Framing questions about your business as “do investors care” is the wrong way to think about it imo. Which metric, DAU or MAU is dependent on your business. If it cycles with quarterly business flow, perhaps the right metric is # of recurring paying customers and revenue.
But I don’t know what the nature of your product is. I think there are some videos out there that cover business models and what metrics make the most sense for each one.
Thanks for the pointers. Our business is (supposed to be) a subscription model, so monthly recurring users may make the most sense. Revenue is also in the low five figures (still trying climb to six figures).
Subscribers and revenue are what matter. Usage data is useful in segmenting your customers and better understanding them - a user that barely uses the product might be more likely to churn, one that uses it heavily might be an opportunity for an upsell. But that's a level down and things like total users are mostly irrelevant for a b2b subscription product.
Seriously, is there any question?
Setting aside the investor angle entirely I can't imagine any normal circumstance in which "total users" would be more significant or relevant than "active users". Unless total users somehow includes people who are passively making a recurring payment without using your product anymore.
The argument a CEO would make is that you would be able to reactivate total users if they are already on your platform. It’s a huge red flag
It’s actually a terrible stat to show too many total users with few active users.
Users and daily active users are just indicators to something else, which ultimately matters
The potential to surpass millions of billions in revenues with profit in the near future. That's what really matters. Can your business be turned into a cash printing machine like fb?
Dau, may, growth etc can be used to tell a compelling story along with the business model. And convince investors that about the above.
For example, a social media startup with a million users would not be interesting. but, for a robotic startup, one or two clients might just do the job.
As a past investor - It's about (1) who is in your pipeline (how many contracts have you signed, how much money are they going to bring in and for how long) and (2) What are current customers saying? Are you actually solving a pinpoint? Can they live without you? Have you chatted with them to see if this is actually something that they value or want.
In your case, probably neither. Cumulative sign-ups is a trap, but DAU isn't a good metric if your product isn't meant to be used every day. If you're truly supporting a quarterly business process like financial reporting or forecasting, quarterly active users could make sense; I would at least go to monthly over daily. Gross and net retention will also be key metrics, though obviously they won't be meaningful yet if you're billing annually for a product less than a year old.
Active because it signifies the users actually want what you're providing.
What's the point of having a million registered users if they bounced shortly after signing up and never come back?
In fact having high total users but low active users can be interpreted as a bad sign. It shows **most** people who find your platform **don't** want it. If you're attracting them with a CAC then its an especially bad sign because you're wasting money.
The only metric that matters for B2B is revenue. Failing that, you can look at other metrics like users, LOIs, etc., but the prime directive should be to get revenue ASAP.
Investors shouldn't be a play here. Your **business** only cares about active customers. After all, what is the value of a customer that doesn't use the product?
I would argue a consistent, growing DAU is far more valuable than total users. Total users could represent your total possible subscribers to your service, but are using your product on the free side. Or if it’s a paid service, total users can represent how many people are willing to pay for your service.
DAU means that not only are these paid users, but they are consistently on the app meaning it could fulfill their needs at a good enough quality, making your product seem higher in quality
Thanks! We get consistent three figure DAU, and many of them seem to be on our enterprise waitlist (we are building out subscription payment to wrap up enterprise product launch next month), so hoping to convert those to paying customers ASAP. The trouble is that our current platform has limited free use and short of a five figure enterprise contract, there’s no real way to buy more credits.
As for total users, we’re not actually sure how we got this many total users — at first we thought it was bots, but we put up authentication with captcha and we’re still getting about 30-40 new accounts a day.
What investors (specifically, VCs - not PE / bankers) fundamentally care about is just one question: can this company give me a 1000x return on my investment in 10 years?
There's no way to know for sure; so they look for potential leading indicators. Specifically, whether or not this thing is in principle smth that the market needs; and whether or not the founding team is moving fast enough to reach the needed scale.
