Your blockchain startup isn’t an exception to the rule — if you’re aiming to create value for yourself and others, you’ll need metrics that can generate actionable insights that drive your decisions, and your growth. As we move beyond the world of token sales and pure speculation, founders need to pay even more attention to the principles laid out in Web2 — and how they may apply to their startup in Web3.

In this post, we’ll walk through a framework of three questions to ask as you develop metrics for your blockchain startup:

What stage of development is your startup at? What metrics fit your current stage of development? How do you account for your startup’s business model attributes?

As a refresher on some of the foundational thinking of Web2, check out the following:

Despite the need to stay grounded in the fundamentals of company-building, Web3 is quite different from Web2 — it’s an early, still-evolving ecosystem with blurry boundaries and ill-defined rules. In addition to all of the traditional obstacles that startups must tackle, blockchain startups often need to understand n-sided markets, tokens, new layers in the tech stack, and emerging business models that don’t fit within the well-established advertising and SaaS business models of Web 2.

Therefore, the four frameworks linked above aren’t fully sufficient to address the obstacles that blockchain startups face. This article is meant to help fill that remaining gap by establishing a common language for blockchain startup metrics — so that founders and Web3 teams can more easily learn from each other and build a foundational, cumulative body of knowledge.

Question 0: Why Track Metrics At All?

Performance metrics are one of the best ways of understanding whether or not you are making progress towards your goals. Metrics also align a team’s many efforts towards a shared vision of success.

To make sure your metrics add value for your team, keep the number of metrics you’re tracking small. If most people on your team can’t even remember what your metrics are, they won’t be able to take actions to improve those metrics on a daily basis. Re-evaluate your company’s key business metrics as your company grows and evolves over time. Don’t simply add new metrics to a growing list — instead, be sure to eliminate old metrics that are no longer relevant. Best practice for new teams is to review your metrics quarterly. We’ll discuss a more nuanced approach to metrics (frequency of updates, leading vs. lagging, etc.) in a follow-up article.

Not All Metrics Are Created Equal

Before we dig in, remember these guidelines when choosing metrics:

Identify a target for each metric: What is the current baseline of the metric, and where would you like it to be in the future? A generic approach would be to measure the baseline, estimate a reasonable growth rate, and then extrapolate a target metric that is achievable for the time frame you’re considering. Not all metrics are meant to change: While you may want to increase or decrease many metrics over time (e.g. revenue or churn, respectively), others may be best suited to simply reach a certain threshold and then be maintained (e.g. server up-time). Each metric should drive a decision: If you’re not making decisions based on your metrics, they are a waste of time and a pointless cognitive load. Beware of vanity metrics!

Question 1: What stage of development is your startup at?

First things first: You’re going to need to understand where in the startup lifecycle your company currently exists. Are you still validating that there is a market-need you’re trying to address? Do you have a validated, scalable solution? Are customers begging “Can I please give you money to use your product?”

More than anyone out there, entrepreneurs need to make sure that the juice is worth the squeeze — that you’re wasting as little time and money as possible and obtaining the most leverage out of ever decision you make. Therefore, be brutally honest with yourself when determining your company’s stage — it’s critical and will only help you company succeed, instead of being the startup failure story you mention when interviewing for your next job.

The stages of development we recommend for Web3 startups are below:

Problem-Solution Fit: Validating the problem you believe exists, and then validating the solution you believe will address that particular problem (typically for a particular type of user / market, etc.) Product-Market Fit: Validating that the product you have built resonates with your target market, and validate that the same market will pay money, data, attention, time, or another resource in exchange for your product Growth: Acquiring more users, customers, or clients, and understand the unit economics of your business model along with the underlying drivers of the unit economics. Market Leadership: Achieving market dominance, or obtain enough market share that your business is financially sustainable, can invest in R&D, product development, and other long-term growth areas. Scaling: Entering new strategic growth areas (typically new geographic markets, new product lines, or new applications of existing tech) that will provide the most value to the business, users, society, or other stakeholders,

Question 2: What metrics fit your current stage of development?

Next, taking into consideration the stage of your company, you can begin considering the metrics that you ought to be tracking in order to inform your startup’s further development.

