he would love to see more foreign companies go through the 500 Startups, but the language barrier prevents many great companies from applying. When international teams are present, their conversational facility with English makes an enormous difference on their ability to build the network and maximize their progress.

“Two-thirds of this batch are from the US and a third are from overseas. I do not have a quota. We like international companies, some of our best teams are from overseas. The biggest part is whether they speak English. If you don’t speak English, you won’t do well here.”

-Marvin Liao, Founder, 500 Startups

500 Startups: Lessons learned

Don’t think of joining a US-based accelerator as a binary “yes/no” proposition. The answer may well be “not right now”. Timing matters, as does the degree to which your product is ready for the market. Your team must be open and ready to absorb the volume of sales and distribution learning that has been described as drinking out of a firehose. The application process is highly competitive, and if your team and product have known gaps you may be at a disadvantage compared to companies that are further along in their development.

Lastly, think about what happens after the program. Many participants aim to maintain at least some presence in the US after graduation. Mark Masongson, the CEO and Co-Founder of Canada-based UrbanLogiq, said it best:

“Now that we have access to this network, we cannot close the door on that.”

-Mark Masongson, UrbanLogiq

Marvin Liao has seen companies have success with maintaining an overseas development team and a US-based sales and marketing team.

“The best companies are the ones that keep the engineering team home, but double down on the sales and marketing front in the US.”

Marvin Liao, Founder, 500 Startups

“I won’t say that it’s easy, but we have seen enough examples,” Marvin said, citing the success story of TalkDesk that has a development team in Portugal and a sales and marketing team in San Francisco. The badge of “500 Startups portfolio company” does not come without sacrifice, but it is well worth it!

NOTE: This article first appeared on 500’s website under the title “You have been accepted into 500 Startups. Now what?”

Eugene Vyborov is technology entrepreneur, geek, Co-founder and CTO of YayPay – Batch 20 company that uses AI and machine learning to accelerate cash flow and automate accounts receivables.

500 Startups Batch 20 Demo Day

Ready to pitch?

Apply to 500 Startups Vietnam


San Francisco
814 Mission St., 6th Floor
San Francisco, CA 94103, USA

© 2010-2019 500 Startups

This pitch deck will rock your 500 Startups application

This pitch deck will rock your 500 Startups application

We’ve talked about how to make your application to 500’s accelerator stand out, and one of the key points we mentioned was ensuring you have a solid pitch deck. But what does a good pitch deck look like? We’ve looked at thousands throughout the years, so we have a few pointers on what makes a good one, and what mistakes to avoid.

We typically only spend a few minutes reviewing each deck, so keep it brief and don’t overload it with excessive text and images. A well-crafted pitch deck doesn’t need more than 10 slides and will have all of the following key elements (get our free template here):

Slide 1: Your Logo & Elevator Pitch

You only have seconds to make a great first impression and introduce your company, so how do you get us (or any VC) excited about what you’re doing?  We recommend using the following format to introduce your company:

A [product type] to help [target customer] with [#1 problem] by [#1 benefit] using our [secret sauce/differentiator].

No expert jargon, no buzzwords—explain it like you would to a 5 year old. It should be simple to communicate, and at the end of those few seconds we should know who your customer is, how you solve their problem, and what makes your product unique.

Slide 2: The Problem

After the introduction, the first thing you should do is talk about the problem you’re solving. Explain it from the point of view of your customer, rather than the global problem. For example, if you sell remote monitoring software to hospitals, instead of saying “40% of patients are not getting the help they need after discharge,” say: “Hospitals are losing $30B by not having the resources to monitor patients remotely.”

Slide 3: Your solution

Now that we know the problem, it’s time to tell us your solution. It’s important to introduce your product at this point, or you risk losing your audience’s attention. Tell us about your product’s key features and list the top benefits to your customer, and explain how you plan to solve the problem you presented in slide #2. This is a great time to show off some screenshots if it applies.

Slide 4: How it Works

Here you can go into more of the nitty gritty about the user experience and how the tech works.  This is a great place to showcase any proprietary or differentiating technology as part of your product. This is also another good opportunity to show off a few screenshots or workflows if they apply.

Slide 5: Traction

The best way to get our attention is to show us user or revenue growth; so if you have it, put it right after your product explanation. Typically, you would only show one metric of growth and put it in a chart. Highlight the current state of this key metric, such as last month’s Monthly Recurring Revenue (MRR – if you have a subscription business), or Gross Merchandise Volume (GMV – if you have an e-commerce or marketplace). Another metric to highlight is your growth rate Month Over Month (MOM). If you’re a B2B company, put a few of your more notable client’s logos next to your graph if you have them.

