The Compass (Startup Genome) Tech Startup Salary Survey 2014

Hiring is one of the biggest challenges a company faces. In a recent article by David Smooke, 50 entrepreneurs shared their biggest hiring challenges, most of them expressing concerns around salary, equity and benefits for employees. Figuring out what to pay an early startup employee is difficult. This is a problem that we, at Compass, have faced in our efforts to expand our small team, and is often echoed by most of our users. The prevailing popularity of this challenge made us dig deeper into the issue and we are determined to find an answer by conducting a survey for employee salary and equity in tech startups.

Employers: Click here to take the survey

Tech employees: Click here to take the survey

Salary + Vision + Equity = Compensation. Sam Altman in his blog says, “You should be very frugal with nearly everything in a startup. Compensation for great people is an exception.” But what does an exception mean? “The best people want to work on a mission they believe in, and make money,” says Mark Zuckerberg. What should you pay to people who are onboard with your mission? How do your compensation packages compare to your peers?

With limited resources, startup founders must ensure that they both retain adequate equity and remain competitive in the market. At the same time, they must also compete with other startups that cater to similar markets but have raised huge amounts of funding. This can be even more challenging if you are bootstrapped. For young companies there is a lot of uncertainty each time they make an offer to a new hire.

There are many blog posts that try to formulate a solution for this problem and many founders have shared formulas to determine compensation packages, but companies rarely share specifics in order to maintain their employees’ privacy. There is no comprehensive startup compensation guide out there.

Recently, Buffer published a blog post giving away the formula they use to determine the salary+equity packages of all its employees. But does this formula apply to all companies? And, what do you do till you reach that level of structure in your company that you can use a formula to determine salary or equity?  

In an effort to help companies, from early stage to scale, be more successful with their hiring, we want to make this process more data driven, and provide a guide to the market.

Earlier this year, we conduct a salary survey of startup founders. With participation from more than 11,000 startup founders from across the world, we were able to benchmark what founders in different startup ecosystems pay themselves. The results of this survey were published on many notable websites including The Next Web and Inc.

We are excited to announce that we are conducting a similar survey on tech employee compensation data in order to chart a benchmark of salary and equity of tech startups. All data specific to your company will be excluded from our published results, in order to maintain the privacy of your employees.

You can contribute and help your peers figure out how to effectively compensate their employees by filling out this survey:

Employers: Click here to take the survey

Tech employees: Click here to take the survey

This data will provide you with insight on your compensation versus industry standards. We aim to bring transparency into the global hiring ecosystem by creating a go-to guide for tech companies to help make data driven decisions for tech employee salary and equity.

Thank You,

Bjoern Lasse Herrmann

and the Compass Team

Articles referred to:

Going Public Has Changed Mark Zuckerberg…Finally – Pando Monthly

50 Startup Founders Share Their Biggest Hiring Challenges – Smart Recruiters

Introducing Open Salaries At Buffer – Buffer

How To Hire – Sam Altman

*This survey is for the engineering team of the startups. We will be conducting a survey for non-tech teams of tech startups very soon*

Kicking off the 2014 Startup Ecosystem Report

I am super excited to once again be part of this amazing project to help entrepreneurs worldwide to gain a bigger voice, provide policy makers with better decision-making tools and ultimately expand the global economic impact and job creation driven by startups.

To do this as effectively as possible, we will need the participation of the whole community, and we want to make sure the output is everything you want it to be. Please help us improve the report by filling out the following survey.

Thank you!

Danny Holtschke (@dannyholtschke)

My story: How I joined Compass

While working on my Master Thesis in 2011, I met Bjoern Lasse Herrmann (CEO of Compass) in Maastricht, Netherlands, where he introduced Startup Genome’s findings to a group of students and I was blown away by the power of aggregated data to solve real-world entrepreneurial problems.

