Tom Blomfield emphasized the importance of organic growth through virality and network effects over paid growth for consumer startups.
Tracking paid acquisition, unit economics, retention, and Net Promoter Score (NPS) are crucial metrics to monitor for consumer startups.
Key benchmarks include: ≥15% monthly active user growth, ≥50% organic growth, positive unit economics before scaling, identifying "magic moments" for retention, and NPS of +50 minimum, ideally +75 or higher.
Meeting Notes:
Organic Growth and Virality
Tom Blomfield emphasized the importance of organic growth over paid growth for consumer startups, as organic growth can be achieved through virality and network effects.
Virality refers to the idea that one user introduces the product to other users through their actions, such as tagging friends on Facebook photos or sharing Wordle results on social media.
Network effects mean the product becomes more valuable as more users join, like with WhatsApp - the more people on the network, the more useful it becomes.
To drive organic growth, Tom Blomfield advised incorporating both virality and network effects into the product.
For virality, identify the "shareable nodes" or points where users accomplish something new and want to share it, and make it easy for users to share these accomplishments through sharing prompts.
For network effects, shift from a single-player to a multiplayer journey, where the product improves as more people join, like Monzo's Venmo-style money transmission and joint accounts among friend groups.
Optimizing virality and network effects pays back forever, unlike paid growth which requires ongoing spending.
Paid Growth
Tom Blomfield discussed paid growth channels like pay-per-click ads but warned about risks like cannibalization and fraud.
Cannibalization refers to paying for users who would have signed up organically anyway.
Fraud refers to people exploiting referral programs for personal gain.
Tracking paid acquisition is crucial: know where every user comes from, calculate customer acquisition cost per channel, and monitor the long-term performance of customers from each channel.
The ideal split is around 80% organic to 20% paid growth, or at most 50/50.
Over-relying on paid growth can drive up costs and erode margins to zero.
Unit Economics
Unit economics refers to calculating revenue per customer vs. variable costs per customer.
This granular view is important to understand profitability of different customer segments and acquisition channels.
Example from Monzo: Certain customer behaviors like frequent ATM withdrawals led to high variable costs.
Tracking unit economics allows optimizing to acquire higher-value, lower-cost customers.
Scaling with negative unit economics is very risky.
Retention and Magic Moments
Defining the right retention period is tricky for consumer products compared to B2B.
Tom Blomfield recommended identifying "magic moments" that predict long-term retention, like adding friends on Facebook within the first 10 days or adding 3 friends to enable Monzo's Venmo-like feature during onboarding.
Optimizing the onboarding flow to drive users to these magic moments can significantly improve retention.
Net Promoter Score (NPS)
NPS measures customer willingness to recommend the product on a 0-10 scale.
Great consumer startups need an extremely high NPS, ideally +50 minimum, +75 or higher is better.
High NPS correlates strongly with word-of-mouth referrals, a key driver of growth.
Consistency in how NPS is measured over time is crucial to avoid skewing results.
Use qualitative feedback from detractors to improve the NPS.
Recap and Closing Thoughts
Key metrics and benchmarks:
≥15% monthly active user growth
At least 50% organic growth
Positive unit economics before scaling
Identifying "magic moments" for retention
NPS of +50 minimum, ideally +75 or higher
These benchmarks may vary; understand the unique drivers of growth, retention, and profitability for your product and industry.