Image: 500 Batch 23 Demo Day

Slide 6: Business Model

How are you making money? And if you aren’t making money yet, how do you plan to in the future? Use this slide to tell us about your top sources of revenue, and prioritize them by size. Examples of common revenue models are:

  • Direct: e-commerce, subscription, digital goods
  • Indirect: advertising, affiliate, lead generation

Slide 7: Competition

You can’t avoid competition, whether direct or indirect, but you can show us how you’re different from them. The last thing you should do is say you have no competition—there’s always competition, and saying you’re the “first” to do something often shows a lack of knowledge about your space. Be honest, and show us where you excel in areas that they don’t. We like to frame this as:

Unlike [existing alternatives], [your product] [primary differentiator] and [secondary differentiator].

Your product should be the only one to offer this combination; and if you put it in a quadrant, your product should be in the upper right corner while your competitors would be in the other (lesser) quadrants.

Slide 8: The Market Opportunity

We’re looking for markets that are BIG, so there should be either a market size of >$1B or an expansion plan that will get there. Two methods for calculating market size:

  • Top Down: Find research that has been published by a third party.
  • Bottom Up: Calculate users against transaction value and frequency:
    • X customers in your market
    • $Y average transaction size
    • Z number of purchases per year
    • X * $Y * Z = >$1B

Slide 9: Progress to Date

Showing major milestones in your business tells us how much progress you’ve made so far, and where you are in the business. Examples would be when you launched (or when you plan to launch), when you landed your first customer, and if you gained any sort of recognition or award. This is also where you can show when you received any previous investments.

Slide 10: The Team

Here’s your chance to highlight your team’s unfair advantage. Many VCs will tell you that the team is the most important part of the company, and that couldn’t be more true—especially at the early stage. Ideas often change and businesses pivot, but the founders stay the same, and it’s the founders that we’re betting on. Here’s a few ideas that will help you stand out:

  1. Experienced entrepreneurs: Have any of you built and sold companies before?  This shows that you have an execution advantage.
  2. Deep product or tech experience: This shows that you have a product or differentiation advantage.
  3. Deep industry experience: Show that you have insider knowledge, and possibly a network to leverage as your advantage.
  4. Sales or customer growth at a relevant company: This shows that you have customer acquisition advantage.

Be careful not to be too verbose here—too much text will likely be forgotten, so highlight only notable achievements. One or two brief callouts per key team member is the perfect amount.

That’s it!

Ten slides is all it takes to show us what makes your company great. If you follow this guideline, it will greatly increase the chances that your application will get noticed. And if you’re still struggling with where to start, we’ve created a handy 500 Startups Application Pitch Deck Template to get you going.

NOTE: This article first appeared on 500’s website under the title “This Pitch Deck Will Rock Your 500 Startups Application”

Author: Rebecca Woodcock

Rebecca is a Venture Partner at 500 Startups, where she manages the San Francisco accelerator’s health tech track. Previously she founded CakeHealth.com (acquired in 2015), to help individuals track and manage their healthcare expenses, and was a TechCrunch DISRUPT finalist. She is recognized as one of 70 Digital Leaders by the United Nations, and has also been an advisor to the White House health data standards movement for patient access. You can often find her kiteboarding in Baja California Sur.

Ready to pitch?

Apply to 500 Startups Vietnam


San Francisco
814 Mission St., 6th Floor
San Francisco, CA 94103, USA

© 2010-2019 500 Startups

Turing helps unlock Vietnam’s tech talent to the rest of the world

Turing helps unlock Vietnam’s tech talent to the rest of the world

“Vietnam is a hub of business process outsourcing along with IT outsourcing. It’s an excellent complement for multinational corporations managing big datasets and looking for data cleansing ahead of software development.” – Forbes

Vietnam has emerged with a rising tech talent pool: the many key factors attributed to this growth include an increase in STEM education, economic policies that encourage domestic and international entrepreneurs, and investments by private tech companies. The fruits of the combined labor of government and private investment are an increasingly skilled workforce that has pegged Vietnam as the technology hub for Southeast Asia. There is a great potential within the Vietnamese tech workforce that will greatly benefit companies throughout the world.

The tech industry demand for talent presents many opportunities for a workforce like Vietnam’s and presents a unique resource for companies across the globe. While India has been a primary outsourcing focus, Vietnam presents itself as a viable contender for the world’s market.

