Your Startup Is a Math Equation

An easy way to think about your startup is like a simple mathematical equation.

It will help you figure out the different elements you should be working on, prioritizing your time and team building, and coming up with tactics that serve your overall goal.

It will also help you build a process that creates a growth machine, using OKRs.

It’s easy for startups, and especially to pre-product market fit startups, to get lost in the noise and shoot in all directions.

Your company’s equation is like your “startup constitution”. Everything derives from it. Whenever you are confused, you’ll find yourself get back to look at it.

Side A of the equation

This is your “north star”. Ideally, it’s usage (which leads to revenue).

You don’t work on that side of the equation. That’s the outcome. You work on what leads to the outcome, side B of the equation.

Side B of the equation

These are the elements that lead to your outcome. This is where you focus. Let’s look at an example.

Airbnb’s equation (of its core original business):

Usage = New users bookings (booked for the first time) + Existing users bookings (booked last year and repeat this year) + resurrected users bookings (booked 2 years ago, skipped last year, and now booked again).

Note: each company has a different usage pattern and so the definition for an existing or resurrected user will change accordingly. For example, on a meditation app, an existing user is someone who probably used the app last week/month (as opposed to last year) and uses it again. For more on that, see the retention lifecycle.

But that equation feels a bit abstract. That leads me to sub-equations.

Sub-equations

Each element on side B of the equation (the inputs) is also side A of a lower, less abstract, equation. If all sub-equations work well, we’ll meet our north star. Let’s have a look.

When Airbnb started they focused on revenue from new user bookings.

New Booking Revenue = Travelers + Properties + Complete a booking

That looks less ambiguous (and obvious). I need travelers to find and book properties. But let’s dig deeper to the first thing we need in order to get revenues - properties listed on Airbnb

Properties = Property owners’ awareness of Airbnb + uploading their property details

Now we move to a more tactical equation. That is listing the different methods that will get property owners aware of Airbnb. Let’s get an equation for that.

Property Owners Awareness = Call and meet homeowners who listed properties on Craigslist +(and/or) Facebook ads + SEO and content marketing + reaching out to multiple property managers, and so forth.

Now we have a list of tactics to prioritize from based on a mix of efforts and impactfulness. This is how treating your startup as an equation helps with both prioritizing and coming up with growth tactics.

In parallel, we need to take care of the second element of the properties sub-equationgetting property owners to list their properties. This is more of a funnel equation (that’s why growth teams need to include product or be able to do product).

Listing your property = singing up + uploading property details + submitting

Now let’s assume property owners are signing up but don’t complete uploading the property details. This is a problem that affects our original north star. No properties, no revenues.

We’ll create an equation for that, which will be assigned to a product manager (or a founder in the early days). The PM will need to focus on talking to property owners and getting qualitative input, as well as checking what property owners do on the site in order to understand what’s not working (quantitative and observational input).

Uploading property details = finding my address on the map + writing a compelling text + uploading images

So many things could go wrong in this funnel. From not finding your address on the map (a bug) to not knowing what to write about your property to not having good-looking images of the property.

It’s been told that Airbnb saw their revenue growth once they took pictures of the properties for themselves. They could have done that because property owners didn’t complete the funnel, or because when they analyzed the Travelers equation they saw people are not converting because the properties listed don’t look appealing enough for them to give up hotels. Or both.

Let’s assume that writing a compelling text was a problem. How can we solve that? Let’s write a tactic equation.

Writing a compelling text = Write it for the property owners + (and/or) showing them examples + creating templates etc.

Again, we’ll prioritize each tactic.

Recap

I have listed 7 sub-equations below our main Airbnb equation. Airbnb has more types of sub equations I won’t get into (for travelers, for the match, and for existing and resurrected users).

Don’t be discouraged by the number of sub-equations. Once you start thinking that way, it’s pretty easy. And helpful.

If all my sub-equations work and lead to their respective outcome, I’ll improve my original north star metric.

This is for any type of company

Whether you are starting a business with no money, or raised a B round, you can and should use this method.

About the writer - I’m Oribi’s product marketing lead, and Spectroomz founder. Previously I founded Mimoona ($10M revenue crowdfunding platform) and served as the head of growth of Guggy (YC and Softbank backed startup).