But I was young and naive thought the best path to becoming an entrepreneur was to be a consultant, since they seemed to know everything. (#illusion) I found myself so disappointed in my career choice, I quit after three months, flew from Berlin to San Francisco (at my own cost, taking all my own risks) and joined Bjoern, Max and Ertan in Silicon Valley to work on the Startup Ecosystem Report 2012. I wanted to learn from the very best and be immersed in their thinking every day -- and I wasn’t disappointed. I met and absorbed the thinking of tons of entrepreneurs, policy makers, investors and service providers in startup hubs around the globe.

After successfully launching the report in October 2012, I went back to Berlin, proposed to my now wife and started Spotistic. Now, my days are mostly filled with guiding the Berlin accelerator Startupbootcamp teams in their journey to market and customer discovery.

- Pic from Startupbootcamp Work in Berlin, 2014 -

And I’ve watched as the last two years have brought major changes, even in my home town of Berlin. Many new accelerators (Hubraum, Google, Microsoft) and incubators have popped up, governmental initiatives for funding have been introduced and successful startups have been launched and exited. The very same holds true for London, Paris, Madrid, Barcelona, Warsaw, Prague, Vienna, Amsterdam, Copenhagen and many many more cities around the globe. Startups are not the ‘new’ kids on the block anymore.

Several factors have lead to an explosion of startups. The Economist (2014) describes this trend as a Cambrian explosion of digital startups, resulting in an amazing variety of services and products that penetrate and change every corner of the economy. Some speak of the "reinvention of capitalism" (Porter & Kramer, 2011). One of the reasons is that the costs for starting a business have dropped enormously. Platforms such as Amazon cloud computing help entrepreneurs host applications for less than a tenth of the original cost. Apple's App Store or Google's Play store allow entrepreneurs to make use of the Internet’s benefits over traditional channels to offer their products and services worldwide. The knowledge to build businesses and products is more democratized than ever and available to anyone who has access to the Internet. That alone increases the number of startups tremendously.

In addition, traditional innovation processes are replaced by new ones (eg slow, linear waterfall methodology by faster, more flexible iterative product development). The Lean Startup movement (Eric Ries, 2011) and Customer Development (Steve Blank, 2010) have played an important role in successfully bringing ideas to market. These new innovation processes and modern tools for business model design (Alexander Osterwalder, 2011) help entrepreneurs to validate potential markets, quickly create prototypes and win paying customers. Today, innovation happens because of startup hubs, networks, clusters and governments have a better understanding of how key stakeholders should work together. For instance, policy makers have come to understand that startups are innovation enabler and job creators in our economies (Kauffman study, 2010).

We are experiencing the Entrepreneurial Enlightenment.

Startup hubs will only mature and increase their economic importance. But to ensure the greatest possible societal benefits from this economic boom, we need the energy, ideas and data of the world’s entrepreneurs to help drive us in the right direction. We invite you to participate in this movement and once we begin collecting data, you can help out in two critical ways.

  1. Contribute your own knowledge and experience to the report

  2. Help spread the word with startups around the globe

You will be helping your fellow entrepreneurs around the globe, and on their behalf, we thank you.

Danny

PS: If you’re interested in sponsoring the report, please contact florian@compass.co.


Compass Monitor Launches Early Access Program

Consultants, investors, accountants and bankers waste half their time chasing and formatting their client’s data, then looking for reference values to pinpoint problems before they can put their expertise to work. For the software businesses they support, this situation is equally imperfect, requiring time-consuming cycles to provide data and leading to less relevant advice and slower access to capital.

Today, Compass announces the first solution designed to give B2B service providers continuous access to key data across a portfolio of clients, along with the relevant benchmarks and industry insights we're known for, launched in a new dashboard product we call Compass Monitor, allowing access to critical information for a portfolio of businesses.

“After launching Compass, we learned many of our biggest referrers were consultants, advisors and investors who found Compass an invaluable tool for serving their many customers,” said Bjoern Lasse Herrmann, CEO of Compass. "So we built the Compass Monitor product to provide an easy way to track a portfolio of businesses. Still, even we were surprised by the level of interest. Before any announcements, we already had 400 companies on the waiting list, including partners from almost every large venture capital, consulting, accounting and market research firm.”