Vietnam currently has around 250,000 engineers, the number of tech jobs having doubled over the last three years. Despite salaries “shooting up” recently, Vietnam’s IT labor costs are estimated to be 40% less expensive than in China and India, according to VN Express.

Turing plans to close the gap between Silicon Valley companies and the relatively untapped tech workforce in Vietnam. At the touch of a button, customers have the benefit of finding the ideal candidates that will develop their products. 

Turing has built the first labor marketplace based on Artificial Intelligence to provide a scalable team of elite, pre-vetted, remote software developers to Silicon Valley companies. Turing’s AI analyzes data from various sources to build rich developer profiles and then matches them with companies looking for engineers. The company believes remote teams are the key to solving the tech challenges and delivering accelerated development.

We believe Vietnam will become a technology hub not just for Southeast Asia but across the emerging world. We’re working hard – like the talented entrepreneurs we support – to help make that happen.” – 500 Startups Vietnam

500 Startups Vietnam has invested in Turing to help talent in Vietnam get access to opportunities and make an impact on the global tech market. The joint effort will not only provide an easy way to pair entrepreneurs with Vietnam’s tech workforce, but also further the connections to an eager global market. 

San Francisco
814 Mission St., 6th Floor
San Francisco, CA 94103, USA

© 2010-2019 500 Startups

Saola Accelerator: supporting the next “Asian unicorns”

Saola Accelerator: supporting the next “Asian unicorns”

Application is now open! 

bit.ly/500saola

One month after announcing its oversubscribed final close, 500 Startups Vietnam today announced that it will bring 500 Startups’ Silicon Valley accelerator curriculum to Vietnam in 2019 in partnership with Korean multimedia retailer GS Shop.

The Saola Accelerator, named after the rare Vietnamese deer also known as the “Asian unicorn”, aims to support three batches of Vietnam-connected startups with US$100,000 investment in each startup as well as programmatic support. In addition, each participating company will receive access to more than US$500,000 worth of free perks and discounts from twenty 500 Startups partners including Amazon Web Services, Google, and Microsoft.

500 Startups’ flagship accelerator has been named a Top 3 accelerator in the U.S. by notable publications including Forbes and Entrepreneur. 500 Startups has also been running growth programs in Latin America, Europe, the Middle East, and Asia. The Saola Accelerator is 500’s latest step in its mission to back talented entrepreneurs anywhere, help them build companies at scale, and develop thriving startup ecosystems around the world.

500’s programs around the world

Marvin Liao, Partner at 500 Startups and head of its flagship accelerator program in San Francisco, said, “We’ve learned a lot from working with 1,000 companies in more than 40 growth program batches around the world. We’re excited to bring that experience to Vietnam.”

In addition to capital, the Saola Accelerator will offer enhanced programming including 500’s signature Growth Hell Week plus hands-on support for growth. The program will conclude with a Demo Day, where the companies will share about their products and progress to an invite-only audience of regional venture investors.

Demo Day

The Saola Accelerator will be operated in partnership with GS Shop, Korea’s foremost multimedia retailer with an internationally active corporate venture capital team. GS Shop and 500 Startups have had a close relationship for years, with investments and collaborations spanning from Korea to the U.S. and the Middle East. GS Shop plans to match 500 Startups Vietnam’s investment in select batch companies, bringing the potential investment per company to up to US$200,000. GS Shop also plans to send two representatives to attend the program.

“We believe Vietnam’s existing incubators and accelerators have played an important role in nurturing startups in their earliest stages. Our program is aimed at companies ready to break out and become Asian unicorns – saolas,” Eddie Thai, a lead partner of 500 Startups Vietnam, explained.

Application form

Submit your application at bit.ly/500saola

 

Interested startups can apply to the program if they meet the following 3 criteria:

  • Tech or tech-enabled
  • Vietnam-connected (serving the Vietnam market, having a Vietnamese co-founder, and/or having a meaningful portion of the team in Vietnam)
  • Have meaningful traction

Deadline is January 20, 2019, and late deadline is February 15, 2019.

San Francisco
814 Mission St., 6th Floor
San Francisco, CA 94103, USA

© 2010-2018 500 Startups

AARRR

AARRR

Acquisition, Activation, Retention, Referral, Revenue.

This is the AARRR (Must Read!) startup metrics model developed by Dave Mcclure. These 5 metrics represent all of the behaviors of our customers.

We want to break down these 5 metrics on your product and look at them separately, then analyze and monitor them so that we can optimize them. A successful startup is one where they are able to optimize every single one of these 5 metrics.

