- The speaker discusses the importance of KPIs (key performance indicators) and prioritization for early stage startups.
- Prioritization helps determine how to spend time each day and directs the team's efforts.
- It is crucial to choose the right KPIs and prioritize tasks that will move the business towards product-market fit.
- Vanity metrics should be avoided as primary KPIs as they do not contribute to real progress.
- Time is valuable in a startup, and prioritization helps expedite the journey to market and reduces costs.
- Setting KPI goals and identifying bottlenecks are important for prioritization.
- A framework is provided to prioritize tasks based on probability of success and complexity.
- Honest evaluation and learning from failures is essential for progress.
- Indecision should be avoided, and fast growth and user feedback are emphasized.
- The summary provides a list of tasks that should and should not be prioritized.

- The video discusses what tasks should and should not be on a startup's task list.
- Tasks that should be on the list include talking to users, building and iterating based on feedback, and responding to support emails.
- Tasks that should not be on the list include passive fundraising conversations, attending conferences, and focusing on arbitrary technical milestones.
- The video warns against falling into traps such as prioritizing low leverage tasks, fooling oneself into thinking something is working when it's not, and spending too much time on downside protection instead of chasing upside.
- The importance of prioritizing tasks based on key performance indicators (KPIs) is emphasized, with growth being the primary KPI for most startups.
- Secondary KPIs such as retention, churn, unit economics, and customer acquisition cost are also mentioned.
- The video provides examples of how a laser focus on growth can lead to strong early traction, while splitting focus can result in slow growth and potential failure.
- Setting growth targets depends on the business and stage, with 5-7% week over week growth considered good and 10% considered exceptional.
- Factors that can impact growth rate, such as latent demand and sales cycle length, are discussed.

- Length of sales cycle can impact early KPI and goal setting for enterprise businesses
- Goals can be set around other process metrics, such as leads in different stages of the funnel
- Organic user acquisition is ideal in the early stages, but paid acquisition tests can be run once organic growth is established
- Retention and engagement are both important for revenue growth, so focus on both acquiring new users and retaining existing ones
- SuperDaily switched their tracking metric to customers who placed 5 or more orders to align marketing with revenue goals
- Two approaches for goal setting: top-down (setting a long-term goal and working backwards) and bottoms-up (setting realistic short-term goals)
- Don't focus on CAC to LTV ratio or free signups as KPIs in the early stages, instead focus on payback period and generating revenue
- Exceptions to revenue-focused KPIs include hardware companies, biotech companies, and enterprise businesses with long sales cycles
- Set ambitious targets, share goals with your community, and hold yourself accountable

The video emphasizes the importance of prioritization and choosing the right KPIs for early stage startups. It advises against vanity metrics and highlights the value of time in a startup. The speaker provides a framework for prioritization and stresses the importance of honest evaluation and learning from failures. The video warns against falling into traps and emphasizes the need for fast growth and user feedback. It provides examples of tasks that should and should not be prioritized and discusses the primary and secondary KPIs for startups. Factors that can impact growth rate and goal setting are also discussed. The importance of retention and engagement for revenue growth is highlighted. The video suggests setting ambitious targets, sharing goals, and holding oneself accountable.

YC Visiting Partner Divya Bhat talks about how to set your KPIs (key metrics) and how to prioritize your time. This talk helps founders launch faster and set goals in order to make real progress.

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Chapters (Powered by https://bit.ly/chapterme-yc) - 
00:00 - KPIs and Prioritization for an Early-Stage Startup
04:48 - How to Prioritize Your Time in the Startup
05:29 - Setting the Right KPI Goals for Prioritization
08:33 - Simple Framework to Optimize KPI Goal 
10:04 - 5 Things That Should & Should Not End Up on Your Task List
15:55 - Choosing the Right KPIs for your Startup
18:58 - How to Set Targets
22:14 - Setting Targets - Top Down & Bottom Up
26:15 - Exceptions To Revenue KPIs: Hard Tech

Good morning, I'm Divya, and today I'm going to talk a little bit about KPIs and prioritization for an early stage startup.

This is my second batch as a visiting group partner here at YC, where I've worked with hundreds of founders on hitting their demo day goals and navigating goal setting and execution as they search for product market fit.

I myself am a two-time YC founder and have also held leadership roles at several fast growth startups.

Just as a heads up, I'm going to be giving you some homework at the end of this talk.

My hope is that today we can improve the way you spend your time and expedite your journey to product market fit.

Now that you're a startup founder, there is nobody telling you how to spend your time.

You might have heard some version of and not or, implying that you have to turn over every rock and optimize every metric to build a successful startup.