Despite the growth of cloud-based systems, data collection for strategic service providers—including consultants, investors, accountants and bankers—remains a startlingly manual process of emailed spreadsheets, inconsistent formatting and delays. Once received, the data is still missing the context of relevant benchmarks, key to understanding rapidly changing sectors such as software.

Compass Monitor provides advisors with a simple way to access and monitor all of their customers’ performance results in one place, with real-time data collection and standardized formatting. B2B service providers can therefore focus their valuable time creating value rather than trudging through spreadsheets. Customized dynamic benchmarks will be added shortly, allowing advisors to provide more specific and actionable insights than ever before.

Easy data access. Compass integrates with more than 30 common SaaS business platforms—from Quickbooks to Salesforce to Google Analytics. Instead of time-consuming manual data dumps, it only takes a few clicks for a client to set up automated data collection and access. The advisor gets real-time information in the same format across clients, displayed in a dashboard designed to quickly spot issues and opportunities.

“In the cloud computing era, you’d be stunned how time consuming it is to stay on top of performance data,” said Phil Morle, Co-Founder and CEO of Pollenizer Global. "I see Compass Monitor not only as a solution for tracking, but also for board meetings. If we don’t have to reinvent the wheel collecting performance data and debating anecdotal comparisons, we can spend our time focused on strategic opportunities and solutions."

Critical data context. While the first step is to see the data, it can be impossible to interpret effectively without contextually appropriate benchmarks. For a certain type of company at a certain stage of development, how does this growth rate compare to the median of similar companies? Bounce rate? Customer acquisition cost to lifetime value ratio? A few large data firms manually gather data for benchmarks, but these are too expensive, time-delayed and limited in scope to be useful for 99% of advisors. Compass is the number one software business benchmarking engine, with crowdsourced data on more than 30,000 companies, and the ability to provide customized peer groups for highly relevant comparisons.

“Looking at data without the context of benchmarks is like knowing you're driving 100 miles an hour without knowing the speed limit,” said Richard Riedmayr of Emporias Management Consulting. "Compass Monitor will let me be far more effective at helping clients set appropriate goals, identify issues and allocate resources.”  

Service providers who wish to register for the private beta of Compass Monitor can do so at monitor.compass.co.

As always, software businesses can get their own custom business benchmarks at Compass.co.


Are you growing fast enough?

This is a post by Cheyenne Richards, head of marketing for Compass and former VP of Marketing for Ancestry.com.


Once upon a time there was a brilliant startup founder who hit upon a great idea, built a product, immediately hit exponential growth and went on to become a billionaire icon.

Who was the lucky founder? Facebook’s Zuckerberg? Groupon’s Mason? AirBnB’s Blecharczyk?

The answer is none of the above. This account is a fairy tale, imbued with as much fantasy as a Grimm’s bedtime story, yet arguably a tale that is at least partially responsible for the vast majority of startup failures—via unrealistic expectations.

We can be forgiven for crafting compelling narratives: As humans, our neurobiology demands it. Tens of thousands of years of evolution developed stories into the vehicles by which our brains derive meaning from the world. If the cavemen had shared data around the campfire, things might have turned out differently.

The problem happens when all the soft nuances are shaved off the story and it hardens into myth. Fine distinctions get warped into broad generalizations and real meaning is distilled to a simplified headline. Currently, myths such as these encourage founders to attempt growth before their business is ready, leading as many as 74% of high growth internet startups to fail due to premature scaling.

This number is so large it can initially be challenging to believe, yet one ultimately finds this incredibly common mistake goes a long way to explaining the dismal 90% failure rate of startups. The lower one’s burn rate, the longer one can survive, using every opportunity to pivot as necessary to achieve a fit between product and market. The higher burn rates of startups pushing for scale take away the safety net.

Of course, there is nothing wrong with growth. The primary distinction between a small business and a startup is the expectation of high growth—or as Paul Graham put it in one of his essays: Startup=Growth—but data shows that attempts to scale must be appropriately timed. Serial entrepreneur Jim Pitkow defined the concept very succinctly: “Premature scaling is growth in anticipation of demand instead of demand-driven growth.”