It’s important to understand about AARRR, because only when you understand all the metrics, you will understand where exactly is wrong with your startup, so you don’t guess and make the wrong assumptions. When you understand AARRR, you can become a startup doctor, because you will know exactly what or which part is wrong, and then fix it.

For example, a Chinese restaurant owner opens his restaurant in San Jose. After 3 months his business is still quite poor, so he simply blames that people in San Jose don’t like to eat Chinese food (impossible!).

The truth is that many startups make the same mistake of thinking if something doesn’t work, it must be everything, or they just guess the wrong reason why their business is not working. Like any website or app, a restaurant relies on many things to be optimized. It needs to have a good location. The storefront needs to look good so customers want to go in. When users are in, customers need to feel comfortable with the interior, and they need to be sold on the content in the menu. Moreover, when they go through the menu, they need to feel comfortable with the price point. Also, the user will obviously rate their experience in terms of the service, the taste of the food, etc.

So, while 1 restaurant owner will conclude that people don’t like Chinese food. Another store owner that knows AARRR-fu will find out maybe it’s because his storefront doesn’t look interesting enough, his price point is too high, or what not.

The truth is, any part of a customer’s experience and its details from walking pass the storefont, to going inside, finding a seat, ordering, eating, paying, and leaving the restaurant, are all very crucial to the restaurant’s business.

Case Study: Michelin 1 star restaurant chain called Ding Tai Fong focuses on every part of the detail. They optimize everything. They are so detailed that when you are paying for the bill, the cash change they give back to you is always new so that you don’t get your hands dirty. So they have someone who goes to the bank every morning to get brand new cash to start the day off. It’s something as subtle as this, but this way, people love their whole experience from beginning to end and come back again or tell their friends.

Website Case Study: StartitUp is getting 1000 visitors/month (Acquisition), and our Activation (conversion) is 70%, so that we are getting around 700 users/month. Out of those 700 users, only 20% of those users are coming back after their first visit (Retention). Out of those 20% (140 users), only 10% are paying (Revenue), so that we end up with 14 users paying each month. Out of the 700 users, about 10% of those are referring out service to their friends (Referral).

When we look at the example above, we can separate each behavior and try to optimize each separately.

For example:

1. StartitUp has a good Activation (conversion) rate of 70%, which means we are dealing with a real problem and we have a real solution, and we also have a convincing landing page.

2. We want to get more signups, so we look to improve our Acquisition (visitors) by adding more acquisition channels or work on SEO to try to get more users.

3. We then look at our Retention, and saw that our Retention is pretty horrible at 20%, so we build some extra features like email newsletters and gamification to get users to come back so that we have another chance to monetize them. But we realize users are not coming back to our service because our service somehow isn’t delivering the value promise we made – it doesn’t solve their problem or it’s not clear how to use our service. We also create a better tutorial feature to help users get started with the guide so they can properly reap the benefits from StartitUp.

4. We also see that we are not doing a very good job converting users into paying customers (Revenue), so we look at our price structure and our pricing page to see if we are not doing a good job communicating, or if we can build a stronger pricing plan with the main pricing plan that we want people to buy highlighted.

5. Finally, we check to see why we are not being recommended (Referral) to friends and see if we can put in some social sharing features to increase the number of referrals. This could also be that our service doesn’t have any referral value since it’s not good enough.

However, for a startup, we don’t need to focus on all of the 5 metrics during the MVP (Minimum Viable Product) phase. The 2 most important metrics we want to monitor and optimize right now are Activation and Retention (Retention is King! – If people like using your product and they return to use it, then you will be successful).

These are the 2 main metrics that will determine whether or not you have built a service that people need. A good Activationtells you that your UVP and landing page is convincing and that you successfully get the user to go through with 1 use cycle post logging in. Good Retention tells you that your MVP actually delivers the UVP to the customers.

If you plan to start charging immediately, then Revenue will be one that we want to monitor as well. Acquisition and Referral are not immediate, but they are the engines to drive new customers to your website, so do keep them in mind when building your MVP.

Important: Before you can get good Activation and Retention, which means that you have proven that your product does indeed deliver the UVP, there is no need to start getting users. The reason is that before you are sure that you have a working solution, the users you get now will leave anyways. You will be depleting your users, and it might also give you bad reviews. Therefore, before we can validate your MVP in a later section, only focus on getting “early adopters” and leave the Growth Hacking for later.

Read the original article by Dave Mcclure here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

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