A Guide to the Venture World: Product Analytics for Startups

Product analytics is a system for measuring and analyzing data on how users interact with a product. For startups, analytics helps understand what works, what problems exist, and which steps lead to business growth. The foundation of analysis lies in key metrics such as Retention, Cohorts, and Funnel. Let’s take a closer look at what these are and how to calculate them.

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Retention, or user retention — a metric that shows how many users return and continue using the product after a certain period of time following their first use. It answers the question: "How valuable is the product to the user for them to come back?"

Retention is calculated as a percentage and measured in days, weeks, or months. For example, if out of 100 new users, 40 remain after a month, the monthly retention rate is 40%.

Retention is the foundation of sustainable growth, as retaining customers is cheaper and more effective than acquiring new ones. Low retention signals problems with activation and product value at the start, negatively impacting monetization and business growth.

Cohorts, or cohort analysis — how to deepen understanding of users

Cohorts are groups of users grouped by registration date or another significant event. Cohort analysis shows how different groups of users behave over time, for example, how their retention changes from week to week.

This allows you to see the effect of changes in the product or marketing on different groups and identify problems in time. For example, if a new cohort shows better retention, it means the improvements are working.

Funnel, or funnel — the user's path from acquisition to conversion

The funnel helps track the stages a user goes through: from first contact with the product to a target action, such as a purchase or subscription. The classic AARRR funnel includes:

— acquisition, user acquisition
— activation, activation
— retention, retention
— revenue, revenue
— referral, referrals.

Funnel analysis helps identify at which stage most users are lost and where the product or marketing needs improvement.

Important metrics for products and investors

For products, important metrics reflect user value and engagement:

Retention rate — retention level
Churn rate — user churn rate
Conversion rate — conversion at different stages of the funnel
LTV, Lifetime Value — lifetime value of a customer
CAC, Customer Acquisition Cost — cost of acquiring a customer.

For investors, important metrics show financial sustainability and startup growth: monthly revenue, burn rate — the rate of capital consumption, cash runway — the amount of money available for operations, ROI — return on investment, NPV, IRR — profitability indicators of the project.

Investors want to see a working product with a growing base of loyal users and control over acquisition costs.