So the billion dollar question—literally—is when is a startup ready to scale? Until recently, founders have had no objective way to know.

Over the 20 years I’ve spent in marketing, one of my most memorable leadership experiences came while working for a startup that eventually achieved a successful IPO. Sitting down one afternoon with the CEO, I thought I knew our data inside and out: customer acquisition cost, lifetime value, retention, spend, headcount. In fact, I was feeling particularly proud that we’d achieved a user growth figure significantly better than prior years. Yet when I mentioned the number he asked the best possible question, a simple one that left me utterly stumped: “Is that good?”

In one of those lightning bolt moments, I realized that all my detailed internal analysis may have been useful for managing our marketing department, but not leading it. I only knew our growth rate was better than last year, but did that put us in the the 90th percentile of our peers or in the 10th? Did I deserve a pat on the back or a kick in the behind? I had the data, but was missing the most important element: context by which to make sense of it.

I was not alone. For mature industries, growth benchmarks are widely available, but for small and medium businesses trying to set targets or plug figures into a business model, finding a good benchmark for growth has been next to impossible.

In place of relevant benchmarks, founders and investors often encounter myths presented as fact: 22% week-on-week growth for Facebook, 20% for Groupon and 17% for AirBnB. What’s extraordinarily difficult to find are the nuances behind those stories. AirBnB founders spent years getting themselves into credit card debt (then selling political-themed cereal to get themselves out) before their storied growth curve began. Groupon was a struggling activism engine that tested coupons as a skunkworks project to keep the lights on before they pivoted to real growth. Facebook was a side project for Zuckerberg who initially accepted ad revenue to offset the $85 per month server space he rented.

Why does myth and uncertainty lead to failure? Founders are consistently under intense pressure to scale, but have few tools beyond their own instincts to decide if they’re ready. Investors want to see a growth curve. The head of sales wants to hire a team of five. Marketing needs more budget to beat AdWords competitors. Without benchmarks to provide an objective perspective, it’s no wonder so many startups scale too fast. But what if founders weren’t blind to their performance relative to peers? What if they could see an abnormally low retention rate that identified a product issue needing to be solved before the big ad campaign began? Or a lower than average close rate pointing to a valid need for more sales staff? Or that peers relying more heavily on PR achieved better results than pay-per-click anyway?

Startups that wait for the right time to scale have much higher rates of both survival and success, whereas those likely to fail overspend on customer acquisition, hiring, product development and several other key metrics before they’re ready.

The graph below demonstrates that those that those who start strongest are not necessarily those who finish strongest. Here we can finally bring in a fairy tale that is valid for comparison: that of the Tortoise and the Hare.



Startup failure rates aren’t just a problem for entrepreneurs or Silicon Valley. The Kauffman Foundation Study showed that net job growth in the US was driven entirely by technology startups. Thus, it is not a stretch to say that if we could improve the success rate of startups by giving founders context about when to scale, the economic future of the country could be significantly improved. Even the globe.

To meet that need, Compass has built a benchmarking engine to allow startup founders to compare themselves to relevant peers, based on multiple criteria. Our mission is no less than to shine the light of transparency into the dark corners of myth and uncertainty, to provide a platform to allow founders and investors to access the critical context they need to make effective strategic decisions. Our 30,000+ CEOs now have a simple tool that helps answer the most fundamental question—“Is that good?”—with real-time benchmarks against a customized group of peers.

Outside the tool, we can provide aggregate figures which are less uniquely relevant, but still provide critical transparency into an otherwise opaque world.

The median user growth rate for startups is 9% per month and those in the 90th percentile hit at least 65.2%.

Having this clear range is a good first step, but to make decisions with figures aggregated from thousands of startups with different customers, business models, products, acquisition channels, user bases and levels of funding would be about as effective as blending all the food in your fridge together and calling it soup. You can forget talking about the nuance of flavors when you’ve got mustard, peanut butter and last week’s burrito in the same bowl.

