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As a general partner at Spark Capital, Megan Quinn hears a lot of pitches.
And too often, what’s missing in those decks and presentations are the metrics that matter most to her as an investor, data that prove users are engaged, happy, and want to keep spending money with that business.
Metrics like stickiness, feature retention, feature adoption, NPS, and product engagement—the five called out in our new interactive product benchmarks experience—show off that a company doesn’t just have product market fit but instead, what Megan calls “product market love.”
Megan suspects that more investors will pay closer attention to product metrics—and how they stack up to peers—as valuations grow higher and VCs look to invest at an earlier stage.
“By understanding the product, value proposition and associated metrics, including those in this study, you have the ability to understand the potential for a company earlier in the investment lifecycle,” she says. “That’s never been as important than it is right now.”
Megan’s perspective is unique because she’s an investor and a product person. Megan led the product team in the earliest days of Square; and before that, spent eight years in product management at Google, primarily working on Google Maps.
Part of Megan’s thesis for investing in Pendo was the gap it would have filled for her as a product leader and the belief that product metrics are a leading indicator of the health of a business. The same goes for benchmarks—at Square and Google, Megan didn’t know how her products stacked up against peers. She lacked a playbook for what to measure, how to get the data, and what numbers were good or not-so-good.
“Without context and color around how product data performs against like companies, or in our industry, it’s hard for a board room or executive team to understand what good means,” she says. “You need the qual and quant understanding and context that benchmarks provide to tell a holistic product story.”
The biggest pitch pitfall
Megan says too often companies pitch her with vanity metrics like overall signups or users, rather than data that shows how users are engaging over time. Her concern as an investor is whether the company is as good at onboarding and retaining customers as it is at winning them to begin with. Often, companies with strong customer acquisition suffer from “leaky bucket” syndrome—they’re not delivering on the promise of the product in some way.
When measures like feature retention and stickiness do make their way into a pitch, they prompt her to ask questions like, “how are users or customers engaging over time? How happy are they?”
“These help you understand how much revenue you can ultimately extract from a given customer— how much opportunity there is to upsell new products,” she says. Happy customers are also going to become advocates and tell their colleagues, other partners and friends about their experience.
Later, in the board room
Once Megan has made an investment and joined the company’s board, she leans on product metrics to show the underlying business and revenue opportunity down the road.
She expects executive teams to highlight engagement around individual features, adoption of new features after test and launch, and feedback that’s coming in from customers through NPS and customer satisfaction scores, as well as feature requests.
Product metrics can show that the product is more than a vision or intuition—a key criteria of the pre-investment stage—but is demonstrating “actual quantifiable success.” With product benchmarks, teams can now show how their stats measure up in the market, and eventually show trends over time.
Megan recommends that product teams surface insights to their executives on a weekly basis and in a very templatized manner so it’s not a different metric every week. By presenting just five or so metrics that are priorities, along with goals for how to improve each over the next quarter or year, product teams can earn trust from executives and arm them with the right story to share with their board.
Megan ended with some advice for fellow investors and board members: Don’t stop at product market fit. Use tools like product benchmarks to drive your companies to product market love.
“It’s not enough to build a big company—you need product market love,” she says. “As an investor (…), you can go to the founding team and say, here is a playbook to help guide you to product market love, which gives us confidence to continue to invest.”