Most startups fail. Nine out of 10 never amount to anything more than fond memories and a forgotten Facebook page. One reason is that they often lack a clear picture of exactly how they’re doing until it’s too late. But there are tools designed to help you assess your startup’s progress compared to similar companies.
The best way for startup founders to improve their chance of success is by learning to make better decisions. But if you want to make better decisions, you need better data. And that’s where Startup Compass comes in: It’s designed to help you benchmark your startup’s performance against thousands of others to identify what you’re doing right and what you need to improve.
Startup Compass collects data from tens of thousands of startups around the world. It collects lots of data, then creates best practices, recommendations and benchmarks to help entrepreneurs make better product and business decisions.
Big Data for Small Companies
“This is a big-data approach to startup success,” says Startup Compass co-founder and serial entrepreneur Bjoern Lasse Herrmann. “Big companies have analysts to make sense of their data, and executives can make decisions based on that data. But startups don’t have any access to that kind of analytics. We wanted to put analysts in the cloud for startups.”
“Startups can learn three key things,” Herrmann says. “First, which key performance indicators actually matter. Most startups don’t even know which KPIs they should track or why they should track them. Second, they learn how their KPIs compare to other companies’ KPIs so they will know if they’re on the right track. See, for example, their customer acquisition costs. The third thing they learn is what actions they need to be taking. We help businesses take the next steps.”
Startup Compass calls its approach “cracking the code of innovation.” We call it “how not to kill your startup.”
The 5 don’ts
The real value of Startup Compass is comparing your company to others like it, but Startup Compass also summarizes its findings in its Startup Genome report. Here are nuggets of wisdom from the first Startup Genome report, five things not to do:
1. Don’t scale too early. This is the No. 1 cause of startup failure. Startup Compass has found that 70% of startups crash because they scale prematurely.
2. Don’t work part time. Sleepy? Get used to it. People who work full time on their startups raise an average of 24 times more funding than those who work part time.
3. Don’t go it alone. Maybe you are the smartest guy in the room. But solo founders raise less than half the money that two to three co-founders raise.
4. Don’t ignore customers. Yes, they’re annoying. (What do they know?) But startups that track customer metrics have 400% more user growth.
5. Don’t forget about the technology. Startups without a tech-oriented co-founder are twice as likely to scale prematurely and have three to five times less user growth.
If you want advice on an ongoing basis, you can join Startup Compass and in exchange for data on your startup, the company will benchmark your startup monthly, comparing you to similar outfits, so you can keep your priorities in line.
Startup Compass has 17,000 companies now using the service for things like checking whether their churn rate is too high or their retention rate is too low – or if they should be spending more money on customer acquisition.
“We have a number of companies that have gone through the process and tell us they used our product and realized they were falling behind on this or that metric and were able to fix those things and adjust accordingly. As a result they were better able to acquire customers in the long run and didn’t waste more money on things that were not productive.”
Images courtesy of Shutterstock.