As you evolve, you’ll likely be tracking more and more metrics, however you’ll also be establishing functional groups within your organization who will be responsible for owning them. Regardless, as the leader of an organization in a particular stage of development, you ought to focus only on the top 3–5 metrics which matter the most to your business success. As an example, having great email open-rates can feel wonderful, but if you’re an enterprise SaaS company, email may not be what truly drives value creation for your business.

Problem-Solution Fit

This stage is similar to Web2, meaning that within it you may want to track metrics that simply help you understand and gauge whether or not you’ve found a problem worth solving. However, at this stage, remember that tracking a single metric may not be meaningful as metrics can often be gamed. For example, if you were to simply track the “Number of customer development interviews” — you may not learn anything from them. You may conduct 100+ interviews with the wrong market, or conduct them poorly, etc. and ultimately you may not gain any new insights about your target market. Therefore, be sure to think critically about whether or not the metric will truly move you and your team closer to your end goal, instead of just providing data that will be helpful in generating a nice-looking “up and to the right” graph.

Number of insights generated from customer development interviews

generated from customer development interviews Community Metrics: i.e. Slack members, Email Sign-ups, Telegram subscribers, or other community metric. For example, developing a landing page that proposes the solution you’ll offer for a particular problem is a classic method of validating a market exists (i.e. Fake Doors)

i.e. Slack members, Email Sign-ups, Telegram subscribers, or other community metric. For example, developing a landing page that proposes the solution you’ll offer for a particular problem is a classic method of validating a market exists (i.e. Fake Doors) Beta Test Conversions, or in other words, the number of potential customers who commit to participating to your beta test when live

Product-Market Fit

As the need for finding product-market fit is the core activity your team ought to be focused on during this stage, it’s no surprise that many of the metrics a startup would focus on in this stage are product focused.

Below are a number of the most common product metrics that a Web3 startup may track during this stage:

Token Metrics

(Review the Consumer Token Framework as well in order to better understand how your token is classified.)

Use case identification : who uses the token and how?

: who uses the token and how? Validate token existence by asking “is the system the same or better if I replace with ETH or BTC?”

by asking “is the system the same or better if I replace with ETH or BTC?” Model input and outputs regarding token’s price action, quantity, and liquidity.

Engagement Metrics

Product Value Prop : How much are users engaging with core value proposition of the product? For example, the Gitcoin team may be interested in the number of issues funded, as a ratio compared to the number of visitors their landing page.

: How much are users engaging with core value proposition of the product? For example, the Gitcoin team may be interested in the number of issues funded, as a ratio compared to the number of visitors their landing page. Breadth : How many users are actually realizing the value proposition of the product?

: How many users are actually realizing the value proposition of the product? Retention : How often do users return? Focusing on the users who churn over time, and understanding why they don’t return may help you increase your retention.

: How often do users return? Focusing on the users who churn over time, and understanding why they don’t return may help you increase your retention. Additionally, of the users who return, what are they doing and who are they? Sometimes these are the best insights to try to glean from your data early on.

How you measure retention matters as well (classic, rolling, range) all of which can represent different perspectives, stickiness of a product.

Growth Metrics

Reach : Number of transactions occurring through your dapp, number of users, number of downloads, etc. It may also be possible to measure specific smart contract calls, as long as the smart contract call is an accurate proxy for users truly being active on the Dapp.

: Number of transactions occurring through your dapp, number of users, number of downloads, etc. It may also be possible to measure specific smart contract calls, as long as the smart contract call is an accurate proxy for users truly being active on the Dapp. Efficiency: Percent of users that learn about your product and then are able to navigate to benefit from the core value proposition

The metrics above, and likely others, will ideally lead you to finding product-market fit (PMF). However be careful not to mistake some light nudges from the market for PMF — as the founders of Dropbox once said “Product-market fit feels like stepping on a landmine.”

Growth

If you’ve begun to get a sense of product-market fit you may be able to shift your focus from product metrics and begin focusing more on the business. As described by Peter Reinhardt, product-market fit doesn’t feel like “vague idle interest…or a glimmer of hope from an early conversation, or a trickle of people signing up, it feels like all of your metrics have gone haywire, and customers are ripping your product out of your hands.”

