I get a lot of business plans for mobile apps in India of different kinds. Some of these are content apps, some are discounting apps and some transaction apps of different kinds. It’s not even possible to categorize all of them neatly. Most founders report a lot of metrics like number of users, daily actives, monthly actives and so on.
When the same founders go to institutional investors to pitch the same, they are asked very similar questions around number of installs, organic installs, DAUs, MAUs, DAU/MAU and so on. Here are my thoughts on what these metrics should be:
Angel / Seed stage: If you are a new app maker, to me, the gold metric for product/market fit at an early stages is the retained actives and their behaviour. I define retained actives as the % of users are retained on the app as active users. Let’s take an example. Let’s say, you drive a 1,000 downloads in August, then I would closely study the behavior of these 1,000 folks, whichever way they have been acquired. A typical behavior would be that 50% would get un-installed immediately and then progressively month over month, more and more un-installs would happen.
Several others will not un-install but will go inactive. After four or five months, hopefully, the number of users from this cohort will stabilize and stop falling. These are active, retained users. To me, this is where the rubber hits the road – did your app become sticky to a set of users. Fantastic apps may have this number to be 45-50%, any lower than 15-20%, and your business is in doubt. I have seen plenty of businesses where this dwindles to 0. I am not making it up, it does. Then you have basically created a revolving door in your shop where customers come in from one side and leave from the other.
Once you have the retained actives, then the next is how much time / money these folks are spending on the app. Compare it with world class apps to see how useful your app is. Size of your target market x the time spend by study actives is proportional to the excitement.
Personally, as an angel investor I am happy to see these numbers with 1,000-2,000 installs/month, however seed-level investors, might want to see at 5,000 /month.
If you don’t have a good retained active number, my suggestion to you is to go back to first principles and solve this without doing anything else. You really have no business, till you have figured this out.
Series A stage: Depending on which Series A investor you go to, some additional metrics start becoming important from a capital efficiency perspective.
Firstly, how do you get these users? Is your method of getting installs a scalable and efficient method? Paid installs keep increasing in price. Organic installs are great. Viral installs are fantastic. Basically, anything that you can do to get large number of installs through a scalable and efficient channel is great.
Secondly, the LTV. Depending on your cost per install, is your app able to monetise enough time / money from the user so that it’s a profitable user? In 2015, there were far fewer of these questions, now there are a lot more.
In my world, where I see apps very early, I would encourage entrepreneurs to solve to retained actives not just for my sake but to ensure they have a real business. There is no point in acquiring installs unless this is definitively established.