So here is a more refined breakdown.

User growth by user base

In the graph below, we broke down the growth rates of software businesses by the size of their existing user base and displayed both the median and 90th percentile values. What can we learn from this? First is a 5-10x difference between the median and the fastest growers, which shows significant variation in acceptable results. We can also see some trending, where median growth rates tend to peak around 1000 users but the fastest growers keep getting bigger until at least a million.

User growth by acquisition channel

Here we see data from the ten most popular acquisition channels for startups (listed in order of popularity). Again, we see significant variation from the median to the fastest growers, as well as among channels. 


User growth by funding level

Another interesting perspective on user growth is to look at the data broken out by funding levels. For those who’ve received some level of funding, the following breakdown represents the user growth they are experiencing.

The most heartening thing about this graph is how similar it looks to those above. The median growers are around 9% per month and the fastest growers are 50-60%, showing that plenty of investors are looking at other factors in addition to growth rate when funding companies.

Of course, we are still looking at aggregates. You may be an enterprise software company for whom 10 corporate users generates significant revenue, comparing yourself to a freemium mobile app who needs a million users before they break-even, or vice-versa. What you really want is not data from thousands of startups but the 50-100 that are relevant to you via your customized Compass peer group.

Using Compass, I can finally answer that our growth rate at that previous company was in the 80th percentile of our relevant peer group and 3x the median of our peers, so yes—pretty darned good. I wish I'd had access to that information back when it would have been helpful with decision-making.

Luckily, leaders today have more tools at their disposal. Finally, we can move past the fairy tales and embrace the nuance by providing context to our data. Welcome to the new world of growth: measured through the lens of real-time, relevant benchmarks.

State of SaaS 2014 and its Challenges

by Bjoern Lasse Herrman, CEO of Compass

I recently gave a presentation in front of leaders from many of the SaaS players at The Small Business Web Summit. The feedback was so positive — clearly many people are struggling with the same issues — that I decided to make the presentation available to everyone in the SaaS community.

As a SaaS business ourselves, those of us at Compass are intimately familiar with both the unprecedented opportunities and heavy challenges in our market. But we also have a unique perspective to offer — our own data.

In the 10-15 years since the birth of SaaS as an industry, it’s now been planted firmly in the mainstream of conversation, but it’s disruptive wave is still getting started.

When we look into Compass data we see that nearly half of SaaS startups have received funding, which indicates a significant amount of investment capital being channeled into the category. There’s a clear reason why. Gartner forecasts the SaaS market will grow at 20% through at least 2020, almost 3 times as fast as software overall, and there remains ample opportunity for greater global penetration over time. Salesforce represents the shining star of possibility, consistently growing at more than 30%.

At the same time, at just 17 billion dollars, the SaaS pool is still relatively small and the field is very crowded. While Compass data indicates that half of SaaS companies are profitable, the statistic also measures a push for profitability over growth, often limiting size. Of all SaaS companies in Compass, only 7% achieve even 10,000 users.

The biggest challenge is distribution. Our data shows SaaS companies rely heavily on direct sales — at nearly twice the rates of every other channel, but can afford only modest sales teams of 1 or 2. The vast majority pay nothing for marketing or advertising.

This means many salespeople out there fighting, one by one, client by client, for the same turf. These crowded market challenges are also driving a push away from SMB audiences and into more lucrative enterprise markets. But it is primarily the packaged software industry titans that dominate SaaS revenue — Intuit, Oracle, Adobe, Microsoft, Google, SAP.

One can think of this as a David versus Goliath scenario, except that the David’s are fighting each other. The Goliath’s may not be as nimble, in many cases their products are inferior, but they have the support of an entire distribution ecosystem — from resellers to channel partners to consultants and trainers — who are dependent on the horse they bet on winning.

Enterprises, then, aren’t just larger small businesses. Their needs run far deeper. Any software solution must integrate effectively with multiple legacy systems. Security is a tremendous concern. Training programs must be rolled out. A small business may make decisions for the moment, but enterprises must have confidence in the long-term viability of the vendor.

