In the early days of Airbnb, co-founders Brian Chesky and Joe Gebbia slept on air mattresses in their own living room, hosting strangers to make rent money. They knew that if their nascent platform was going to become something more than a quirky side project, they needed to track numbers that mattered. Instead of just counting sign-ups, they focused on “nights booked,” a key performance indicator (KPI) that revealed genuine engagement and revenue potential. This humble metric became a crucial compass, guiding them from a scrappy apartment experiment to a multi-billion-dollar hospitality platform.

Why KPIs Matter

At their core, Key Performance Indicators (KPIs) are measurable values that signal whether a startup is on track to meet its goals. Without relevant KPIs, decisions become guesswork, strategies drift, and growth opportunities go unnoticed. According to the Harvard Business Review, effective KPI selection is vital for strategy execution and organizational alignment1. The right metrics help startups focus, prioritize, and iterate, setting the stage for sustainable growth.

For early-stage ventures—where resources are limited, stakes are high, and pivots are common—KPIs can mean the difference between joining the 90% of startups that fail and becoming the next household name. By identifying the numbers that truly matter, founders create a data-driven culture that enables them to learn, respond, and evolve in real-time.

Common KPIs That Successful Startups Track

  1. Customer Acquisition Cost (CAC)
    CAC measures how much it costs to acquire a single paying customer. Successful startups know that reducing CAC is crucial, especially in the beginning. In his early days at Stripe, co-founder Patrick Collison closely monitored CAC to ensure that the company’s marketing spends correlated with user growth. By keeping CAC in check, Stripe focused on cost-effective acquisition channels like developer evangelism and word-of-mouth, which ultimately fueled its global expansion2.
  2. Lifetime Value (LTV)
    LTV represents the total revenue a single customer generates over their entire relationship with the company. Startups often couple LTV with CAC to measure profitability. If LTV > CAC, the startup has a sustainable model. Dropbox co-founder Drew Houston noted early on how crucial it was to understand the value of each user over time, focusing on user retention and referrals. By increasing LTV through features that encouraged users to store more files and invite friends, Dropbox systematically improved its long-term profitability3.
  3. Churn Rate
    Churn measures how many customers stop using a product over a given period. A high churn can signal issues with product fit, user experience, or customer support. For Slack, one of its most critical early KPIs was daily active users (DAUs), but beneath the surface, they also monitored churn closely. Stewart Butterfield, Slack’s CEO, emphasized the importance of retention. Slack’s early pivot from a gaming platform to a communication tool succeeded because they focused on keeping the users they gained, driving the churn rate down and ensuring customers stuck around, boosting long-term growth4.
  4. User Engagement Metrics
    Engagement metrics—like daily active users (DAUs), monthly active users (MAUs), session length, or messages sent—offer insights into how users interact with the product. Facebook famously tracked MAUs as a cornerstone KPI from the start. Mark Zuckerberg and his team needed to know if people kept coming back and engaging with the product. This focus on engagement helped shape product iterations, news feed algorithms, and features that encouraged users to remain active on the platform5.
  5. Conversion Rates
    Conversion metrics measure how effectively a startup turns prospects into paying customers. For e-commerce startups, conversion rates reveal the efficiency of funnels, landing pages, and marketing campaigns. In the early days of Etsy, its founders tracked conversion rates from product views to purchases. As the marketplace grew, understanding which listings and categories converted best enabled targeted improvements, eventually turning Etsy into a beloved platform for artisans and shoppers alike6.
  6. Referrals and Virality
    Referral metrics indicate how many new users come from existing customers. Early Airbnb growth was fueled by a combination of supply (hosts) and demand (guests), but referrals—both hosts referring other hosts and guests bringing in new travelers—played a significant role. By measuring and optimizing referral programs, early-stage startups can leverage a powerful growth engine that compounds over time.