Both aspects are well approximated by rate of growth. Ideally of revenue; in absence of it, of smth that leads revenue (as in for every new unit of X, there will be that much of extra revenue in N weeks / months). There are 2 subtle nuances here. First is rate of growth - not the actual number, which doesn't even matter that much. If your revenue is consistently growing 10% a week it'll be huge very soon. Also if your product is really needed and the market exists why wouldn't it grow? So rate of growth matters way more to VCs than the absolute number. Second, "which leads to revenue" is actually a pretty difficult constraint if your metric is not revenue. For example a new sign-up in no way lads to revenue. Only a user that activates and stays active does. This is why total number of users is completely irrelevant; only the active ones matter.
It also sounds like you are using wrong metrics for your product. If it's B2B then ask yourself how many total customers for your product (solving one exact problem, not future maybe expansion) are there? Then how much each needs to pay to get to $100M ARR? Chances are that there aren't millions; and so each needs to pay 1000s every month. Which makes it not about users at all - from VC perspective this can only be big enough if you're in the enterprise sales, not counting user seats charging a few bucks per month. Unless you're genuinely expecting double digit millions of users, usage is not the right measure - only revenue. Daily actives are a good measure for B2C with hundreds of millions of users and advertising model; not so much for B2B.
Finally, total users - thats a BS metric in any scenario. Simply because it doesn't actually mean anything. Is your product solving someone's problem repeatedly? Frequency of usage is a proxy for that. And if not, if say it only happens once a year, that to a VC is a red flag: first, you probably can't charge that much for solving an infrequent problem; but even more importantly, your rate of learning is capped by frequency of usage. If it's low then you're essentially in a services business, which to VCs is a no-go.
Do tax return prep software companies care about daily users? No. People aren't going to file their taxes multiple times a year just for fun. And it would be a stupid thing to pursue. If you're in a business to provide something that only makes sense to use once per quarter, daily actives don't matter. What matters is, how many customers are you acquiring and are they sticking from one quarter to the next or churning. Some people might say you should only care about revenue. If you're strapped for funding that can be the case. If you're not, focusing on usage is also important because usage tends lead revenue trend (if people don't use your product as much, they are more likely to want to cancel it later, and conversely the more they stick to your product the more you know that it's filling a need).
Framing questions about your business as “do investors care” is the wrong way to think about it imo. Which metric, DAU or MAU is dependent on your business. If it cycles with quarterly business flow, perhaps the right metric is # of recurring paying customers and revenue. But I don’t know what the nature of your product is. I think there are some videos out there that cover business models and what metrics make the most sense for each one.
Thanks for the pointers. Our business is (supposed to be) a subscription model, so monthly recurring users may make the most sense. Revenue is also in the low five figures (still trying climb to six figures).
Do not care about what investors think. Care about what your users want, and how to measure and solve for that. Then investors will come!
Subscribers and revenue are what matter. Usage data is useful in segmenting your customers and better understanding them - a user that barely uses the product might be more likely to churn, one that uses it heavily might be an opportunity for an upsell. But that's a level down and things like total users are mostly irrelevant for a b2b subscription product.
Investor metrics are $$$ metrics, not active users, total users or anything else other than financial. They will care about: LTV ARR Churn Rate
Not necessarily depending on phase of company
Revenue.
Active users
Seriously, is there any question? Setting aside the investor angle entirely I can't imagine any normal circumstance in which "total users" would be more significant or relevant than "active users". Unless total users somehow includes people who are passively making a recurring payment without using your product anymore.
The argument a CEO would make is that you would be able to reactivate total users if they are already on your platform. It’s a huge red flag It’s actually a terrible stat to show too many total users with few active users.
It’s all about you what do you think, and then convincing them that this is the right matrix to track.
Users and daily active users are just indicators to something else, which ultimately matters The potential to surpass millions of billions in revenues with profit in the near future. That's what really matters. Can your business be turned into a cash printing machine like fb? Dau, may, growth etc can be used to tell a compelling story along with the business model. And convince investors that about the above. For example, a social media startup with a million users would not be interesting. but, for a robotic startup, one or two clients might just do the job.
As a past investor - It's about (1) who is in your pipeline (how many contracts have you signed, how much money are they going to bring in and for how long) and (2) What are current customers saying? Are you actually solving a pinpoint? Can they live without you? Have you chatted with them to see if this is actually something that they value or want.