All of this goes to reinforce the fact that history tells us, sometimes painfully, that the best product does not always win. The best distribution method does.

So returning to the David side of the equation, what can SaaS businesses do to beat the Goliaths?

Target the weaknesses and work together:

Focus on CRM, the fastest growing enterprise market

Specialize in mobile technology that is outside of the core knowledge base of Goliaths

Make liberal use of partnerships, the least expensive growth channel by far

Cross-sell, not just for revenue, but to build distribution networks

Scale fest and build a platform

Band together. Channel partners increase distribution and both scalability and portability attract enterprise buyers.

Alone, the David’s have a hard time competing. Together, they can win.

Compass was founded to bring Moneyball analytics to the 99% of businesses for whom the major information service providers of the world are either too expensive, too slow, irrelevant, or all of the above. We solve these challenges with crowdsourcing. Data from over 30,000 businesses enters into our warehouse through common SaaS business platforms such as Google analytics, Quickbooks, Salesforce and many others. Business leaders feed their own data in and in return get an immediate and reliable perspective about how they are doing on key performance indicators relative to their custom peer group. This allows for instant problem identification and more targeted strategic priorities. You can get your own benchmarks at compass.co.



What determines founder salary levels?

One week ago, Compass.co released results from a survey that showed that 73% of startup founders make less than $50k per year and entrepreneurs around the world have been talking about it ever since. To answer some of the many great questions posed, we went back to our data to bring you more answers.

For all data analyzed, current monthly revenue is the greatest predictor of founder salary, with a more than 3.5x difference between the lowest and highest tiers. Until a company makes more than $10k per month in revenue, the average founder salary does not break the $50k mark, and not until the company reaches over $1 million per month in revenue, does the founder salary break $100k. 


This may relate to the all-important burn rate equation. More revenue coming in means more money available to pay back out again without impacting the long-term sustainability of the company. This would tie in closely with Compass’ earlier findings on premature scaling.

One of the most oft-asked questions related to how much a founder’s salary changed by age. We found this is indeed a significant factor in salary, with older founders paying themselves as much as 71% more than younger ones, though the highest salary age range still barely breaks $60,000 per year.

Perhaps even more significant is the fact that 78% of founders are under the age of 40. This may speak to the rigors of entrepreneurship, conflicting family requirements, ageism, technology literacy or a number of other factors we can leave to others to debate. In any case, it may help provide additional perspective on lower salary needs.

Also contrary to the perception of the serial entrepreneur, Compass data found that 67% of founders were working on their first startup, or at least the first in a significant capacity. (Founders were asked to clarify the number of previous startups where they had been one of the first five team members and the company had raised at least $100,000.)

As shown in the graphs above, since founder salary grows by experience level. This is another reason for low average salaries overall.

In the same way Compass found salaries increased by product phase in the previous report, so to do they increase by team size.

And in the same way most founders are working on their first startup, so too are most teams comprised of five or fewer people.

What are your thoughts on founder salaries? What levels seem appropriate to you? We'd love to hear your thoughts and opinions.

Startup and software leaders can also discover their own benchmarks at Compass.co.


73% of Startup Founders Make $50,000 Per Year or Less

Our survey data shows startup founders are living lean, paying themselves low salaries. Even in Silicon Valley, 75% of founders make less than $75,000 per year.

In 2008, Peter Thiel, venture capitalist and co-founder of PayPal, was the first to publicly propose the idea that higher founder salaries are correlated with lower levels of success. The reason is that founders who sacrifice everything for their startup are more dedicated to their idea, set a strong example for their team and have lower burn rates. More than five years since, the debates continues.

Compass analysis has now made publicly available—for the first time—evidence-based confirmation of this strategy’s validity, with data from more than 11,000 global startups.

We received many questions from founders on the subject of salary, due in part to the extensive online opinions, and wanted to provide fact-based answers back to the community. We don’t expect this will end the debate, but will hopefully help focus it with data. Meanwhile, it seems founders are living lean indeed, and that such frugality is likely to accelerate their success. This also ties in closely with to our previous findings on premature scaling.