While this is true to some extent, you still have to choose how you're going to spend your time each day.

Ultimately, as a startup founder, you want to get to product market fit as quickly as possible.

Prioritization matters and having clarity on your KPIs is crucial for prioritization.

KPI stands for key performance indicator.

These are the metrics that you track and report on, both internally and externally.

These metrics make sure that you're measuring what matters and they tell you whether what you're doing is working.

Prioritization tells you in what order you need to tackle your work each day.

There are infinite things you could be doing each day and your work is never done, but time is finite.

Prioritization tells you how you spend your time each day, how you direct your team to spend their time each day when you have 1, and most importantly, prioritization helps you decide which super important things on your list you don't get to today.

Here's what your task list may look like.

Note that the highlighted items in yellow are the ones that I might decide to prioritize.

Also note that every item on this list feels important, yet only a few are likely to truly move your business forward and toward product market fit.

In a world where you can't possibly get to everything, you need to prioritize the tasks that will move you toward your KPIs faster.

So why are KPIs and prioritization in 1 talk?

Well, prioritization means that you're working on the things most likely to impact your top KPIs.

So it's critical that you choose the right KPIs and then are honest with yourself about which tasks are most likely to move those KPIs.

When you're moving fast, it's extra important to make sure you're running in the right direction.

I'll use this analogy a few times today, so look out for it.

We come across companies all the time who are working so hard, but optimizing for the wrong thing.

We call these vanity metrics, things that make you feel good and things that you can brag about on LinkedIn.

At the end of the day, if you fall into the trap of making these your primary KPIs, you're going to be spending your time on the wrong things.

So why are KPIs and prioritization important?

Well, as a founder, no 1 is gonna tell you how to spend your time.

It's very easy to feel busy and feel productive and not be moving your business forward.

Here's some common examples of things you can be doing to feel busy today.

Optimizing paperwork tasks, maybe where good enough is all that you needed.

Perfectionism and craftsmanship on a feature that nobody's using anyway.

Premature optimization or building for scale that you don't need to yet.

Or choosing a more intellectually hard problem to solve rather than building what your users want.

I remember in the early days of 1 of my companies, we were trying to pick a legal firm to work with.

Sure, you need a lawyer, and you need to pick a good lawyer.

There are so many to interview, and so many of them wanted to take us out to lunch or to drinks, have us visit their offices, the works.

You guys, this felt flattering and glamorous.

But at the end of the day, we hadn't even launched.

Again, it's easy to run fast, but in the wrong direction.

You need to run fast and be running in the right direction.

When you're doing a startup, time is at a premium.

The faster you get to market, the sooner you earn money, and you can reinvest that money in your business and be less dependent on outside capital.

Or, even if you want to keep raising, you'll have more leverage to raise money on better terms.

Taking more time to get to market means you burn more money.

Lastly, moving slowly means that competitors have more time to copy you and catch up.

Time spent without making real progress also has an emotional and mental cost and can raise red flags externally in fundraising and hiring.

So, don't waste time on things that don't matter.

There are 2 ways we can talk about prioritization.

1 is how you spend your time on your startup versus other things in your life.

This depends on what else is going on in your life and how you want to spend your time.

This is a whole separate topic that we won't spend much time on today.

And 2, this is an area where it's really important to align with your co-founder on expectations.

When we discuss prioritization, we mean, how do you spend the time you've allocated to working on your startup?

Let's make sure that you're doing the most impactful things with your valuable time.

We're going to talk more about how to set KPIs in the next section, but I want to talk about why this is critical for prioritization.

So first, you need to identify your top KPIs.

If you've launched, your primary KPI should be revenue growth.

If you don't want to make revenue growth your primary KPI, you need to really push yourself on why.

We talk more about this later in this talk, but this is important enough to mention here.

A non-revenue KPI is rarely the right 1, and we'll talk about a few exceptions later.

If you're pre-launch, your KPIs in the short term might be weeks until launch or a number of conversations with users.

But once you do launch, please quickly shift your KPIs to revenue growth.

Second, you need to decide, What's your KPI goal for this week?

We'll talk about goal setting later, but assume that you have some goal, for example, 10 more paying customers by next week.

Make sure this ladders up to any longer term goals that you have.

The reason setting the right KPI goals is critical is that it'll remind you of the urgency of growing fast.

Early growth compounds and tracking goals weekly reminds you of this.

Here at YC, we talk a lot about the early days of Airbnb where the founding team wrote their weekly KPI goals on their bathroom mirror.

So they were facing that reality multiple times a day.

In addition to identifying the right KPIs, you also need to identify your biggest bottleneck or problem in moving your top KPI.