If you feel like you’re getting signals like that from the market, then march on, and begin considering metrics such as:

Token Metrics

Monthly Value Transfer (MVT): If your Dapp, exchange, or other web3 product deals in facilitating the transfer of digital value, tracking the amount of value being transferred may be more important than tracking the number of new users you are acquiring. Be cautious here however, as two accounts could transfer value back and forth creating an inflated metric — in that scenario, the product manager would be well-advised to understand value transfers between unique accounts as one potential solution to that issue.

Engagement Metrics

Community Engagement : Number of individuals engaged on Riot, Telegram, etc.

: Number of individuals engaged on Riot, Telegram, etc. Developer Activity : GitHub stars, forks, etc.

: GitHub stars, forks, etc. Churn Rate

Growth Metrics

Marketplace Metrics (as applicable): Buyer/seller growth, ratio of buyers vs. sellers, inventory growth, search effectiveness (are users searching for inventory you have and/or are building for), signs of fraud, pricing metrics, etc.

(as applicable): Buyer/seller growth, ratio of buyers vs. sellers, inventory growth, search effectiveness (are users searching for inventory you have and/or are building for), signs of fraud, pricing metrics, etc. Time to break-even at current growth trajectory

at current growth trajectory Unit Economics : Typically the direct revenues and costs associated with the most basic element of a company’s business model.

: Typically the direct revenues and costs associated with the most basic element of a company’s business model. Customer Acquisition Cost (CAC)

Lifetime Value (LTV)

Market Leadership

After growing, acquiring users, customers, etc., you’ll likely want to focus on capturing value for your startup and solidifying your place as a leader within the market in which you operate. In doing so, it may be helpful to monitor metrics such as:

Interoperability : Number of dapps, exchanges, or other Web3 products with which your product can interact may have a long-term effect on your ability to continue leading, and growing into new market segments.

: Number of dapps, exchanges, or other Web3 products with which your product can interact may have a long-term effect on your ability to continue leading, and growing into new market segments. Revenue per user : Although bottom line revenue can also be helpful, RPU can better inform your pricing model, customer acquisition strategies, and your overall revenue model.

: Although bottom line revenue can also be helpful, RPU can better inform your pricing model, customer acquisition strategies, and your overall revenue model. Time to Customer Breakeven (sometimes known as customer acquisition payback): Accounting for the CAC, how many months will it take for you to break-even for a single customer?

Scaling

There are very few, if any, true Web3 startups that are operating at this stage. Binance, Coinbase, and ConsenSys may fit within this stage but across the industry there are very few. Much of the information below is directional in nature, and more detail will be included in follow-up articles as the ecosystem evolves.

If you believe your company is at this stage, it may benefit you to begin considering Web2 as a competitive set. For example, if you’re scaling a stablecoin payment solution, you may now need to compare your metrics to those of PayPal, Venmo, or others — instead of solely focusing on outpacing other Web3 startups.

Unit Economic Comparisons : such as customer lifetime value across regions, distribution channels, or different marketing campaigns, which then allow for optimization across the product line / company.

: such as customer lifetime value across regions, distribution channels, or different marketing campaigns, which then allow for optimization across the product line / company. Cannibalism : Is the launch of an additional product actually hurting the sales/engagement of another product of yours? Understanding these tradeoffs can be crucial as you grow in size and complexity.

: Is the launch of an additional product actually hurting the sales/engagement of another product of yours? Understanding these tradeoffs can be crucial as you grow in size and complexity. Competitive Metrics: Although these were likely just a distraction before, they may begin to matter more as you now focus on establishing barriers to entry for markets you already operate in, understanding market saturation, and more.

Question 3: How do you account for your startup’s business model attributes?

We’ll be posting soon to dig into this further, so please follow along as we dive into business model attributes next!

Last but not least, a HUGE THANK YOU to all of the amazing talent and intellect who contributed to this article, in particular: Corbin Page, Rohun Jauhar, Katie Johnson, Shawn Cheng, Leah Feuer, Dean Ramadan, David Wu. Marc Beharry, Frank Chen, Cheryl Douglass, Jacob Blish, Wayne Chang, Matthew Groff, Elise Ransom, and more.

And of course a shout-out to the folks who have laid the foundations on which this post is built: Dave McClure, Eric Reiss, Ash Murya, Sean Ellis.