The data shows the vast majority—73% of founders—pay themselves less than $50,000 per year, whether their company has been funded or not (not including any ownership stake or additional benefits). 

In Silicon Valley, even with the reportedly highest rents in the U.S., 66% of founders pay themselves less than $50,000 per year and a full three quarters make less than $75,000.

Average salaries ranged from a low of $30,208 in India to a high of $72,363 in Australia, and as a ratio to funding ranged from 1.98% in Silicon Valley to 4.8% in Australia.

Below is the breakdown for a number of startup ecosystems.

Survey details: 11,160 founders provided their salary ranges in $USD equivalents. For this particular survey, we did not ask for options or additional benefits. All null values were removed. Averages were estimated based on the midpoint of each range and applied equally to all geographies. All ecosystem breakdowns include responses from at least 75 companies.

References:

Startup and software leaders can discover their own benchmarks at Compass.co.

Last note: this story has created a lot of great debate and we're happy to write a follow-up next week to address the many questions, comments and thoughts we're hearing from all corners, so stay tuned.

This post was updated on 21 January 2013 to use consistent blue graphs rather than multi-colored.


Steve Blank helps fund Compass’ future

One month after launching Compass.co, a next-gen benchmarking tool, Compass announces the $700,000 in funding it received in 2012. We’ve also hired a full team of data scientists and engineers to expand functionality for our 30,000 users. 

The team (in above graphic, from top to bottom, left to right): Bjoern Lasse Herrmann, Jason Chuan-Chih Chou, Cheyenne Richards, Jason Kulatunga, Piotr Migdal, Mathieu Ripert, Jean-François Gauthier, Rayo Kniep, Skander Garroum, Ron Berman, Ertan Dagrultan and Robert J. Berger.

Angel investors include Alex Moradi, Allen Morgan, Amir Banifatemi, Anil Sethi, Ben Congleton, Christopher Grey, Clemente Germanetti, Daniel Recanati, Erik Jansen, Everson Lopes, Gianluca Dettori, Henning Lange, Joe Caruso, Kirill Makharinsky, Martin Gedalin, Michael Staton, Nils Herrmann, Oded Hermoni, Oliver Thylmann, Oussama Amar, Rafal Han, Raju Induku, Roger Krakoff, Stefan Glaenzer, Steve Blank, Ullas Naik and Yaron Kniajer.

Compass.co allows startup and software leaders to understand their business results in the context of peer companies.

We hit upon the startup benchmarking need during our Startup Genome research three years ago. After analyzing data from more than 100,000 startups around the globe and conducting hundreds of in-depth qualitative interviews, we discovered that the data pointed to accurate benchmarks being one of the most success critical factors, responsible for up to a 7x increase in success rate. These findings tie closely to Steve Blank’s perspective on evidence-based entrepreneurship, but a solution was needed that didn’t leave founders casting about for random benchmark data from an assortment of mentors, colleagues, blogs and friends. So we founded Compass in order to bring modern data science to entrepreneurship and management.

Aside from an expansive data set of more than 30,000 companies, the real value of Compass is in its precise peer ranking algorithm. Rather than simple classifications, such as B2B or B2C that don’t reflect the complexities in today’s business models, Compass ranks companies along multiple spectrums, such as size, industry, development phase, revenue model and many other criteria. This shift in peer ranking is akin to the revolution Google started in search, the algorithm provides more relevant results in real-time by including the most predictive criteria.

Ken Rudin, Head of Analytics at Facebook helps explain the appeal of Compass: "When CEOs define goals for their company, they need to think about key strategic initiatives as well as improving their performance in problem areas. Often it's hard to figure out if you are doing well in an area or not because you don't have a baseline to compare yourself to. Compass solves that problem.”

You can join the vanguard of evidenced-based leaders at Compass.co.

