A North Star Metric can be a valuable tool for a startup founder. When done right, it can have a few very important benefits:
In this article, I’ll share thoughts on what makes a good north star metric, how to structure rituals to leverage it, and elaborate on how doing so helps you achieve the benefits above.
As Paul Graham eloquently described, “a startup is a company designed to grow fast.” Perhaps the most valuable purpose of a North Star Metric (NSM) is to provide a simple and powerful yardstick to demonstrate this growth.
In order to do this, a strong NSM will be:
✅ Valuable – Tied directly to the value customers or users receive.
✅ Actionable – Straightforward, and something your team can influence in short iterations.
✅ Investable – If it grows, it makes your company more compelling.
The internet is full of great examples from AirBnb, Uber, Hubspot, et. al. In all cases you see that it is concise, easy to understand, and clearly meets the criteria above.
💡 Note that they are rarely expressed as an average and never expressed as a percentage.
⚠️ Avoid “vanity metrics” that feel good but don’t move the needle. Common examples are views, downloads, followers, time on site, email opens… These are not actually valuable by the definition above, as they (usually) don’t represent the customer having received value. (They may be good leading indicators, just not “north stars”.)
Revenue (or Gross Market Value for marketplace products) can work well, and should probably be your default. It is certainly tied to value and investable. It works great for a product with simple sales process. However, there are a few reasons to consider alternatives.
The most common reason to veer from revenue is that it may not be “actionable” early on or by everyone in your company. Your product may be too immature to charge a fee, or it may have a sales cycle too long to be measurable on a short iterative timeline. You may also want to prioritize user acquisition for network effects, or to hone your value creation before increasing your value capture.
💡 Revenue (and eventually profit) will be the destination you ultimately seek, but like ancient travelers used Polaris as an orientation to their earthly destination, an alternative to revenue may be a useful early guidepost for you.