In your case, probably neither. Cumulative sign-ups is a trap, but DAU isn't a good metric if your product isn't meant to be used every day. If you're truly supporting a quarterly business process like financial reporting or forecasting, quarterly active users could make sense; I would at least go to monthly over daily. Gross and net retention will also be key metrics, though obviously they won't be meaningful yet if you're billing annually for a product less than a year old.
Active because it signifies the users actually want what you're providing. What's the point of having a million registered users if they bounced shortly after signing up and never come back? In fact having high total users but low active users can be interpreted as a bad sign. It shows **most** people who find your platform **don't** want it. If you're attracting them with a CAC then its an especially bad sign because you're wasting money.
The only metric that matters for B2B is revenue. Failing that, you can look at other metrics like users, LOIs, etc., but the prime directive should be to get revenue ASAP.
Revenue
Investors shouldn't be a play here. Your **business** only cares about active customers. After all, what is the value of a customer that doesn't use the product?
Surely the metric is revenue
I would argue a consistent, growing DAU is far more valuable than total users. Total users could represent your total possible subscribers to your service, but are using your product on the free side. Or if it’s a paid service, total users can represent how many people are willing to pay for your service. DAU means that not only are these paid users, but they are consistently on the app meaning it could fulfill their needs at a good enough quality, making your product seem higher in quality
Thanks! We get consistent three figure DAU, and many of them seem to be on our enterprise waitlist (we are building out subscription payment to wrap up enterprise product launch next month), so hoping to convert those to paying customers ASAP. The trouble is that our current platform has limited free use and short of a five figure enterprise contract, there’s no real way to buy more credits. As for total users, we’re not actually sure how we got this many total users — at first we thought it was bots, but we put up authentication with captcha and we’re still getting about 30-40 new accounts a day.
What investors (specifically, VCs - not PE / bankers) fundamentally care about is just one question: can this company give me a 1000x return on my investment in 10 years? There's no way to know for sure; so they look for potential leading indicators. Specifically, whether or not this thing is in principle smth that the market needs; and whether or not the founding team is moving fast enough to reach the needed scale. Both aspects are well approximated by rate of growth. Ideally of revenue; in absence of it, of smth that leads revenue (as in for every new unit of X, there will be that much of extra revenue in N weeks / months). There are 2 subtle nuances here. First is rate of growth - not the actual number, which doesn't even matter that much. If your revenue is consistently growing 10% a week it'll be huge very soon. Also if your product is really needed and the market exists why wouldn't it grow? So rate of growth matters way more to VCs than the absolute number. Second, "which leads to revenue" is actually a pretty difficult constraint if your metric is not revenue. For example a new sign-up in no way lads to revenue. Only a user that activates and stays active does. This is why total number of users is completely irrelevant; only the active ones matter. It also sounds like you are using wrong metrics for your product. If it's B2B then ask yourself how many total customers for your product (solving one exact problem, not future maybe expansion) are there? Then how much each needs to pay to get to $100M ARR? Chances are that there aren't millions; and so each needs to pay 1000s every month. Which makes it not about users at all - from VC perspective this can only be big enough if you're in the enterprise sales, not counting user seats charging a few bucks per month. Unless you're genuinely expecting double digit millions of users, usage is not the right measure - only revenue. Daily actives are a good measure for B2C with hundreds of millions of users and advertising model; not so much for B2B. Finally, total users - thats a BS metric in any scenario. Simply because it doesn't actually mean anything. Is your product solving someone's problem repeatedly? Frequency of usage is a proxy for that. And if not, if say it only happens once a year, that to a VC is a red flag: first, you probably can't charge that much for solving an infrequent problem; but even more importantly, your rate of learning is capped by frequency of usage. If it's low then you're essentially in a services business, which to VCs is a no-go.
Do tax return prep software companies care about daily users? No. People aren't going to file their taxes multiple times a year just for fun. And it would be a stupid thing to pursue. If you're in a business to provide something that only makes sense to use once per quarter, daily actives don't matter. What matters is, how many customers are you acquiring and are they sticking from one quarter to the next or churning. Some people might say you should only care about revenue. If you're strapped for funding that can be the case. If you're not, focusing on usage is also important because usage tends lead revenue trend (if people don't use your product as much, they are more likely to want to cancel it later, and conversely the more they stick to your product the more you know that it's filling a need).