Here's an example from a YC company called SuperDaily, a daily grocery subscription service in India that sold to Swiggy in 2018.

SuperDaily faced a scenario early on when they launched V1 of their product.

There were a ton of things to be optimized.

It's operationally complex, The mobile app, ops tooling, inventory management, and a whole lot of messy on the ground logistics.

And they were able to see clearly that their bottleneck was the conversion of users who actually got pretty far down the sign-up flow and then churned.

So they asked themselves, why are high-intent users not converting?

That was the biggest problem they needed to solve.

And the first tasks they prioritized were conversations and experiments to understand this.

By focusing on this question, they realized that high intent users were dropping out because a lot of users wanted a specific milk brand that SuperDaily didn't carry.

It wasn't a UX friction issue or an app issue, So they onboarded that milk brand rather than beautifying their sign-up screen.

Once they solved this, then they started looking at how to convert users that were maybe farther up the funnel or lower intent, users that were referred by word of mouth or people that were casually checking out SuperDaily.

So by the time those users got farther down the funnel to the highest intent phase, they now had that top milk brand on the app, and they knew that they weren't optimizing a funnel that would leak farther down.

By onboarding this new brand, SuperDaily was able to increase their conversion rate by 50%.

Here's a simple framework to prioritize aggressively to optimize for that KPI goal.

Number 1, write down any ideas that you might have to hit your goals.

It's really easy to chase shiny new things.

Next, you want to rank by probability of success and then sub-rank with respect to complexity or how long it's going to take you to do this task.

Once you pick a few tasks and start working on them, If your KPI isn't moving, be really honest about why.

Ask why several times until you feel like you can actually understand the real reason, even if it's hard to hear.

Per the example of Super Daily earlier, it might be something simple like the milk brand.

Are you predicting impact and complexity well?

Did you complete all the tasks you were expecting to complete in this sprint?

Give yourself time blocks to reduce context switching.

Or maybe did you accidentally work on some of those fake progress tasks we talked about, just do better next time.

And then move fast, learn, and then do something differently the next time if what you did didn't work.

The definition of insanity is doing the same thing over and over and expecting different results.

Ideally, you're going to be growing fast.

Churn through your bad ideas fast so that you can get to working on the right good ideas as fast as possible.

So as a sanity check, here are some things that should and should not end up on your list in most cases.

Since we're talking about the 90% case here, and specifically talking about early stage startups, here are a list of example tasks that you should see on your task list.

Talking to users, and then building and iterating based on user feedback.

When you're spending time talking to your customers and responding to support emails, There is a direct path to revenue growth.

The only way you know what your customers want is by talking to them all the time.

And the only way to grow is by building something people want.

Not much else is going to help you at this stage.

Here are some things that should not end up on your task list, aka fake progress.

Passive fundraising conversations or coffees when you aren't actively raising.

When you do decide to raise, it should be deliberate, focused, and time-boxed.

Other than a few select industries, this generally won't move your needle in an early stage.

Spending time optimizing technical benchmarks, launching an Android app.

Unless you're hearing clearly from your users that this is a burning pain point, this is probably fake progress at this point.

You guys, this fake progress list, it's not anything to be ashamed about.

Smart people put these things on their list all the time.

These are all tasks that can make you feel good.

They're metrics that you can brag about on LinkedIn, they might make your mom proud, they might make your ex-boyfriend jealous.

But what they don't do is they don't necessarily get you closer to product market fit.

Here are some common tricks your brain plays on you when you're trying to prioritize.

These are tricks and traps that your mind has to help you avoid negative feelings, like shame, despair, embarrassment, self-doubt.

Many people are drawn to low leverage tasks.

They allow you to check things off your list and it's so tangible.

At a time when your startup's future is uncertain, there can be so much satisfaction in checking tasks off a list.

Spending too much time optimizing paperwork around licensing, incorporation, equity.

This is not an area where you need to optimize or innovate.

Just follow the standard advice to stay legal and compliant.

Slightly cheaper workers comp insurance or a slightly better equity structure is not going to make or break your business.

Taking meetings with potential investors, advisors, partners, or building cool, hard features that you don't know people want yet.

Again, these things can make you feel really good and really smart.

Unfortunately, it's not going to help you find product market fit sooner.

It's just going to be things you're checking off a list.

The second mental trap I want to talk about is that sometimes you can fool yourself into thinking something is working when it's really not.

It doesn't feel good to admit to yourself or your teammates or your investors or your mom that things aren't going well.

But you're not doing yourself any favors by not diagnosing problems early and often.

It's easy to mistake slow growth for product market fit.