Announcing the launch of Compass

Friends,

In the past two years, we've achieved unprecedented insights for startup and software CEOs. Our research has demonstrated that premature scaling is the fastest path to failure and that CEOs with mentors to provide benchmarks are 7 times more likely to be successful than those who lack such critical reference points.

Now—continuing on our mission to radically increase the success rate of businesses—we are thrilled to announce the launch of Compass, the next generation leadership tool for startups and software companies that gives CEOs consistent, relevant and powerful benchmarks, those vital guideposts to data-driven decision-making.

Compass launched today, so you can find out where you stand right now.

Benchmarks can help you identify issues, set and prioritize objectives, allocate resources and control results via information that is nearly impossible to find elsewhere. Is your retention rate strong enough to scale? What's a good target for revenue per employee? Could you achieve a stronger conversion rate with a different primary acquisition channel? Compass provides customized insights that are nearly impossible to find elsewhere.

  • Data is collected automatically from more than 30 common cloud-based sources
  • Sophisticated algorithms compare your business to a custom set of peers, based on deep behavioral data
  • A contextual dashboard displays your company’s most critical data in comparison to relevant, aggregated benchmarks

If you created an account with the previous incarnation, Startup Compass, you can log in and update your data. If you haven't yet created an account, now is your chance.

Whatever the case, we're here to help. Feel free to reach out with suggestions and questions to feedback@compass.co.

We would also be extremely grateful if you could pass the word on to entrepreneurs you know. Go on. Tweet your heart out.

Thank you,

Bjoern Lasse Herrmann and the Compass team

Should you bank on Twitter? Yes, if your product is free, Compass benchmark analysis has found.

By Bjoern Lasse Herrmann

After only ten years, social media has a huge global penetration, allowing businesses to reach nearly 2 billion people, practically the entire online population, through just a few platforms. Naturally, there is a lot of hype. The question is whether the hype is deserved.

To allow leaders to make more effective, data-driven decisions, we decided to analyze how important social media really is as a growth engine for businesses. From our active user base of 30,000 businesses, we found that about 30% of the technology companies with between one and a hundred employees (median at eight), and a million dollars in annual revenue, primarily rely on social media to acquire customers with a growing trend.

While there are many ways to measure social media’s impact, such as brand value or informational benefits, we wanted to begin with the core business problem. We put ourselves in the shoes of a software CEO trying to craft a go-to-market strategy or decide whether to hire a traditional or social-focused VP of Marketing. To that end, we defined effectiveness around a common, critical performance indicator: user growth. We looked at the aggregated business metrics of thousands of small to mid-sized, high-growth technology companies at the 6-month stage of evolution, and analyzed the data in several directions. The most significant findings came down to business type:

1. For free products, social media is up to 2x more effective than traditional marketing methods. Overall about 38% of tech companies with free products (monetized indirectly), use social media as their primary acquisition channel.

2. For paid products, traditional marketing is 10% more effective. Only 29% of directly monetized companies rely primarily on social, favoring more traditional methods such as direct sales, partnerships and affiliate marketing, that led to greater success.

In just a few short years, therefore, social media has clearly established itself as part of the marketing mix for small and medium-sized technology companies. For those looking to grow free products with indirect monetization, it is a must as a primary acquisition channel. However, for most paid products, social media still serves better in a supporting role than as the primary channel.

“Finally someone is applying data to the question of social commerce”, says Lutz Finger, Director of Fisheye Analytics and author of the forthcoming book Ask-Measure-Learn, a book on social media decision-making, to be published by O’Reilly Media in January 2014. “Social media is great for creating awareness or reach, but awareness is not intention. Because I know about a product, does not mean I intend to buy it. To make customers purchase still requires more than pure attention.”

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Analysis details: Social Media includes includes Facebook, Twitter, Google, Youtube, Linkedin, Pinterest, Tumblr, Instagram, etc. For these findings we picked a representative sample of about 4000 technology companies and examined their trajectory. Free Product examples are companies with indirectly monetized business models, such as Facebook, Techcrunch, Udemy and Wordpress. Paid Product examples are directly monetized companies such as Amazon, Salesforce, Quickbooks and Zendesk.