IN THE FALL of 2015, my recently launched New York City-based presentation software startup, Slidebean, hit a milestone two years in the making: We reached 100 customers on our platform. Whooo! For a team of sleep-deprived, broke co-founders, this was surely the milestone that would prove to investors-unequivocally-that we had "figured it out." The celebration, though satisfying and psychologically needed, was premature.
Getting 100 customers is not easy, and I felt good about hitting the marker, of course. But 100 customers didn't prove we could do that 10 times againand in a third of the time. It might have meant we were lucky, or that we had a strong network, or that we created a TikTok post that went viral. We needed to scale the concept.
So we set our sights higher, to 1,000 customers. To do so, we focused on unit economics. That is, we had to determine whether we'd still have a thriving company on our hands after assessing our expenses. We asked two questions: How much does it actually cost to convert a new customer? And what's the dollar value of that customer over a lifetime?
Venture-backed startups have to spend a lot of money for exponential growth; that's what most funding rounds are for. Yet it's easy for a company to lose track of its actual customer-acquisition costCAC and whether there's ever a return on that investment. Generating three times your customer's cost of acquisition, investors suggest, shows a necessary equilibrium between your company's returns and marketing costs.
To get to this 3X promised land, we tapped Google search: We created dozens of campaigns targeting different keywords, from "presentation software" to "PowerPoint alternatives" to "pitch deck design," and measured them against one another.
In a matter of days-not weeks or months-we learned that most of the keywords we were testing had poor unit economics: Few customers converted, making our CAC higher than our lifetime value, or LTV. The timing of this lesson was key. While it may sound counterintuitive for a cash-constrained startup to pay for clicks, visits, or leads, getting answers to questions fast proved pivotal. You want to know immediately what works, so you can refocus the team on what matters most as soon as possible.
Other growth channels, like PR, organic search, content marketing, or influencer marketing, are much harder to measure, or they take more time to have a traceable effect. For us, none of these options made sense because, like a lot of startups, time was a luxury we didn't have.
The search marketing experiment wasn't a total loss; our customer ...
Getting 100 customers is not easy, and I felt good about hitting the marker, of course. But 100 customers didn't prove we could do that 10 times againand in a third of the time. It might have meant we were lucky, or that we had a strong network, or that we created a TikTok post that went viral. We needed to scale the concept.
So we set our sights higher, to 1,000 customers. To do so, we focused on unit economics. That is, we had to determine whether we'd still have a thriving company on our hands after assessing our expenses. We asked two questions: How much does it actually cost to convert a new customer? And what's the dollar value of that customer over a lifetime?
Venture-backed startups have to spend a lot of money for exponential growth; that's what most funding rounds are for. Yet it's easy for a company to lose track of its actual customer-acquisition costCAC and whether there's ever a return on that investment. Generating three times your customer's cost of acquisition, investors suggest, shows a necessary equilibrium between your company's returns and marketing costs.
To get to this 3X promised land, we tapped Google search: We created dozens of campaigns targeting different keywords, from "presentation software" to "PowerPoint alternatives" to "pitch deck design," and measured them against one another.
In a matter of days-not weeks or months-we learned that most of the keywords we were testing had poor unit economics: Few customers converted, making our CAC higher than our lifetime value, or LTV. The timing of this lesson was key. While it may sound counterintuitive for a cash-constrained startup to pay for clicks, visits, or leads, getting answers to questions fast proved pivotal. You want to know immediately what works, so you can refocus the team on what matters most as soon as possible.
Other growth channels, like PR, organic search, content marketing, or influencer marketing, are much harder to measure, or they take more time to have a traceable effect. For us, none of these options made sense because, like a lot of startups, time was a luxury we didn't have.
The search marketing experiment wasn't a total loss; our customer ...
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Inc. (Digital) - 1 Issue, Winter 2023/2024