As someone that's worked at both kind of slow steady growth companies, my own startups, and companies with clear product market fit, like DoorDash, trust me you guys, these types of growth feel fundamentally different.

Third trap I want to talk about is perfectionism, or indecision, blocking progress.

When nothing seems to be working, it's really easy to make every decision feel like it's going to make or break your company.

And for the ones that do, it's okay to decide wrong first and then fix it later.

So the best case scenario, you know, the 1 you can put on a pedestal, is a scenario where you make the right decision quickly every time.

I recommend the second best option, which is to make pretty good decisions quickly.

And then if they turn out to be wrong, fail, learn, and switch to what's working quickly.

As a startup founder, you have dozens of decisions to make every day.

Don't waste time on the ones that won't help you get to product market fit.

Remember, if it's a tough call, it actually probably means you can't go wrong.

The fourth mental trap I wanna talk about is spending too much time on downside protection instead of chasing upside.

Downside protection is straightforward and satisfying.

Fixing little problems is very easy, but rarely where the innovation happens.

Chasing upside requires risk-taking, creativity, a lot of false starts.

For example, we hear a lot of ops teams talking about getting themselves out of spreadsheets.

Y'all, at this stage, spreadsheets are fine until they're not.

It's good to do things that don't scale as long as they're not breaking.

Instead, spend your time finding out what your users need in order to use your product every day instead of once a week.

That's the upside chasing that we're talking about.

The last trap I wanna call out today is chipping away at small problems when there's a big existential 1 looming that maybe you don't want to face.

For example, you may tell yourself, hey, my 150 users are asking for one-click ordering.

Maybe you've only had 150 users for the past 3 months, and they're starting to churn, and no 1 new is signing up.

So here's a quick recap on prioritization.

You'll never get to everything on your task list.

You have to use KPIs to prioritize your work, and only work on the biggest blocker to your primary KPI, and be honest with yourself, and fail fast.

So now let's talk about how to choose the right KPIs.

Remember, we can't afford to waste time running fast in the wrong direction.

Your primary KPI or primary metric is the main metric you use to measure whether your business is on track.

For the vast majority of startups, your primary KPI should be growth, and ideally revenue growth.

This indicates that you've built something people want, and you're on track to building a huge business.

As we've mentioned, there are a few exceptions to this.

For example, maybe a marketplace business might choose signups or GMV as their primary KPI, or an early enterprise business with a long sales cycle might choose letters of intent.

Secondary KPIs are things that need to be tracked, moving in the right direction, to make sure you're not cheating on your primary KPI, or to give you an early signal when your primary KPI is very lagging.

These are going to actually contribute to your revenue growth, so they're very important to track.

You need to make sure you're making money on each user and not giving away free money and calling it growth.

Depending on your stage, you may not need to optimize this right now.

Just have a sense for your payback period and whether you'll make or lose money per customer acquired.

I've also included a short list here of vanity metrics.

As we discussed earlier, it is very easy, even for good founders, to fall into the trap of prioritizing for these metrics.

They feel good and they provide external validation.

If you find these creeping into your task list, just ask yourself, is this directly on my path to revenue growth?

To illustrate what a laser focus on growth looks like, I dug up some examples.

Here's a side-by-side comparison of DoorDash on Demo Day, which everyone knows, and my own startup, Rickshaw, which was also a delivery platform.

We went through YC right after DoorDash did, and DoorDash eventually acquired Rickshaw in 2017.

Both companies had a laser focus on order volume as a top-line metric.

This allowed for clear, focused execution and resulted in strong and very similar early traction.

However, post-demo day, the paths diverged a little bit.

Rickshaw had a bit of trouble fundraising, despite comparable early traction to DoorDash.

This caused us to make a decision out of fear.

And instead of continuing to have a clear focus on top-line growth as DoorDash did, we tried to optimize for both growth and unit economics.

We tried to hedge, and this was very dangerous.

This split focus put us in a weird no-man's land of slow growth, which, as we described before, can kill startups.

There is a lot more nuance about profitability versus growth that I won't get into here.

The main message today is to choose your primary KPIs and don't try to get smart and optimize for 2 or more hard things at once.

So now that we've talked about how to define primary and secondary KPIs, how do we set targets?

Assuming growth is your primary KPI, how much growth is enough?

This depends on your business and your stage.

But in Paul Graham's classic essay about growth, He notes that for a company going through YC, 5% to 7% week over week growth is good, and a 10% week over week growth is exceptional.

As I've said a few times now, small changes in weekly or monthly growth rate really compound and make a difference in the long run.

So early growth is better than late growth if you can choose.

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