Strategies for Selecting and Assessing KPIs

  1. Start With Your Business Model
    According to The Lean Startup by Eric Ries, the best KPIs are derived from a startup’s unique value proposition and business model7. If your startup sells software subscriptions, recurring revenue and churn are primary metrics. If it’s a marketplace, transactions per user and gross merchandise volume might be key.
  2. Focus on Actionable Metrics
    Avoid “vanity metrics”—numbers that look good but don’t drive real decisions. Instead, embrace “actionable metrics” that correlate with strategic changes. Andrew Chen, a renowned startup advisor, emphasizes focusing on metrics that can be tested and influenced through experiments8. For instance, if user retention improves when onboarding is simplified, that’s actionable. Pageviews without context, on the other hand, are often vanity.
  3. Use a Balanced Dashboard
    While it’s essential to have a North Star metric—like Airbnb’s “nights booked”—a balanced dashboard prevents tunnel vision. CAC, LTV, churn, and referral rates can complement the primary KPI, providing a holistic understanding of the business. A 2018 report by First Round Review suggests that startups maintaining a balanced dashboard are better at identifying growth opportunities and addressing emerging problems before they become critical9.
  4. Regular Review and Iteration
    KPIs are not static. As your startup evolves, so too will the metrics that matter. In the early days, monthly sign-ups might be crucial, but as you scale, product usage, revenue growth, and brand recognition might become more important. Regularly review and update your KPIs to match your current stage and strategic goals. Slack, for example, shifted from focusing solely on DAUs to also considering the quality of user engagement and adoption rates in enterprise clients as it matured.
  5. Data-Driven Culture
    Embedding data-driven thinking in your startup’s DNA ensures that every decision—from product features to marketing campaigns—is informed by metrics. GitHub, in its formative years, encouraged engineers and designers to propose changes supported by data. This helped the platform evolve from a small code repository service to a central hub for millions of developers worldwide. By tracking KPIs like user contributions and repository forks, GitHub pinpointed improvements that delivered tangible value10.

Developing and Refining KPIs Over Time

Early-stage startups often have limited data. Initially, gut instinct and qualitative feedback from early adopters might guide you. As the user base grows, more data becomes available, and KPIs become clearer. Adjust your metrics as you learn more about user behavior, market trends, and revenue streams.

For instance, when Uber started, it focused on “completed rides” and “time to pick-up,” ensuring that drivers were reliable and wait times short. Later, as it scaled, metrics like driver retention, customer LTV, and revenue per region became equally critical. This evolution of KPIs helped Uber identify markets ripe for expansion and services that needed refinement11.

The Right Metrics

In the early days of Airbnb, Brian Chesky and Joe Gebbia’s focus on “nights booked” must have seemed almost quaint. Yet that single KPI encapsulated the core value of their product—actual usage and revenue potential. Today, as we marvel at Airbnb’s global footprint, it’s clear that their diligent attention to KPIs paid off.

From Airbnb to Dropbox, Slack to Stripe, the most successful startups share a commitment to tracking the right metrics and using those numbers to drive iterative improvement. By identifying actionable KPIs, reviewing them regularly, and fostering a data-driven culture, you can turn abstract numbers into a roadmap for sustainable growth. In a world awash in information, the real competitive advantage lies in choosing the numbers that matter—and acting on them.

Sources

  1. Harvard Business Review. (2021). KPIs Aren’t Just About Assessing Past Performance
  2. Andreessen Horowitz Podcast with Patrick Collison (2015).
  3. Forbes. (2013). Drew Houston’s Interview on Dropbox’s Early Growth.
  4. First Round Review. (2015). Stewart Butterfield on Slack’s Early Metrics.
  5. Wired. (2010). The Facebook Effect. Interview with Mark Zuckerberg.
  6. Etsy IPO Filing (2015). SEC Filings.
  7. Ries, E. (2011). The Lean Startup.
  8. Chen, A. (2016). Actionable vs Vanity Metrics.
  9. First Round Review. (2018). How Founders Use Metrics to Drive Growth.
  10. GitHub Engineering Blog (2014). Making MySQL Better at GitHub.
  11. Uber Engineering Blog (2016). The Uber Engineering Tech Stack, Part 1: The Foundation .