

Ask HN: How to estimate (best case) early user growth? - smanek

How do you estimate/predict a new startup's growth? A lot of potential investors want to see numbers like this in a model - and establishing some 'upper bounds' on growth would be helpful for planning technology as well.<p>I would love to see approximate early growth numbers (first 1-2 years) for social web applications (ideally popular/successful ones, but anything would be helpful). My application is addressing a relatively new market with a large potential appeal (think Craigslist, Ebay, Google, Yelp, Youtube, etc. in their early days), but numbers in different spaces would be helpful as well.<p>If anyone would be willing to share some numbers for iPhone or Android Applications, I would be grateful as well.<p>Thanks for the help.
======
tom
Have you launched something yet? Paid service? Free? Freemium? Without
launching and looking at real, initial numbers just assume you'll be like 99%
of the startups out there and get none. That's what your potential jnvestors
will do until they see some real numbers.

Seriously, get something real, prove you're on to something, and THEN talk
numbers with investors. You've got a bigtime uphill battle without at least
one solid proof point. Get that, and then hockeystick that sucker up!

~~~
smanek
Completely free.

I agree with you - we won't be raising money till after we launch and
(hopefully) gain some traction. But one of our founders is handling the
business side of things and really wants to get at least some rough numbers
now. Given his considerable business experience (and the lack of downside to
letting him create his model), it sounds like a reasonable request. Rather
than have him pull the numbers out of his head, I thought it would be better
to do some research.

Don't worry, all our technical people (myself included) are completely focused
on making the product as great as possible for launch! And, for what it's
worth, we are following a very quick schedule - just two or three months of
part time development before we launch and start iterating on user feedback.

~~~
idlewords
Not having a model is better than using a model based on imaginary data, which
is what you'll have until you launch your site. As other people here have
pointed out, traffic for new sites is very bursty and depends in large part on
who links to you when.

~~~
lowkey
I call bullshit. The purpose of making a forecast is not to predict the
future, it is to identify errors in the logic of your assumptions. The
experienced business guy is simply putting together a model based on obviously
fictional data to help understand the financial dynamics of the business -
probably to see if there even IS a real business.

It's nice rhetoric to proclaim that since user adoption figures cannot be
predicted with accuracy, they should not be predicted at all. Even without
accurate forecasts, it is trivial to calculate the required breakeven users
and examine scenarios where that breakeven is achieved in a short,medium, or
long ramp period. Other valuable metrics are also more easily discerned from a
model than by pure guess.

It sounds like me that that business guy is simply doing his job - and it
sounds like he knows his job better than many readers here.

~~~
idlewords
You don't need to badger your devs for anticipated traffic figures in order to
calculate those kinds of scenarios. It's one thing to calculate various
thresholds and set up hypotheses that you'll test later, once you've collected
real data. It's another thing to make numbers up out of whole cloth so you can
fool yourself into thinking you understand more than you do about your
business.

------
MWarneford
I agree with the general sentiment that traction beats a prediction, however,
I think its valuable to understand the relationship between the key metrics
before you start.

Thats not to say that your model will match reality, but its certainly
valuable to understand the dynamics involved.

I'm working on a series of blog posts that develop a virtual world business
model. However, the principles also translate to freemium & social business
too.

I recently wrote a post (with google spreadsheet) illustrating how the
addressable market size (network carrying capacity) effects the viral growth
of your application.

The theory goes that as the network becomes saturated the viral invites, paid
acquisition, etc starts to fall on players who have already evaluated your
service. Over time the success of your marketing and viral actives decline.

Check out the post at: [http://dubitplatform.com/blog/2009/7/30/calculate-how-
the-ad...](http://dubitplatform.com/blog/2009/7/30/calculate-how-the-
addressable-market-size-affects-your-virtu.html)

The google spreadsheet linked in the post illustrates how I've set about
modeling viral growth, paid acquisition, ARPU, churn, and so on.

The model applies to any viral application - but its worth noting that
products relying on advertisements can expect a significantly lower ARPU,
knocking into your paid user acquisition.

You may also find this post interesting:
[http://dubitplatform.com/blog/2009/7/26/calculate-how-
much-y...](http://dubitplatform.com/blog/2009/7/26/calculate-how-much-your-
virtual-world-can-afford-to-spend-ac.html)

It goes through the relationship between ARPU, LTV, and how your viral
coefficient effects how much you can afford to spend acquiring a new player.

I think paid acquisition is a under utilized strategy within social networks -
Zynga aggressively bought FBK users.

Hope it helps!

------
nico
Whatever estimate you come up with, will be BS, and if investors know their
way around, they'll know this. This is true not only for your user base, but
your sales and revenue projections as well. Probably the most accurate number
you can get are expenses, and even that won't be very good.

But all of the above doesn't mean you shouldn't do your homework. So you still
have to do some research, learn how other startups grew, estimate your market
and market penetration in time. What investors really care about is the
reasoning behind estimating those numbers, rather than the numbers themselves.

Here's a good series of posts with useful tips for pitching a VC:

\- <http://bothsidesofthetable.com/pitching-a-vc/>

Good luck!

------
joez
As lots of people already said, your user growth projection is probably not
going to be very exact. ARPU can be pretty close. Expenses can be really
close.

Depending on your product, you might be able to set up some initial targets
and just run with those. I.e. if your marketing plan is to start at colleges
(or one particular college that you have strong affiliation with), you can
calculate a growth for that slice of your market. Since you are pretty set on
creating a model, this will probably help you get closer. I.e. your user
acquisition went from a geometric curve to more lumpy. Kinks in your curve are
a good indication you gave it some thought. I.e. is there a point at time
where you switch to a more aggressive growth by buying users?

If you have some goals in mind of when you want to hit profitability, you can
backout a user growth rate. So you have ARPU and a pretty good idea of what
your expenses will be, just divide expenses by ARPU and you have a user
target. So if you then have a goal of hitting break even in 13 months, you
know that you will need a x factor of geometric growth. You can make this more
complicated by changing your ARPU (I don't know your business model but
probably ARPU goes up as you hit critical mass?).

Again, probably still a BS hockey stick but hope this helps!

------
yannis
x=S+e^(t*0.05)

where S = web sexiness factor

and t = time (weeks)

------
chinmi
It's quite impossible to predict those numbers, as it depends on so many other
factors outside of "it's a social web application!".

For these kinds of things the only thing you can depend on before launch, for
better or worse, is your own common sense.

In an industry that tries to be successful by providing value for free, all
bets are off and the old rules don't apply anymore.

------
lsb
What are your numbers so far?

~~~
smanek
We are prelaunch, so no numbers yet. We are doing a small 'soft launch' in a
few weeks (I'll mention it here when the time comes) - but the business guys
could use a hand estimating 'best case' numbers (some potential partners,
investors, etc. are interested).

Incidentally it would also help me figure out if my back-of-napkin load-
testing numbers are in the right ballpark.

I know this is a bit premature for me, but the question piqued my curiosity
and I couldn't find very much written about it (please feel free to correct me
if my Google-fu is lacking).

~~~
petervandijck
OK, let's get some numbers out for a typical "not selling anything for money"
startup:

\- First 1000 users means nothing whatsoever. \- 10,000 users means nothing.
\- If 100,000 free users take 2 years, you should shut down. \- When you
double every, say, 3,4 months above 10,000 users, you're doing great. \-
Active users (used service in past month) are what matter, not signed-up
users.

If it's a for-pay service, ignore above, then you can just calculate the $$

