You don’t ask a school kid “how much money you are making”. If you did, that would gui­de them to skip school and get the odd job they are qua­li­fied for wit­hout educa­tion. And that would be the end of their deve­lop­ment – they would be stuck with that for the rest of their lives.

What people nor­mal­ly do is ask about how kids are doing at school and what new did you learn today. If they keep lear­ning eve­ry day, by the time they are adults they are rea­dy to be wor­king and then “how much you are making” will be a rea­so­nable ques­tion to ask.

For grown up com­pa­nies, reve­nue growth, EBIT­DA, quick ratio etc KPIs the tra­di­tio­nal (and domi­nant) busi­ness lite­ra­tu­re (not to men­tion for­mer cor­po­ra­te execu­ti­ves) is full of, are per­fect­ly valid met­rics. But what about com­pa­nies who are still at school, i.e. startups?

By defi­ni­tion, a star­tup enters unc­har­ted ter­ri­to­ries and its job is to do explo­ra­tion so that it can draw a map. The success cri­te­ria for explo­ra­tion is – lear­ning. Fin­ding the answers to the unknown.

The results of lear­ning do not trans­la­te to reve­nue, pro­fit, growth etc then and the­re. So what hap­pens if success is mea­su­red as reve­nue growth, pro­fit etc? You get what you mea­su­re. Star­tups skip lear­ning and are trying to get the odd jobs they can, to get the ins­tant results. For­get­ting what their rea­son to exist is. Even­tual­ly, this may result in pre­ma­tu­re sca­ling – the #1 rea­son star­tups die. Pre­ten­ding to be an adult when one is not.

In star­tup world eve­ryt­hing is ext­re­me­ly con­text depen­dant. The con­text being your posi­tion on the lear­ning cur­ve – the “Star­tup J Cur­ve”. Like a kid growing from child to adult­hood, a star­tup is growing from a set of hypot­he­sis to real busi­ness. How its success is mea­su­red should reflect their place on that jour­ney. A concep­tual illustra­tion of that below.

As you get what you mea­su­re, knowing what is the mea­su­re­ment that mat­ters at each sta­ge on the way is crucial. You should unders­tand what is the indica­tor that gui­des you best given whe­re you are and whe­re you want to go next. You first need to vali­da­te that your plan works befo­re you start trac­king your per­for­mance against it.

Gorilla Capital Management Oy

VAT 2827907-4

Maria 01, Building 1, entrance B
Lapinlahdenkatu 16, 00180 Helsinki


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